HMOs: Despite Strong Income, Rates Expected to Rise

     In the first six months of this year, HMOs "regained a firm financial footing," with only Aetna posting earnings lower than expected, but employers should "brace" for rate hikes of up to 12% next year, Business Insurance reports. Premium increases appear to have outpaced medical costs, creating "stable" medical loss ratios in the first half of 2000; prescription drug costs may also be stabilizing with the advent of three-tiered co-payment systems. Industry success stories include Humana, with $40 million in net income marking a 33.3% increase over the same period last year, and WellPoint Health Networks, which reported $163.3 million in net income -- a 34.3% increase -- for the first half. Though analysts say the "immediate outlook is good," some also caution that "tremendous pressure" from providers to increase reimbursement rates, along with the rising costs of drugs and technology and the aging of the baby boomers, could cut into profits in the future and will compel HMOs to keep raising premiums. Experts expect to see a 10-12% rise in 2001 (Greenwald, 8/14). Analysis suggests that hardest-hit states will likely be Texas, Ohio and Michigan, with some regions facing a rate hike of up to 20% (Corporate Research Group release, 8/16).