New Study from Hay Group Predicts Another Year of Sharp Increases in Medical Premiums

Medical premiums rose an average 15% in 2003 after plan reductions, according to the 2003 Hay Benefits Report, a cross- industry survey of over 1000 US companies. This increase is sharply higher than the US Consumer Price Index of 2.0%. To make matters worse, medical premiums are expected to increase by about 15% again for 2004.

Medical costs are rising dramatically for several reasons. In recent years, employers have shifted away from HMO-type plans that require primary care physician referrals for specialist visits and tests. In 2003, 57% of companies used a Preferred Provider Organization (PPO) as their primary plan, up from 40% four years ago. Unlike HMOs, PPOs do not require referrals and thus are more expensive. In addition, HMOs are now less likely to limit care than in the past given the potential legal implications, again resulting in higher premiums.

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