Double-Digit Increase Predicted For HMO Premiums in 2005

Sixth consecutive year of HMO double-digit price rise will push employers and payers to squeeze labs

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THERE’S GOOD NEWS AND BAD NEWS from the 13th annual Milliman survey of HMOs. Milliman predicts that the rate of health premium increases will decline by 3.8% over last year’s survey. However, the average premium increase for 2005 is still predicted to be in double digits, at 11%.

For the lab industry, this is definitely bad news. It means that both employers and payers will be pushing hard throughout 2005 for hospitals and providers to accept lower reimbursement. All providers will want to anticipate these demands at contract renewal time. THE DARK REPORT recommends that lab directors and pathologists should negotiate with payers from a well-prepared and well-documented position.

Milliman, based in Seattle, Washington, is a respected consulting firm. Its annual survey of HMOs and PPOs is unique because payers “are asked to respond to a given set of benefits and demographics. The survey removes three important factors that can skew the results of a typical survey on health costs: differences in benefit design scope, cost sharing levels, and member demographics.”

Milliman’s full survey will be released later this fall. It released preliminary results from the first 30% of payers surveyed. For HMOs, the 2005 rate increase is predicted to be 11.0%, compared to 14.8% for 2004. Milliman notes that this will be the sixth consecutive year of double-digit increases in HMO premiums. For PPOs, Milliman’s preliminary findings predict a 2005 renewal rate increase of 12.0%.

These numbers are consistent with findings announced recently by the Kaiser Family Foundation and Health Research and Educational Trust, based in Oakland, California. In a survey of 3,000 employers, Kaiser researchers determined that healthcare premiums increased 11.2% during 2004. This reflects an average for various types of payers and a range of insurance plan options.

PPO Costs Climbing

Kaiser’s survey determined that the average family premium for a PPO now costs in excess of $10,000 per year. This is a key statistic, because this number is close to the average annual earnings of a full-time, minimum wage worker.

The implications of this fact are significant for the entire medical profession. Increases in the cost of healthcare insurance are outstripping the ability of employers to fund their employees’ health benefits. Significant increases in the number of employed individuals who lack adequate health insurance will trigger an intense political debate. Labs should carefully follow how employers respond to this situation. Their wishes will carry the substantial political clout.

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