While HMO premiums are on the rise again for 2009, they are increasing at a lower rate compared to last year.

A study by Hewitt Associates, a global human resources consulting company based in Lincolnshire, Ill., shows that HMO insurance premium rates will increase by a national average of roughly 11.8 percent in 2009. But your premium rate increase will vary depending on where you live (see sidebar). If you live in the southeast region of the United States, you'll likely see the greatest increase. The lowest increase is expected in the southwest.

"Here's where we are at the moment but we expect them to go down because of negotiations, plan changes and terminations," says Jeff Smith, senior consultant and co-leader of Hewitt's HMO rate-analysis project.

The initial estimated increase for 2008 of 13.2 percent turned out to be 9.4 percent after companies started combating high health insurance premiums with a variety of measures that lowered their rates. Employers are likely to continue this trend as they begin negotiating rates for 2009, Smith says. According to the Kaiser Family Foundation, roughly 66.8 million Americans were enrolled in HMO plans last year (compared to about 183 million in PPOs, according to a Health Leaders-InterStudy, a health care business-information company).

Fighting rate increases

Facing high premiums that crush their health insurance budgets, employers are responding in a number of ways. Some have decided to cut back on administrative costs by consolidating vendors (cutting out multiple HMO plans, for example) and moving to self-insured plans. Reducing the number of health insurance vendors gives employers more purchasing power during negotiations, and self-insured plans — though more risky for an employer due to fluctuating costs — also save money.

In addition, many companies have started focusing on employee-wellness programs in the belief that improving employee health will control health care costs and increase productivity.

"There's a big push on wellness now — keeping the healthy healthy so they don't become sick," Smith says.

Hewitt's study found that more than 85 percent of companies invest or plan to invest in a wellness program. Some popular features include offering incentives to quit smoking, join a health club and eat healthy. Another popular response — that has been a growing trend in the past five years – is shifting costs to dependents. This can be through increased contributions for dependent health care coverage or by applying surcharges to encourage dependent spouses to take coverage under their own employer's plans.

Different strokes for different folks

Trying to figure out why certain regions experience higher HMO premium rate increases than others isn't a perfect art. Regional rates depend on a number of factors such as demographics, health risks and plan designs.

"That's a million-dollar question," Smith says. "I don't have a definitive answer, but what we have traditionally seen is that different regions have different populations."

For example, certain regions attract older populations that require more health care, thus those regions may see higher rate increases. Changes in state legislation and times of contract negotiations for major hospitals or physician groups can also greatly impact rates, Smith says.

However, no matter where you live, HMO premium rates appear to be increasing at significant levels annually — a trend that is worrying many industry observers.

For example, if national wages increase by 3 percent and health care costs climb 5 percent, employees will take home less net income.

"I think that the only thing that is surprising is that even though the initial rate of increase is decreasing from last year, it's still substantially outpacing inflation and wages," Smith says. "That can't continue."