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Milliman 2005 Group Health Insurance Survey Sees Slowing of Premium Increases

Posted on: Monday, 24 October 2005, 09:01 CDT

SEATTLE, Oct. 24 /PRNewswire/ -- Results from Milliman's fourteenth annual survey of Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) indicate a slowing of premium increases. Among plans responding in both 2004 and 2005 for the benefit plan provided, 2005 HMO premiums increased 8% over 2004, the lowest increase in five years. PPO premiums for a standard benefit plan also increased 8% among plans responding in both 2004 and 2005, while premiums for high deductible PPO plans increased 1%.

Milliman's annual survey was sent to the nation's HMOs and fully insured PPOs that serve the commercial large- or mid-group employer markets. About 40% of those surveyed participated. The annual Milliman survey is unique in that it asks HMOs and PPOs to respond to a given set of benefits and demographics. The survey removes three important factors that can skew the results of a typical survey on health costs: differences in benefit design scope, cost sharing levels and member demographics.

While the reported 2005 high deductible PPO premium for the requested benefit plan is virtually the same as reported in 2004, use caution in extrapolating this relationship forward. "In particular, we expect the increase for high deductible plan premiums to be at least as great as the increase for low deductible plan premiums, all else being equal. The small increase in high deductible PPO prices in 2005 may help fuel employer interest in shifting to a high deductible PPO product with an integrated employee account," says Steve Cigich, author of the survey. Earlier, Milliman reported that 93% of those who responded to the Consumer Driven Health (CDH) portion of the survey expect to offer employers within the next year a high deductible plan with an integrated employee account, i.e., Healthcare Reimbursement Account (HRA) or Health Savings Account (HSA). "Market forces may be moving into alignment for those products."

For 2006 renewals, HMOs anticipate premiums to increase 10 to 12% while PPOs anticipate premiums to increase 12 to 13%. These anticipated increases are on book or manual rates. Actual rate increases implemented will likely differ due to group experience, contract negotiations, changes in cost sharing, and market conditions.

A comparison of results between HMOs and PPOs showed that PPOs reported lower medical expense ratios and higher profitability than HMOs. However, unit price and utilization measures are higher for PPO plans.

Complete results for the Milliman 2005 Group Health Insurance Survey are now available and include premium rates and trends by component, hospital inpatient cost and utilization data, physician reimbursement levels, medical expense ratios, and profit levels. Results are provided by metropolitan area, state, region, and nationwide. HMO and PPO results are shown separately. This year's survey results also include information regarding the implementation of consumer-driven approaches to healthcare and small group medical underwriting practices.

Milliman, whose corporate offices are in Seattle, serves the full spectrum of business, financial, government and union organizations. Founded in 1947 as Milliman & Robertson, the company has 32 offices in the United States as well as offices in Bermuda, Hong Kong, London, Madrid, Mexico City, Milan, Munich, Sao Paolo, Seoul, Tokyo, and Warsaw. Milliman employs approximately 1,850 people, including a professional staff of about 850 qualified consultants and actuaries. The firm has consulting practices in healthcare, property & casualty insurance, employee benefits, and life insurance/financial services. It is a founding member of Milliman Global, an international organization of consulting firms serving insurance, employee benefits, and healthcare clients worldwide. For further information, visit http://www.milliman.com/.

Milliman

CONTACT: Steve Cigich of Milliman, +1-262-784-2250

Web site: http://www.milliman.com/

Source: PRNewswire

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