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HMO premiums to see biggest increase in 5 years: Aon Hewitt


Affected by adverse selection, health maintenance organization premium rates will increase by an average of 9.8% in 2011, the biggest increase in five years, according to research released Tuesday by Aon Hewitt Inc.

Next year’s 9.8% average rate increase compares to average rate increases of 9.4% and 9% in 2010 and 2009, respectively. In 2006, rates increased by an average of 10%.

By region, HMO rates will rise the most in the Southeast, with rate increases averaging 12.5% in 2011, up from 8.6% in 2010. By contrast, in the West, rates will increase by an average of 9% next year, down slightly from 9.2% in 2010.

Lincolnshire, Ill.-based Aon Hewitt says a number of factors, including adverse selection, are propelling the rise in HMO rates.

Enrollment during the past few years—especially by younger, unmarried and healthier employees—in lower-cost, high-deductible health plans and preferred provider organization plans has increased.

By contrast, HMOs, which tend to offer richer benefits at a higher cost, are attracting more individuals and families who use more health care services.

“Having a higher mix of these plan participants in HMO plans” drives costs higher, Aon Hewitt notes.

In addition, Aon Hewitt says HMOs have been more aggressive in calculating the cost impact of changes to plan design, such as covering employees’ adult children up to age 26 and eliminating lifetime dollar limits, mandated by the health care reform law and which generally kick in next year.

The analysis is based on HMO rate information obtained for 160 large employers.

A summary of the analysis is available at