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July 02, 2007
HMOs Propose Higher Rate Increases

HMOs are proposing the highest premium-rate increases in four years, according to an analysis by Hewitt Associates, a consulting firm.

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The firm found initial HMO premium rate increases are averaging approximately 14.1 percent for 2008, up from 11.7 percent for 2007 and 12.4 percent for 2006. Initial HMO increases are before plan changes, negotiations, and terminations. In 2007, average HMO rates increased by 8.2 percent after plan changes, negotiations and terminations, according to Hewitt.

"While the majority of HMOs are proposing initial rate increases that are consistent with those provided in previous years, a few carriers have proposed significantly higher rate increases for 2008, which seems to be the primary reason for the spike in this year's overall rate increase across plans," says Jeff Smith, a senior consultant and co-leader of Hewitt's HMO rate analysis project. "We expect that average rates will decrease once negotiations are complete; however, they may continue to be in the double digits."

The analysis is based on data from the firm's website that captures HMO rate information for nearly 160 large companies representing more than 1 million employees and annual premiums of nearly $3 billion.

Hewitt says that employers are considering a number of strategies to help mitigate the eimpact of high HMO premium increases on their healthcare budgets this year, including:

  • Shifting costs to employees,
  • Moving to self-Insured plans,
  • Aggressively negotiating with health plans, and
  • Implementing strategies for keeping employees healthy
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