MANAGED CARE: INCREASES IN RATES EXPECTED
Mid year insurance renewals are showing that costs forThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
health care coverage, which have not increased since 1994, are
beginning to increase, Business Insurance reports. Analysts see
percentage cost increases in the range of "mid-single-digits,"
with premium increases beginning next year in the double digits.
A variety of factors were cited for the increases, including: an
"inevitable rebound from years of artificially low pricing by
[HMOs] eager to gain market share"; "'HMO backlash' by consumers
and legislators"; "savvier contracting by physicians and
hospitals;" and a return of cost inflation that reflects the lack
of real "structural change in the nation's health care system."
OTHER REASONS FOR INCREASES
According to Tom Willig, an actuary for Towers Perrin,
recent "flat" HMO rates were "the reflection of intense
competition and margin cutting" among HMOs. Dan Hoemke, a vice
president of marketing and sales at PacifiCare of California,
said of the increases, "Mainly it's a catch-up component. Most
health plans from the start were offering big decreases on rates,
and now it's catching up. ... So there were three or four years
of less-than-responsible financial management, and now we have to
make up for it."
According to Richard Sinni, director of health care
management for the New York-based Buck Consulting Group, "HMOs
are trying to raise rates two percent to six percent during
midyear renewals, with reports of some individual rate increase
attempts of 11%." Joseph Lynaugh, CEO of NYLCare Health Plans
Inc., said "he expects 1997 to show a five percent to six percent
level of health care inflation," and a 10% or 12% rate for 1998.
Richard Allen, CEO of the New York-based benefits consulting firm
American Corporate Benefits, Inc., said that "HMOs have raised
rates five percent to eight percent this renewal season."
AROUND THE COUNTRY
However, industry observers note that there are major price
differences around the country. NYLCare's Lynaugh noted that
California doctors are "sophisticated and aggressive" in
negotiating with HMOs, while East Coast hospitals are
"sophisticated at negotiating their arrangements with health care
organizations." According to Jack Erb of William M. Mercer Inc.,
"South Florida, California and New York seem to be particularly
ahead of the pack in terms of doctors' increased skill at
negotiating contracts with managed care organizations"
(Zolkos/Kazel/Simpson, 7/7 issue).