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June 15, 2006
HMO Rate Increase Slows

HMO rates should see an average increase of about 11.7 percent for 2007, down from initial increases of 12.4 percent in 2006 and 13.7 percent in 2005, according to preliminary data from Hewitt Associates, an HR services company.

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The firm examined its database that captures HMO rate information on 160 large companies representing more than 1 million employees, finding that initial 2007 HMO rate increases are averaging 11.7 percent. After plan changes, negotiations, and terminations, the final average HMO rate increased by 10 percent in 2006, according to the firm.

"Although there has been a steady decline in the level of HMO rate increases over the past several years, double-digit increases are still very difficult for employers to absorb," says Paul Harris, senior health care strategist, Hewitt Associates.

Companies continue to make plan design changes and share more of the cost with employees, such as higher copays, Harris says. The number of companies offering $20 office copays increased from 16 percent in 2004 to 29 percent in 2006. Meanwhile, the number of employers offering $10 copays dropped from 29 percent in 2004 to 17 percent in 2006.

Earlier this month, Aon Consulting released results of its survey of 70 healthcare insurers. The survey found that healthcare costs for HMOs are expected to increase by 12.2 percent in the next 12 months.

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