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HMO rates to rise 17 percent in 2003, survey says

Health maintenance organizations will increase renewal rates by approximately 17 percent in 2003, according to the annual Milliman USA survey of the nation’s HMOs.

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The Milliman survey shows this is the fifth consecutive year premiums have increased after four years of little or no increase.

“Health care has evolved to the point where the managed care delivery model, despite its successes, can no longer be the sole solution for controlling costs. Consumers cannot be expected to shoulder a doubling of health care costs roughly every five years,” notes Steve Cigich, author of the Milliman survey.

Ciglich says HMO executives expect employers to increase workers’ share of health care costs, while stepping up efforts to educate employees about making wise health care decisions. HMOs also plan to work more closely with physicians to provide efficient and effective care.

“Emerging health care issues to address in controlling future costs include societal attitudes toward health care, governmental cost shifting resulting from covering special populations, malpractice litigation cost and awards, and government mandated health benefits, to name a few,” Ciglich says. “DCCD health plans have the ability to raise consumer awareness regarding health care’s true cost. This awareness is an important step as it will lead to a national debate on these issues.”

"The key drivers behind health care increases continue to be prescription drug costs and the pressure HMOs are under to produce improved bottom line results," says Jack Bruner, national heath care practice leader with Hewitt Associates. "Health plans are standing tough in negotiations, as they are focused more on profitable membership rather than total membership as in years past."

As costs and rates rise,

HMOs are still looking for profitability.

Employers are reacting to these rate hikes in different ways, besides just passing costs on to their workers, Hewitt found. Companies are moving to multi-tiered prescription drug plans, tightening managed care plans, eliminating "cost inefficient" plans, moving toward preferred provider organizations (PPOs), getting tougher and smarter in negotiations with health plans, and contracting with plans offering specialized programs for employee populations that might have a high prevalence of certain medical conditions.

Rising drug prices a prescription for higher HMO costs

Ciglich says a major factor in rising HMO costs is the sharp increase in prescription drug prices. "With direct-to-consumer advertising, the introduction of newer drugs and drug therapy, and the desire to avoid costly hospitalizations, prescription drug costs have naturally risen," Ciglich says.

The HMOs surveyed by Ciglich say their drug outlays rise despite attempts at controlling costs with programs that increase member co-pays, shift from flat to multi-tiered co-pays, counsel doctors with abnormal prescription programs, and shift some costs to doctors.

"HMOs are trying to control [drug] costs but something is happening beyond their reach," says Cigich.

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