Posted on: Thursday, June 6, 2002

HMO rates to soar in '03

By Theresa Agovino
Associated Press

NEW YORK — HMO rates for next year are surging more than 20 percent, an unexpectedly high figure that sets the stage for a third year of double-digit increases in overall healthcare premiums, a new survey says.

As companies begin negotiations for 2003 contracts, rates are rising an average of 22 percent but as much as 94 percent, according to the survey released this week by Hewitt Associates. The consulting firm's Web site captures rate information from nearly 140 companies with a total of more than 1 million employees.

Hewitt had been expecting HMO rates to increase about 14 percent for 2003. HMO premiums for 2002 rose an average of 15.3 percent.

"This is a harbinger of overall rate increases," said Mindy Kairey, e-business leader for Hewitt's Health Management Practice.

Overall healthcare premiums for 2002 rose an estimated 15.6 percent after jumping 10.2 percent in 2001.

The dramatic increase in HMOs rates is partially a result of plans keeping rates low during the late 1990s to win market share. Also during the '90s, many members left HMOs for less restrictive plans, leaving the sicker, more costly patients behind.

Now the HMOs are trying to recoup losses suffered during those years, said Kairey.

Several other factors are driving up costs for the HMOs and other types of plans, including the high price of prescription drugs and new medical technologies. Moreover, health plans are adding new computers and software programs to comply with federal medical privacy regulations which go into effect next year.

To offset some of the increases, companies are shifting more costs to employees. The survey found that the number of companies charging $15 for a doctor visit more than doubled to 24 percent in 2002. Meanwhile, the number of employers offering a $10 visit dropped to 58 percent in 2002 from 64 percent in 2001.

Patients also pay more for their medicines. In 2001,

52 percent of companies surveyed offered a $5 copay for generic drugs. That dropped to 46 percent in 2002. Meanwhile, the number of companies with a $10 copay for generic drugs increased to 40 percent in 2002 from 27 percent in 2001.

The number of firms with a $20 copay for branded drugs increased to 26 percent in 2002 from 12 percent in 2001.