Initial HMO rate increases will “only” be 12.4% in 2006. This comes as good news, as increases this year averaged 13.7% according to Hewitt Associates, who also noted the 2006 number is the lowest in five years.
We’ll get to the “if this is the good news, I’m not wanting to hear the bad news” in a moment. First, the details. The actual rate increases tend to be lower than the initial rates. The reason is that employers, shocked by the initial rate increases, cut benefits, increase employee co-pays, alter prescription drug programs, and change HMOs. This usually results in final increases somewhat lower than Hewitt’s “initial rate increase statistics.
So far, so good. Before we all relax, consider that the only way rate increases were held to a rate more than three times the underlying rate of inflation was by shifting costs to the insureds and reducing coverage. Not exactly innovative or long term strategies. However, Hewitt expects that more of this will occur this year, as companies cut benefits and increase copays to offset at least part of the rate increases final increases are likely to be in the 8-9% range.
One benefit that has been particularly affected by these design changes has been prescription drugs. For example, over the last five years, the number of companies offering a $5 generic copay has been cut in half, while the number with a $10 copay has more than doubled and companies are now requiring a $15 copay. With many generics costing pennies per pill, the result is insureds are paying much, if not all, of the cost of many of their generic prescriptions.
Particularly hard hit will be employers offering health plans in the northeast, with initial rate increases coming in at 15.8%.
What does this mean for you?
Leaving aside the benefit design changes and other financial alterations, this means that your health insurance costs for the same benefits you “enjoy” today will cost more than twice as much in five years.
Jun
13
