Kaiser Permanente Hawaii, the state's No. 2 health insurer, has received state approval for a 3 percent increase in premiums for Hawai'i businesses and government agencies next year.

State Insurance Commissioner J.P. Schmidt said he cleared the rate hike after a review of the application and supporting information he requested.

The increase is Kaiser's lowest since 2000 and follows an 11 percent hike this year for about 210,000 members statewide.

The increase will take effect as contracts are renewed beginning Jan. 1 and affects 174,000 of the insurer's 227,000 members, Kaiser spokeswoman Lynn Kenton said.

The Hawaii Medical Service Association, the state's largest health insurer, typically files a rate request in March to take effect in July, Schmidt said. HMSA last month reported lower third-quarter profit and said it may seek higher rates because of rising costs.

In July, HMSA raised rates by up to 4.9 percent for businesses with fewer than 100 workers.

HMSA and Kaiser have faced increased competition from Summerlin Life and Health Insurance Co., which began operations here about a year ago.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.