HMO RATES UP AGAIN FOR 2003 AVERAGE HIKE PEGGED AT 22%.

Byline: From Staff and Wire Reports

HMO rates for next year are surging more than 20 percent, an unexpectedly high figure that sets the stage for a third year of double-digit increases in overall health care premiums, a new survey says.

As companies begin negotiations for 2003 contracts, rates are rising an average of 22 percent but as much as 94 percent, according to the survey released this week by Hewitt Associates. The consulting firm's Web site captures rate information from nearly 140 companies with a total of more than 1 million employees.

Hewitt had been expecting HMO rates to increase about 14 percent for 2003. HMO premiums for 2002 rose an average of 15.3 percent.

``This is a harbinger of overall rate increases,'' said Mindy Kairey, e- business leader for Hewitt's Health Management Practice.

Overall health-care premiums for 2002 rose an estimated 15.6 percent after a 10.2 percent jump in 2001.

The dramatic increase in HMO rates is partially a result of plans keeping rates low during the late 1990s to win market share. Also during the 1990s, many members left HMOs for less restrictive plans, leaving the sicker, more costly patients behind.

Now the HMOs are trying to recoup losses suffered during those years, said Kairey.

Several other factors are driving up costs for the HMOs and other types of plans, including the high price of prescription drugs and new medical technologies. Moreover, health plans are adding new computers and software programs to comply with federal medical privacy regulations that go into effect next year.

``Given the pace of health-care inflation we are currently seeing, it's not totally unrealistic that rates would be going up,'' said Michael Chee, spokesman for Thousand Oaks-based Blue Cross of California.

Aside from soaring costs associated with prescription drugs, mounting hospital and doctor bills are also contributing to the rate increase. And while Woodland Hills-based Health Net perceives the numbers calculated by Hewitt's survey as a bit high, the managed care company is not completely surprised given the conditions.

Instead of rates rising 20 percent, Health Net expects a 17 to 18 percent increase, said David Olson, a spokesman for the company. ``But this data is really Round One of the rate proposals we're going to see,'' he said. ``And I expect to see some catch up, with more employees sharing the cost.''

To offset some of the increases, companies are shifting more costs to employees. The survey found that the number of companies charging $15 for a doctor visit more than doubled to 24 percent in 2002. Meanwhile, the number of employers offering a $10 visit dropped to 58 percent in 2002 from 64 percent in 2001.

Patients also are paying more for their medicines. In 2001, 52 percent of companies surveyed offered a $5 co-pay for generic drugs. That dropped to 46 percent in 2002. Meanwhile, the number of companies with a $10 co-pay for generic drugs increased to 40 percent in 2002 from 27 percent in 2001.

The number of firms with a $20 co-pay for branded drugs increased to 26 percent in 2002 from 12 percent in 2001.

Kairey said such incremental changes will not bring down overall costs, but they do expose patients to the cost of health care. She said a key to holding down costs is creating more educated patients who are responsible for their decisions.