Consumers are becoming more price-conscious when it comes to choosing an HMO.
HMOs able to charge lower premiums in competitive markets are reaping the harvest of new enrollees, according to the latest data from InterStudy, a Minneapolis-based managed-care research organization.
As competition among managed-care plans grows, premiums are likely to continue dropping to satisfy price-conscious consumers shopping for the best deals, said Richard Hamer, InterStudy's research director.
The study raises the question of whether it's wise government policy to try to curtail medical spending by placing caps on commercial health insurance premiums, as some lawmakers have proposed.
Based on a survey of 262 HMOs, plans with lower premiums saw new membership grow at an average annual rate of 16%, compared with 0.08% for plans charging higher premiums, InterStudy executives said.
About half of the new enrollees joined HMOs operating large group practices, which traditionally have been more efficient than other types of managed-care plans.
Premiums in high-growth plans averaged $370.06 for families and $136.75 for individuals. The less successful HMOs reported average premiums of $387.23 for families and $144.71 for singles.
According to industry reports, annual jumps in HMO premiums have been declining for several years.
Nationally, payers on average will see increases in the 5% to 6% range in 1994, according to the Group Health Association of America, a Washington-based HMO trade organization. That compares with average annual increases of 8% in 1993 and 10.6% in 1992.
Some large payers with political or financial clout may be able to negotiate even better price breaks with providers.
For example, this year the California Public Employees Retirement System, which spends $1.6 billion on annual health premiums to cover 920,000 state workers and their dependents, persuaded 18 California HMOs to roll back premiums by 1% over the prior year's rates. Over the last three years, average health premiums paid by CalPERS have risen only 6.4%.
Traditional health insurers, on the other hand, may charge rates two or three times higher than HMOs in many markets. As the gap between premiums widens, more and more payers are flocking to HMOs.
Through July 1993, HMOs covered 39.8 million enrollees, a jump of 6.9% over a year ago and the fastest 12-month growth rate since 1989, according to InterStudy figures.
HMOs that offered less restrictive insurance products such as point of service also saw membership increase to 2.3 million, a jump of 9% over the same period a year ago. In point of service, consumers have a wider choice of providers at greater out-of-pocket expense.
InterStudy surveyed HMOs in 199 metropolitan markets. It then computed the average family premium charged in each city based on the number of enrollees in each health plan (See chart).
As competition among health plans increases, the relative price of an average family premium will drop to even lower levels, Mr. Hamer said.
Based on statistical models, the appropriate family premium price floor in a metropolitan area averaging $13,500 in per capita income is $304.