HMO Premiums Expected to Rise Nationally in 1997

Massachusetts Health Care Purchaser Group Calls for Average 2% Premium Reduction

The Massachusetts Health Care Purchaser Group (MHPG) has called for a 2% reduction in HMO premiums for 1997. MHPG had challenged HMOs to reduce their premiums over the last three years. In 1994, MHPG sought no more than a 6% increase and they received an average 3% premium increase. In 1995, a zero percent challenge was made and achieved. In 1996, a 3% reduction was sought and a 2% reduction delivered. Based on this experience, the plans could meet the 1997 challenge.

The MHPG was created in 1993. It represents 45 large purchasers covering 1 million lives.

Due to reduced premiums, plans experienced increased enrollment but still enjoyed record profits. However, increased medical costs, particularly in pharmacy and outpatient services, coupled with reduced premiums, have eaten away at HMOs' margins (see chart).

Dolores Mitchell, Executive Director of the Group Insurance Commission and member of the MHPG, attended a MMS Managed Care Committee meeting where she indicated that the MHPG will continue to conduct its cost challenge until the HMO profits are brought under control and purchasers benefit from the premium reductions.

Should plans continue to reduce premiums it would most likely be that IPA, PHO, and other budgets are reduced. Conversely, should the premiums rise, budget adjustments would be appropriate as well. Physicians should talk with their health plans to identify the possible changes in budgets and the implications of these budget changes. Vital Signs will also continue to track this issue closely.

- Yael Miller

Figure source: Boston Globe