California HMO Monthly Premiums Lag National Average by 21%.

CALIFORNIA--(BUSINESS WIRE)--Nov. 18, 1998--Average HMO monthly book premiums in California were some $30.10 -- 21% -- less than the national average of $138.30 in 1998 according to a survey of local HMOs by Milliman & Robertson, the national consulting and actuarial firm with a large health care practice. The number, $108.20, reflects the amount California HMOs had to charge per member per month to meet budgeted revenue figures. In the region, California's book premium number was $6.56 less than the Pacific as a whole.

Hospital utilization by California HMOs in 1998 stood at 188.9 days per 1,000 members, compared with 239 days nationally. The study consisted of data received from 23 California HMOs.

National PMPM Rate Reflects Highest Increase In History Of Survey

Nationally, following four years of flat HMO monthly book premium rates, (the rates required to achieve budgeted revenue targets), the rate per member per month in 1998 increased to $138.30, a 7.8 percent rise from the 1997 rate of $128.28. On a per employee basis, that number was higher, posting an almost 10 percent increase from $151.01 in 1997 to $164.17 for 1998. The survey represents data as of July 1, 1998, based on responses from over 40 percent of all U.S. HMOs.

"HMO rates are still only up 1 percent annually since 1994 even allowing for this year's spike," said Steve Cigich, the Milwaukee M&R principal who compiled the data in the survey. "Three factors contributed to this year's rise in rates: poor profitability, the inability of HMOs to obtain further unit cost reductions, and the inability of HMOs to further encourage providers and health care systems to provide care more efficiently. Many of the easy process inefficiencies have been worked out of most systems. Further efficiencies will only be gained by community investment in the right facilities and provider quality initiatives. If this trend continues, we cannot rule out further premium increases, although most likely of a lesser order of magnitude, next year."

Hospital Utilization Down; Pharmaceutical Prescriptions Up

HMO revenues were affected in 1998 from a decline in hospital admissions and an increase in lengths of stay. Total inpatient days per 1000 members declined 3.2 percent from 247 days in 1997 to 239 days for 1998. Admissions similarly declined, falling some 5 percent from 66.9 admissions per 1000 members in 1997 to 63.5 admissions in 1998. The implied length of stay increased almost 2 percent, from 3.69 days in 1997 to 3.76 days in 1998.

There was also a nearly 7 percent increase in the number of pharmaceutical prescriptions written per thousand members from 6,604 in 1997 to 7,046 in 1998.

Government Programs Also Problematic

Both Medicare and Medicaid hospital utilization rose in 1998 adding to profitability pressures. Medicare hospital days per 1,000 are up 3 percent to 1,550 days while Medicaid day usage increased 19 percent to 451 days. Prescription drug utilization while up 5 percent on Medicare, fell 3 percent in Medicaid programs. "Clearly government programs have not performed up to expectations and are adding to HMOs woes," said Mr. Cigich.

New England Had Highest Rates

New England had the highest level of 1998 monthly book premium rates in the country, standing at $170.49, up 9.1 percent from 1997. Next highest was the Mid-Atlantic region, including New York, New Jersey and Pennsylvania, at $144.27 per member per month, a 4.2 percent increase over 1997. Lowest rates were found in the Pacific region with a per member per month book rate of $114.76, an increase of 5.3 percent over 1997. The national average was $138.30, up 7.8 percent.

The Mid-Atlantic HMOs had the highest annual level of hospital utilization per 1,000 members, reporting 286 total inpatient days in 1998, down 3.1 percent from the previous year. West South Central HMOs were next with 265 days reported in 1998, a 4.7 percent increase compared with the 1997 mark. HMOs in the Pacific region reported the fewest inpatient days with 197 per 1,000 members in 1998. The nationwide average of 239 annual inpatient days in 1998 represented a 3.2 percent decline compared with last year's average of 247.

Milliman & Robertson, Inc., headquartered in Seattle, serves the full spectrum of business, financial, government and union organizations. Founded in 1947, Milliman & Robertson has 28 offices in the United States and offices in Bermuda and Tokyo. It is a member firm of Woodrow Milliman, an international affiliation of actuaries and consultants. Milliman & Robertson employs approximately 1,200 people in the United States, Bermuda and Tokyo, including a professional staff of over 480 qualified actuaries and consultants. The firm has consulting practices in property and casualty insurance, pensions, employee benefits, healthcare, life insurance and risk management.