HMO rates expected to jump 19% next year

Denver Post ^ | July 2, 2002 | Marsha Austin

[sarcasm]

Tuesday, July 02, 2002 - HMOs will log a third year of double-digit price increases in 2003, and the bill will go to employees.

"You personally will be paying more," said Steve Cigich, who is surveying health maintenance organizations for Seattle-based employee benefits consultant Milliman USA.

Employers will pass these price increases to their workers in the form of higher monthly premiums and bigger out-of-pocket co-payments for pharmaceutical drugs, hospital stays and visits to doctors' offices, Cigich predicted.

Premiums will rise an average of 19 percent in several regions of the country, including the Mountain states, according to preliminary results of the Milliman USA survey.

That's the highest price increase nationally and the biggest jump in health insurance prices since Milliman began tracking HMO premiums 11 years ago.

Nationally, premiums will rise an average 17 percent, according to the survey. Milliman will release its full report in October.

"We would need to look back to the mid-1990s to find a time when HMO rates increased by less than the general inflation rate," said Cigich.

The rate of inflation last year was 2.8 percent.

Health insurance prices are rising faster in Colorado and other Western states - Arizona, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming - mainly because doctors and hospitals are increasing the rates they charge HMOs to treat plan members, said Cigich.

Also driving prices higher are HMOs' attempts to reverse financial losses that plagued much of the industry in 1999 and 2000.

The other areas of the country that are projected to see price increases of 19 percent are the West South Central region, including Texas, and the South Atlantic region, from Delaware to Florida.

The lowest price hike next year is expected to be about 14 percent in the East North Central region, including Illinois.

In Colorado, Lockheed-Martin's 5,600 employees can expect bigger health insurance bills in 2003, said Julie Andrews, a spokeswoman for the Maryland-based aerospace and technology company.

"The company still does contribute the bulk of the cost of the plans," said Andrews. "But underlying all of this is a realization that costs are going up."

Employees won't find out the details of next year's health benefits package for a few more months, she said.

Because it is such a large company, Lockheed is able to offer several health plan options from more restrictive but less costly HMOs to comparably high-cost choice plans and pre-tax medical savings accounts.

Andrews' premiums jumped enough this year that she decided to enroll in an HMO to save money.

"The plan I was on went up more than I wanted to pay, so I opted for a more HMO-type plan," said Andrews.

Louisville-based Storage Technology Corp. made major changes this year in its employee health benefits, raising co-pays and asking employees to pay a bigger share of their medical bills. The company does not expect premiums to rise much in 2003, said Terri Evans, StorageTek manager of employee benefits.

For Colorado's smaller companies, many of which have borne back-to-back HMO premium increases of 50 to 90 percent in 2001 and 2002, this latest round of price hikes may be too much to bear, Cigich said.

"Those employers that are at the margins will exit the market," Cigich predicted.

Colorado's insurance commissioner has expressed concern over the rising cost of health insurance for small employers and their dwindling menu of affordable options. He has supported changing Colorado insurance law to allow HMOs to sell "bare bones" plans with basic but inexpensive coverage and giving small companies with young, healthy employees a break on price.

State lawmakers have voted down both proposals.

Managed care companies are heavily marketing "consumer-driven" health plans to mid-size and smaller employers this year.

These products typically couple high-deductible health insurance with medical savings accounts that employees fund with pre-tax dollars.

The IRS announced last week that it will allow employees to roll-over from year to year funds from personal medical accounts - a move many insurance brokers say will dramatically increase the popularity of such products.

"The intent of a consumer-directed plan is to get employees to take more responsibility for their health care," said Linda Keller, an employee benefits consultant for Marsh Inc. in San Diego.

"It can get them thinking about whether a visit to the doctor's office should be the first choice or if some other type of treatment would make more sense. It's all about putting some of the decision-making into the hands of the consumer."

[Free the USA]

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