CHICAGO-The first time seems to be the charm for the Chicago Business Group on Health.
In its first time negotiating premium increases for nine Chicago-area employers, it secured increases for 1999 averaging 4% from 10 managed-care plans-at a time when 8% to 10% increases are more the norm.
"We were willing to sit down and work together with the participating plans," said Larry Boress, the CBGH's executive director. Only one HMO that had previously worked with the employers, Minneapolis-based United HealthCare Corp., opted out of negotiations, officials said.
The four major employer groups participating included Ford Motor Co., the Jewish Federation of Metropolitan Chicago, the Northern Trust Bank and the state of Illinois. They represent 250,000 enrollees in the Chicago area.
The CBGH, formed in 1983, is an affiliated chapter of the Midwest Business Group on Health. Its more than 80 members cover 500,000 enrollees.
"We were expecting a renewal (increase) somewhere in the neighborhood of 8% or 9%, so we were very happy with what we got," said Lynn Zehnder, benefits manager for the state of Illinois, which provides healthcare coverage for about 50,000 employees and retirees in the Chicago area.
Steve Riedl, a Towers Perrin senior consultant and actuary, who helped conduct negotiations for the CBGH, said that pooling all the enrollees was key to keeping rates down.
"We had the HMOs prepare renewals for each of the participating employers individually, and they came up with renewals averaging 9.9%," said Riedl. He said 1999 increases for other Towers Perrin clients in the Chicago area averaged 8%. But with the CBGH, "(HMOs) were very responsive to the fact that so many (enrollees) were put together."
Consultants elsewhere expressed mixed reactions to the CBGH's results.
Stephen Cigich, a consulting actuary with Milliman & Robertson in Milwaukee, called a 4% rate increase "a good deal in today's environment," noting that up to 10% increases are common. Milliman's Intercompany Rate Survey showed HMO premiums increased 6.1% in the Chicago area in 1998.
But Blaine Bos, a principal in the Chicago office of benefits consulting company William M. Mercer, said many Chicago-area employers held premium increases to 3% or less in 1999 by making concessions such as offering fewer HMOs to their employees. Otherwise, premiums rose up to 5%.
Boress said the CBGH's employers declined to make concessions. A report card the CBGH compiled on all the plans helped employers choose plans.
Meanwhile, increases of 4% in 2000 are unlikely, according to Riedl. "We're looking at 6% or 7%, but that will pretty much be locked in."