Human Capital & Careers

HMO Rate Hikes Easing Up

''Employers who aggressively manage their health care spending [may see] increases in the single digits for the first time in five years.''
Stephen TaubJune 7, 2004

On the face of it, the latest figures on HMOs from Hewitt Associates are not too encouraging. The human resources outsourcing and consulting firm indicated that in 2005, HMO rates will increase by an average of 13.7 percent — yet another year of double-digit rate hikes.

That projected increase, however, is well shy of the 17.5 percent hike indicated at the same time last year, according to Hewitt. The consultancy captures HMO rate information for nearly 160 large employers representing more than 1 million employees and annual premiums of nearly $4 billion.

After plan changes, negotiations, and terminations, added Hewitt, the average HMO premium increased by 13 percent in 2004.

“As we predicted last year, we’re starting to see a moderation in health care premium increases, with the possibility of employers who aggressively manage their health care spending seeing increases in the single digits for the first time in five years,” said Hewitt’s Ken Sperling, in a statement. “The declining growth in HMO rates reflects the fact that health plans have reached comfortable margins and are willing to price closer to their underlying costs.”

Despite the slowdown in rate hikes, employers are increasingly laying off more costs onto their rank and file.

Take co-pays, for example. In 2004, 16 percent of the companies that Hewitt examined require a $20 payment for an office visit (up from 9 percent last year) and 47 percent require a $15 payment (up from 24 percent). Employers still offering a $10 co-pay fell from 58 percent in 2002 to 29 percent in 2004. The trend is similar for co-pays for specialty care and for emergency-room visits.

Employees also continue to pay more for prescription medication. Today, 50 percent of companies require a $10 co-pay in their prescription drug plans, up from 40 percent in 2002. Companies that require a co-pay of just $5 fell from 46 percent in 2002 to 28 percent in 2004.