Health Care

''Unprecedented'' Hikes Expected for 2003.


Brace yourself for the next great health-care price hike. As companies begin to negotiate health-plan rates for 2003, they are finding that health maintenance organizations (HMOs) and other insurers are insisting on massive rate hikes for next year.

In fact, the California Public Employees' Retirement System (Calpers), the largest employee health-care purchaser in California, has already agreed to a health-care package that includes a 25.1 percent increase for HMOs. "The marketplace is extremely difficult," says Clark McKinley, a Calpers spokesman.

Last year, when HMOs proposed high premium increases, Calpers rejected them all and asked for new bids. It later managed to keep premium increases to 13.2 percent. "We didn't get a sense that we could do that this year," says McKinley. This year, plans weren't prepared to take losses to get the sizable Calpers business.

Other health-care purchasers are seeing similar increases. Data from Hewitt Associates Inc. indicates that initial HMO rate increases for 2003 are averaging a gruesome 22 percent, compared with an average premium increase of 15.3 percent this year. "It's bad," says Jim Winkler, a health-care consultant at Hewitt. "And with no end in sight, it's going to get worse before it gets better." Winkler attributes the higher premiums to the economy, which has increased the ranks of the uninsured; still-higher drug costs; consolidation among providers; and an emphasis on earnings by Wall Street.

He expects companies to get more aggressive in passing costs on to employees. For example, the number of companies with a $15 co-pay for office visits more than doubled, from 11 percent in 2001 to 24 percent in 2002.

And as Calpers's experience shows, health-plan providers are no longer willing to come down on price to get large contracts from big companies. "The days of [health plans] going for market share are over," says Winkler. "Big companies can no longer pound their shoe on the table."


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