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Benefits May 29, 2001
Weakening Controls Push Medical Costs Higher
May 29, 2001 (PLANSPONSOR.com) - After a decade of
5% increases, the largest insurance companies dealt with
10-15% medical cost increases in the first quarter, according
to preliminary data from Hewitt Associates.
Reported by Nevin E. Adams
Health maintenance organizations (HMOs) are reportedly asking for an average premium increase of 18.3% from employers, according to the NY Times, citing preliminary estimates from Hewitt. That report also cited proposed increases as high as 60%.
Costs are rising for a variety of reasons, including:
- the increasing ability for hospitals to extract concessions from HMOs as the former consolidate in their markets
- while many hospitals have received no payment increase for years, they are now contending with rising labor costs for workers such as nurses and pharmacists.
- as insurers drop care restrictions, the cost of treatment is rising again
- drug costs continue to rise precipitously (nearly 19% last year)
The report suggests that insurers are going back to paying a fee for each service, with some health plans again requiring patients to pay 20% of the fee ? as they did before the advent of managed care.