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Home / News & IndustryManaged Care Insight and Analysis
Updated: Dec. 16, 2008
While HMO Premiums Remain High, Rate Of Increase To Decline In 2009

Health management organization (HMO) premium rates will increase by approximately 11.8 percent in 2009 — lower than last year’s initial rate increases, but still on track to outpace inflation and underlying healthcare trends, according to preliminary information from Hewitt Associates.

As U.S. companies begin to negotiate HMO plan rates for 2009, data from Hewitt Health Resource (HHR) — a Web site that captures HMO rate information for 160 large companies representing approximately 1 million participants — shows that initial 2009 HMO rate increases are averaging 11.8 percent, compared with estimates of 13.2 percent in 2008 and 11.7 percent in 2007.

After plan changes, negotiations and terminations, final average HMO rates in 2008 increased by 9.4 percent, Hewitt said.

Although U.S. rate increases for 2009 are projected to decrease relative to last year’s, there are variances by region. While the Southeast region is expected to experience higher-than-average rate increases at 15.4 percent, the rate has declined from its 2008 level of 18.2 percent.

The Southwest region will have the lowest premium increase for 2009 at 7.3 percent, down almost 50 percent from 13.7 percent in 2008.

Building on the success of their efforts last year, employers will continue to take aggressive steps in 2009 to mitigate the impact of high HMO premium increases on their healthcare budgets.

An increasing number of companies are aggregating the lives from smaller and/or less efficient HMO plans into a consolidated risk pool with their most efficient health plan administrators.

In addition, employers are moving away from local and regional fully-insured HMO plan offerings, which have higher administrative costs and are subject to state-mandated benefit requirements that drive up premium costs.

Instead, they are consolidating plan participants under self-insured arrangements where they assume the full financial risk for medical claim costs and pay the health plan an administrative fee for services such as claims processing and provider network management.

Employer interest in building employee knowledge and ownership for managing their health continues to grow. Most employers believe that keeping employees healthy has a direct impact on controlling healthcare costs, maintaining high levels of productivity and mitigating absences.

Hewitt’s research shows more than 85 percent of companies invest or plan to invest significant resources in long-term health and productivity initiatives over the next three to five years. Health and wellness related programs that address the spectrum of health risk from the healthy to the chronically ill — including health risk assessments, disease management programs, nurse help lines and smoking cessation and weight management programs — are the most widely offered; however, emerging strategies such as value-based health plan designs and biometric screenings are rapidly gaining interest among employers.

As in past years, employers continue to negotiate aggressively with their health plans to try to reduce initial premium increases, and they are coming to the negotiations table well-informed and ready to articulate their requirements.

As employers struggle with making their healthcare budget dollars stretch further in an environment of continued high costs, some are beginning to cost-shift a portion of their dependent subsidy dollars to employees. This is taking many forms, whether through increased payroll contributions for dependent healthcare coverage or by applying surcharges to encourage dependent spouses to take coverage under their own employer’s plans.

In addition, employers are becoming increasingly interested in conducting dependent audits, which are designed to assess and remove plan costs for dependents who don’t qualify for coverage based on the employer’s eligibility requirements.

Address: Hewitt Associates, 100 Half Day Rd., Lincolnshire, IL 60069; (847) 295-5000, www.hewittassociates.com.


  This article was taken from:
The Executive Report on Managed Care

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