Nevada HMO’s rates to rise 10 %

Thursday, June 6, 2002 | 11:31 a.m.

SUN STAFF AND WIRE REPORTS

HMO rates for next year are surging more than 20 percent nationwide, an unexpectedly high figure that sets the stage for a third year of double-digit increases in overall health care premiums, a new survey says.

As companies begin negotiations for 2003 contracts, rates are rising an average of 22 percent but as much as 94 percent, according to the survey released this week by Hewitt Associates. The consulting firm's website captures rate information from nearly 140 companies with a total of more than 1 million employees.

In Nevada, Sierra Health Services Inc., the state's largest HMO, projects its rates will increase by 10 percent to 12 percent heading into next year as the company wrestles with rising costs in three categories: hospitals, physicians and pharmaceuticals.

Peter O'Neill, a spokesman for Sierra, said today that the company has the ability to keep better control on hospital and physician costs. The company has long-term contracts with hospitals, so the HMO's costs in that category should only rise by 7 percent to 8 percent, he said.

O'Neill said because Sierra manages its physician primary care network, the company anticipates increases of 5 percent to 6 percent in that category, with most of that a result of medical malpractice insurance issues.

Pharmaceutical costs, however, are expected to climb about 15 percent to 20 percent for Sierra and O'Neill said the company would tweak benefit plans in an effort to better manage higher costs in that category.

Hewitt had been expecting HMO rates to increase about 14 percent for 2003. HMO premiums for 2002 rose an average of 15.3 percent.

"This is a harbinger of overall rate increases," said Mindy Kairey, e-business leader for Hewitt's Health Management Practice.

Overall health care premiums for 2002 rose an estimated 15.6 percent after jumping 10.2 percent in 2001.

The dramatic increase in HMOs rates is partially a result of plans keeping rates low during the late 1990s to win market share. Also during the '90s, many members left HMOs for less restrictive plans, leaving the sicker, more costly patients behind.

Now the HMOs are trying to recoup losses suffered during those years, said Kairey.

Several other factors are driving up costs for the HMOs and other types of plans, including the high price of prescription drugs and new medical technologies. Moreover, health plans are adding new computers and software programs to comply with federal medical privacy regulations which go into effect next year.

To offset some of the increases, companies are shifting more costs to employees. The survey found that the number of companies charging $15 for a doctor visit more than doubled to 24 percent in 2002. Meanwhile, the number of employers offering a $10 visit dropped to 58 percent in 2002 from 64 percent in 2001.

Patients also are paying more for their medicines. In 2001, 52 percent of companies surveyed offered a $5 copay for generic drugs. That dropped to 46 percent in 2002. Meanwhile, the number of companies with a $10 copay for generic drugs increased to 40 percent in 2002 from 27 percent in 2001.

The number of firms with a $20 copay for branded drugs increased to 26 percent in 2002 from 12 percent in 2001.

Kairey said such incremental changes won't bring down overall costs, but they do expose patients to the cost of health care. She said a key to holding down costs is creating more educated patients who are responsible for their decisions.

There are a host of new plans that do provide patients with more information about doctors, procedures and hospitals that can save patients money if they choose wisely. Kairey adds health plans are also trying to move more procedures such as filing claims or making appointments to the Web, which should eliminate paper work and cost.

"Companies are trying to leverage the Web to give consumers better choices so they can make more-informed, more-responsible decisions about their health care," Kairey said. "You need something like these dramatic rises to jump-start the industry to think more creatively about bringing down costs."