HMO Premiums to
Rise in 1998

Health maintenance organization (HMO) premiums are expected to rise approximately 8 percent nationally in 1998. The 1997 national average increase was approximately 3 percent.

What can be attributed to the rising costs? Experts say prescription drug costs, an aging population, increased chronic illness, HMO expansion into new markets, including new regions and new target populations, and upgraded information systems. Plans concessions to consumer demand to increase choice and access to providers without having to coordinate care with a "gatekeeper," and plans offering Point-of-Service and Open-Access options are also factors.

During the past four years, HMOs have maintained stable premiums. This stability has been due to employer pressure and the plans' desire for market share but the result over time has been smaller profit margins and increasing costs for the plans. The compelling challenge now facing HMOs is their ability to control health care costs for sicker, larger populations while improving quality.

Experts predict that large employers will most likely tolerate premium increases because of the tight labor market and a booming economy. A major concern is that some small employers may be forced to drop coverage for their employees.

- Kathy Bishop-Flood

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