Managed Care Outlook

Premium hikes for 2006 could be lowest in 5 years

Health plan premiums will rise substantially next year, but not so much as in the recent past. Indeed, there's a good chance that the increase will be less than 10 percent, experts at Hewitt Associates, the large consultancy, are saying.

One way they come to this conclusion is to look at what the plans are asking for when they make their first proposals. The plans have done that, and Hewitt sees a mean asking price of only 12.4 percent. Last year, the requested increase was 13.4 percent. The analysts emphasize that the premium increases now on the table are the lowest in five years.

Next comes negotiations with the payers. Some employers will choose other plans, and for others the scope of coverage may change.

The bottom line, according to Hewitt, is that employers can probably hold plans to premium increases below 10 percent.

While the United States is showing a lower rate of increase overall, health plans in some regions will be better off (and others, sad to say, worse off). Hewitt's preliminary analysis (again, this is from initial proposals) indicates greatest premium inflation in the Northeast and least in the Southeast.

In the graph below, all figures are the "preliminary" or first-round-of-negotiation figures early in the year before the rates go into effect.

Preliminary HMO rate increases 2004–2006 by region (%)

Note: Preliminary HMO increases calculated before plan changes, negotiations, and terminations accounted for.

Northeast: Conn., Del., Maine, Mass., Md., N.H., N.J., N.Y., Pa., R.I., Vt.
Southeast: Ala., Fla., Ga., Miss., N.C., S.C., Tenn., Va.
Southwest: Ark., La., N.M., Okla., Texas
West: Ariz., Calif., Idaho, Nev., Ore., Wash.
Midwest: Colo., Ill., Ind., Iowa, Kan., Ky., Mich., Minn., Mo., Mont, N.D., Neb., Ohio, S.D., Utah, Wis., W.Va., Wyo.

Source: Hewitt Associates

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