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July 21, 2009
Initial Healthcare Premiums Projected to Rise Nearly 12%

Initial HMO premium rates will increase by about 11.8 percent in 2010, about the same as last year, according to research by Hewitt Associates, a consulting firm. The actual rate increase will drop after plan changes, negotiations, and terminations.

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"While HMO rates continue to outpace inflation and underlying healthcare trends, employers have been increasingly successful in reducing these costs by 3 to 4 percentage points over the past few years through plan design changes, cost shifting, and negotiating aggressively with health plans," said Maureen Fay, a principal and co-leader of Hewitt's HMO rate analysis project. "Given these challenging economic conditions, we expect to see employers continuing to implement similar--if not more aggressive--strategies for 2010."

Most employers are considering a number of strategies to help mitigate the impact of high HMO premium increases for 2010. These strategies include:

  • Consolidating Vendors or Moving to Self-Insurance: Companies continue to consolidate vendors under self-insured plans, or in many cases, are terminating less efficient HMOs in favor of more efficient network models. Consolidating plans enables employers to take more control of their claims data so that they can better analyze the results, and put the right healthcare strategies in place to address underlying health risks, conditions, and utilization patterns specific to their population. In other cases, some employers are choosing to eliminate HMO plans altogether. According to Hewitt's data, 56.6 percent of employers offered HMOs in 2009, compared to 59.1 percent in 2008.
  • Aggressively Negotiating with Health Plans: This year, employers are negotiating more aggressively with health plans as they look for ways to achieve cost savings amidst the continued recession.
  • Changing Plan Design: Companies are continuing to look for ways to shift a greater portion of health care costs to employees. This year, an increasing number of employers are shifting from a copay to a coinsurance model by, for example, moving from a $15 office copay and $250 hospital copay to a $200 plan deductible followed by 90 percent coinsurance for all services.
  • Improving Employee Health: Improving the overall health and wellness of employees continues to remain a main focus for companies, even in an environment where cost containment is a top priority. Recent Hewitt research shows that almost two-thirds (65 percent) of companies are making a significant investment in the health and productivity of their employees.
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