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June 16, 2005
HMOs Propose Lowest Rate Increases in Five Years

HMO rates will increase approximately 12.4 percent nationally in 2006, the lowest rate of increase in more than 5 years, according to a preliminary analysis by Hewitt Associates.

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Initial HMO rate increases are averaging 12.4 percent compared with 13.7 percent at the same time last year, according to data from a Hewitt website that captures HMO rate information for roughly 160 large companies representing more than 1 million employees and annual premiums of nearly $4 billion.

After plan changes, negotiations, and terminations, the average HMO rate increased by 9 percent in 2005, according to Hewitt. The firm expects that in 2006, the rate of increase will be even lower after negotiations.

"While HMO rate increases have trended downward for the past several years, 2005 marked a turning point in that employers who managed their healthcare spending through plan design adjustments and aggressive negotiations were able to realize HMO rate increases of less than 10 percent for the first time in five years," notes PaulHarris, senior health care strategist, Hewitt Associates. "In 2006, we expect to see even lower increases, perhaps in the 8 percent to 9 percent range, after negotiations are complete."

While the U.S. is showing a lower rate of increase overall, some areas of the country, namely the East and Southwest, are experiencing slightly higher rate increases. Preliminary analysis shows 15.8 percent increases for the East in 2006 compared with 14.6 percent at this time last year, and 13.5 percent for the Southwest compared with 13.4 percent last year.

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