Rising rates bring focus on self-insured plans

Initial 2010 HMO premium rates will increase by 11.8 percent — consistent with last year’s projected rate increases and down from 13.2 percent in 2008, according to Hewitt Associates, a human resources consulting company. This increase is fueling greater interest in self-insured plans and other strategies to hold costs down.

Over the past few years, employers have been able to reduce costs “through plan design changes, cost shifting, and negotiating aggressively with health plans,” says Maureen Fay, a principal on Hewitt’s HMO rate analysis project.

Fay says that more employers are interested in greater transparency in plan offerings. Designs that incorporate coinsurance or upfront deductibles are gaining considerable attention.

“Health plans that can support a deductible or coinsurance model will be more appealing to employers,” says Fay.

A fully insured health plan has to conform to any number of state mandates, which tend to add costs and cause employers to offer different benefits to employees in different states. Purchasers can avoid the added overhead by going the self-insured route.

“A self-insured plan can get around state mandates and have lower administrative costs,” says Fay.

Compared to fully-insured HMOs, self-insured plans allow employers to customize programs to meet the specific needs of their covered population.

Preliminary HMO rate increases by region, 2007-2010

Source: Hewitt Associates