Large California employers offering PPO plans will see just a 5.1 percent hike in premiums next year, much less than the 10.1 percent expected rise in HMO premiums, according to a new survey.
PPOs are somewhat similar to HMOs but have wider choice of providers and looser controls over usage but higher out-of-pocket costs.
The survey of 47 large employers by the Towers-Perrin benefits consulting firm found that overall health care costs will rise 8.5 percent after years of double-digit increases.
The unusually low rise in preferred provider organization costs was being attributed to an improved economy and aggressive steps taken by large businesses to control costs after four years of sharp premium hikes.
"Some employers who had not done anything (about the rise in costs) said, 'This is the year,'" said Ron Mason, a principal at the firm's Irvine office. "More have sat down and done a hard-edged analysis."
Mason said his clients reviewed comparative provider costs and made efforts to reduce drug costs and manage employees with chronic diseases something particularly effective with PPOs, which are often part of self-insured health plans.
In addition, Mason believes the improving economy lessened the number of "worried well" who visit doctors when they're under financial stress.
California's overall premium increase was slightly above the 8.1 percent national rise found by a separate Towers-Perrin study issued earlier this month. However, the state's PPO hike was below the 7.4 percent nationwide rise.
The companies surveyed by Towers-Perrin averaged about 9,000 employees nationwide.
Shares of locally based WellPoint Health Networks Inc., Health Net Inc. and PacifiCare Health Systems Inc. were off as much as 11 percent last week after reports that New York State Attorney General Eliot Spitzer's probe into corrupt brokerage practices would likely draw in big health insurers.
And with good reason, according to at least one analyst, who was recommending investors "sit on the sidelines" with managed care stocks until the probe blows over.
Spitzer has so far focused his probe on the questionable practices of Marsh Inc. the world's largest commercial insurance brokerage. Spitzer has accused the Marsh & McLennan Cos. unit of steering business to certain property and casualty insurers through rigged bids in exchange for payments called "contingent commissions."
Ellen Wilson, a Sanford C. Bernstein & Co. analyst, said in a research note that there isn't much chance of bid rigging in the brokerage of health insurance benefits, given that no one broker dominates the business in the way Marsh dominates the property and casualty business.
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