Enrollment in California HMOs Decreases As More Residents Choose Less-Restrictive Health Plans, Study Says

For the first time in at least eight years, the percentage of Californians enrolled in HMOs has decreased, dropping below 50% in 2001, according to a survey released yesterday by the Kaiser Family Foundation and the Health Research and Educational Trust. The Los Angeles Times reports that HMO enrollment dropped from 55% in 2000 to 48% in 2001; until 2001, the percentage had risen steadily since 1994, when 35.3% of Californians were in HMOs (White, Los Angeles Times, 2/20). The results are based on a survey of 846 California employee benefit managers conducted between May 2001 and August 2001 (KFF/HRET release, 2/19). The Times reports that the decline in HMO enrollment reflects growing consumer demand for greater health care choices than those offered by HMOs, the most restrictive type of managed care plan. Accordingly, California enrollment in preferred provider organizations rose from 25% in 2000 to 27% in 2001, while enrollment in point-of-service plans -- "once considered a dead model by some health care analysts and experts" -- increased from 19% in 2000 to 25% in 2001. Both PPO and POS plans offer consumers greater flexibility, the Times reports. The decline in HMO enrollment below the 50% mark is a "significant milestone," given California's role in the development of managed care and the prevalence of HMOs in the state, the Times reports.

Despite the drop, the percentage of Californians enrolled in HMOs remains much higher than HMO enrollment nationwide. Nationwide, HMO enrollment dropped from a peak of 31% in 1996 to 23% in 2001, according to the Kaiser Family Foundation (Los Angeles Times, 2/20). Concerning the drop in California's HMO enrollment, foundation Vice President Larry Levitt said that HMOs "haven't fulfilled their promise of decreasing costs," adding, "They're still cheaper than other types of insurance, but their premiums are going up just as fast." But Walter Zelman, head of the California Association of Health Plans, disputed the notion that managed care had failed to control costs, saying that health plans have simply "respond[ed] to consumer concerns" about choice, adding, "Unfortunately, that response can be expensive" (Colliver, San Francisco Chronicle, 2/20).

The survey also found that health insurance premiums for California employers increased by 9.9% in 2001, more than double the state's 4.3% inflation rate (Fong, San Diego Union-Tribune, 2/20). However, premiums in California remained lower than in the rest of the nation. Monthly premiums for employer-based health plans in California averaged $197 for an individual and $521 for a family, compared to the national average of $221 for an individual and $588 for a family (San Francisco Chronicle, 2/20). In addition, the share of health costs paid by employees in California remained lower than those in the rest of country and did not change from 2000 to 2001, the survey found. "Health insurance costs in California have remained lower than the national average likely due in large part to the percentage of people enrolled in HMOs and the number of different HMOs that compete in the market," Jon Gabel, vice president for Health System Studies for the Health Research and Educational Trust, said, adding, "But it looks as if that, too, is changing" (KFF/HRET release, 2/19). The survey also found that the drop in HMO enrollment coincides with an increase from 48% in 1999 to 66% in 2001 in the percentage of California employers offering health coverage (Wolfson, Orange County Register, 2/20). Levitt said that increase reflects the economic and "dot-com boom" of the late 1990s, but he added that he would expect the percentage of employers offering insurance to drop in the future because that economic situation no longer exists (Los Angeles Times, 2/20). The survey and other related materials are available online.