HMO rate hikes easing off

By Millie Munshi
Associated Press

NEW YORK — As employees take on a greater share of healthcare costs, proposed rate increases at health maintenance organizations are at their lowest levels in more than five years.

Hewitt Associates, which last week released a study analyzing HMO rate increases expected for 2006, said they are worrisome in spite of the moderation.

"The good news is that the rate of increase has declined but it is still troubling news that they're increasing at double-digit rates," said Paul Harris, senior healthcare strategist with the benefits consultancy.

Hewitt found that the average rate of increase so far proposed by insurers nationwide for 2006 is 12.4 percent —compared to 13.7 percent proposed at this time last year for 2005. The proposed figure is likely to change after companies and insurers complete their negotiations; the average HMO rate of increase for 2005 ended up at 9 percent.

Kaiser Permanente, which operates the most popular HMO in Hawai'i, won state approval to raise rates by 11 percent in 2005. Kaiser said it expects to ask for a lower increase in 2006.

Harris noted that healthcare costs are still increasing at a higher rate than inflation.

Rate increases are down for a number of reasons. For one, employers have managed healthcare spending through plan design adjustments and aggressive negotiations, Harris said. And companies are increasingly shifting costs to employees.

In 2005, a quarter of companies had plans that charged $20 co-payments for doctor visits, up sharply from 16 percent in 2004. The percentage of companies with plans charging $10 co-pays declined to 22 percent from 29 percent in 2004.

Pharmaceutical co-pays are increasing. This year, 15 percent of companies had plans charging $15 co-pays for a brand-name prescription on the employer's suggested drug, down from 20 percent in 2004. Meanwhile, 35 percent had plans with $20 drug co-pays, up from 33 percent in 2004.

Harris said employers cover 80 percent of healthcare costs — and he predicted that this percentage will change little even as employees pay more.

The Hewitt study found that HMO rates are expected to rise 15.8 percent in the Northeast, 9.4 percent in the Southeast, 11.7 percent in the Midwest, 13.5 percent in the Southwest and 10.9 percent in the West.

The study is conducted by surveying 160 companies that represent an aggregate of more than 1 million employees.