Study: Health Cost Hikes Slowing

October 25, 2005 ( - The latest Milliman health care cost data show that among Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) the once spiraling prices are gradually coming back to earth.

A Milliman news release said that among health plans responding in both 2004 and 2005, 2005 HMO premiums increased 8% over 2004. That is the lowest hike in five years, according to the announcement. Meanwhile, PPO premiums for a standard benefit plan were likewise up 8% among plans responding in both 2004 and 2005, while premiums for high deductible PPO plans were ahead by 1%.

Earlier, Milliman reported that 93% of those who responded to the Consumer Driven Health (CDH) portion of the survey expect to offer employers within the next year a high deductible plan with an integrated employee account, that is a Healthcare Reimbursement Account (HRA) or Health Savings Account (HSA).

As far as next year goes, HMOs anticipate premiums to increase 10% to 12% while PPOs anticipate 12% to 13% premium hikes. These anticipated increases are on book or manual rates. Actual rate increases implemented will likely differ due to group experience, contract negotiations, changes in cost sharing, and market conditions, Milliman said in the news release.

A comparison of results between HMOs and PPOs showed that PPOs reported lower medical expense ratios and higher profitability than HMOs. However, unit price and utilization measures are higher for PPO plans.

Milliman’s annual survey was sent to the nation’s HMOs and fully insured PPOs that serve the commercial large- or mid-group employer markets. About 40% of those surveyed participated.

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