HMO Premiums To Increase 11.8% - Employers Move to Self-Funded Plans

MyHealthGuide Source: Hewitt Associate, 7/16/08, www.hewitt.com 

LINCOLNSHIRE, Ill -- Hewitt Associates, a global human resources consulting and outsourcing company, surveyed 160 large U.S. companies representing approximately 1 million participants regarding negotiations for HMO plan rates for 2009.

Survey findings

• Initial 2009 HMO rate increases are averaging 11.8% compared with
  • 13.2% in 2008 and
  • 11.7% in 2007.
     
• Expected Regional Rates
  • 15.4% - Southeast region
  • 7.3% - Southwest region

Employers Move Away from Employee Cost-Shifting

"We expect to see more companies move away from traditional employer strategies—such as employee cost-shifting—toward more aggressive and innovative steps that not only help mitigate health care costs, but also keep more money in employees’ pockets," said Jeff Smith, a senior consultant and co-leader of Hewitt’s HMO rate analysis project.

Anticipated Moves To Self-Funding

Building on the success of their efforts last year, employers will continue to take aggressive steps in 2009 to mitigate the impact of high HMO premium increases on their health care budgets including:

• Consolidating Vendors and Moving to Self-Insured Plans: An increasing number of companies are aggregating the lives from smaller and/or less efficient HMO plans into a consolidated risk pool with their most efficient health plan administrators. This creates more purchasing power and leverage through the negotiation process and typically results in more realistic assumptions around such factors as overhead and risk margins, while also reducing overall cost by having a smaller number of health plans to manage.
  
   
• Moving away from local and regional fully insured HMO plan offerings, which have higher administrative costs and are subject to state-mandated benefit requirements that drive up premium costs. Instead, they are consolidating plan participants under self-insured arrangements where they assume the full financial risk for medical claim costs and pay the health plan an administrative fee for services such as claims processing and provider network management.
  
   
• Increasing Focus on Improving Employee Health: Employer interest in building employee knowledge and ownership for managing their health continues to grow. Research shows more than 85% of companies invest or plan to invest significant resources in long-term health and productivity initiatives over the next three to five years. Health- and wellness-related programs that address the spectrum of health risk from the healthy to the chronically ill—including health risk assessments, disease management programs, nurse help lines, and smoking cessation and weight management programs—are the most widely offered; however, emerging strategies such as value-based health plan designs and biometric screenings are rapidly gaining interest among employers.

About Hewitt Health Resource™

Hewitt Health Resource™ (HHR) is a Web-based service that helps companies manage all of their health plan interactions and data needs. HHR includes online capabilities for health plan selection and renewal, and Hewitt’s Connections service for eligibility and premium management. To date, Hewitt has used HHR for 160 companies representing approximately 1 million participants. Approximately 128 health plans have also used the site.

About Hewitt Associates

For more than 65 years, Hewitt Associates (NYSE: HEW) has provided clients with best-in-class human resources consulting and outsourcing services. Hewitt consults with more than 3,000 large and mid-size companies around the globe to develop and implement HR business strategies covering retirement, financial and health management; compensation and total rewards; and performance, talent and change management. As a market leader in benefits administration, Hewitt delivers health care and retirement programs to millions of participants and retirees, on behalf of more than 300 organizations worldwide. In addition, more than 30 clients rely on Hewitt to provide a broader range of human resources business process outsourcing services to nearly a million client employees. Located in 33 countries, Hewitt employs approximately 23,000 associates. Visit www.hewitt.com.