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Batten down the wallets, HMOs want more money

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By ROBERT TRIGAUX, Times Business Columnist

© St. Petersburg Times
published June 7, 2002


Sure, it's the start of hurricane season. But just as scary, it's also HMO pricing season.

Word is that 2003 HMO rate increases once again are going to slap us like a Category 4 storm. Average increase: an unexpectedly high 20 percent nationwide, continuing the recent tradition of double-digit health care cost run-ups.

How much of that total increase will be passed along by your employer? More than you want to know. The weaker economy will encourage many companies to toss more HMO cost increases at workers, and also force changes in HMO plans.

Talk about getting caught between a rock and a rising co-pay. If you're lucky to get a modest pay raise this year, get ready to spend it on higher HMO premiums.

For 2003, the initial HMO rates being announced are averaging 22 percent. That's higher than in 2002, when the average HMO premium increase nationwide was 15.3 percent, and 17.6 percent in the Southeast. And it's much higher than the 10.2 percent bump in 2001, according to Hewitt Associates, a benefits consulting firm.

"We are seeing unprecedented HMO increases for 2003," warns Mindy Kairey, e-business leader for Hewitt's health management practice.

Hewitt's analysis shows that companies plan to shrink HMO services and dump more of the overall cost on employees. As proof, Hewitt says the number of companies with a $15 office co-pay more than doubled from 11 percent in 2001 to 24 percent in 2002. At the same time, employers offering $10 co-pays dropped from 64 percent in 2001 to 58 percent in 2002. Rising deductibles also are on the increase.

Toss some -- but not all -- of the blame at companies obsessed with trimming benefit costs. Hewitt argues employers lost more of their negotiation leverage with health plans. Now HMOs are more motivated to make a profit than gain market share with lower prices.

Barring a change in the HMO weather, Hewitt predicts an eventual backlash. Like increasing interest in consumer-driven health plans. Eroding HMO enrollment. And a shrinking menu of health plans offered by employers.

At some point, workers will rebel against too-high HMO premiums and lousy service. After all, health care ranks as most employees' most important benefit -- even more critical than compensation.

* * *

Never underestimate the power of a good quote. Especially when it touches on the future of the Florida economy. This week offered some gems:

We'll certainly have to adapt in some ways. But when you look at maps of rising sea levels, a lot of Florida disappears. Where are those people going to go, Georgia? -- F. Sherwood Rowland, a University of California at Irvine chemist who shared the Nobel Prize for revealing the effects of chlorofluorocarbons on Earth's ozone layer. He was commenting in the Orange County Register on the Bush administration urging people to adapt to the potentially severe consequences of global warming, rather than dealing with the causes of the problem.

It's a heated battle that's getting hotter. -- John Sicher, publisher of Beverage Digest, quoted in the Houston Chronicle about Minute Maid's decision to buy the naming rights to the Houston Astros' (formerly Enron Field) baseball stadium. Owned by Coca-Cola, Minute Maid is battling for orange juice market share with the larger, Pepsi-owned Tropicana, whose name graces the stadium of the Tampa Bay Devil Rays.

It's more and more questionable what kind of result you might get from holding a convention. -- Herbert Alexander, a retired University of Southern California professor, quoted in the Dallas Morning News, who has studied the (overblown) economic benefits of political conventions. The Tampa Bay area wants to land the 2004 Republican national convention.

Short takes

TIMING IS EVERYTHING: Let's see. Tampa Bay's first incubator for tech startups, dubbed TechVillage, opened last summer. A second one opened at the University of South Florida in February. But in such major high-tech centers as Boston and parts of California, the buzz over incubators is fading. This week, University of Southern California officials decided to shut the school's technology business incubator, known as EC2, on June 30. They say the "six-year experiment" had run its course with shrinking funding from venture capital and the dot-com collapse. Perhaps Tampa Bay's tech clock runs in a different time zone . . .

PLAYING BOTH SIDES?: Perot Systems Corp., a company run by H. Ross Perot, helped develop the computer systems used to track California's electricity trading. Now California officials claim the company sold its inside knowledge of the system to energy companies so they could milk the state's power market. Perot denies wrongdoing. But it's one more nail in the coffin of widespread energy deregulation in other states, Florida included . . .

DELAYED REACTION: Tampa's recent IPO, Liquidmetal Technologies, was a nonevent when it hit the Nasdaq market on May 22. The new stock's been stuck since opening day near $15 a share. Until this week, when it topped $20. Shares closed Thursday at $21.08 . . .

-- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

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