|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
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
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
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
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.