HMSA may hike premiums 12.8%
By Greg Wiles
Advertiser Staff Writer
Health insurance premiums will jump by 12.8 percent for thousands of Hawai'i small businesses under a proposed rate hike by the Hawaii Medical Service Association.
The requested increase is the largest by HMSA in 19 years in its Preferred Provider Plan and must be approved by state Insurance Commissioner J.P. Schmidt before it can go into effect July 1.
The state's biggest health insurer said the increase is needed to cover climbing doctor, hospital, emergency room and other healthcare costs. The insurer said it has been increasing reimbursements paid to hospitals and physicians while also trying to keep rate increases at reasonable levels.
Last year's formula proved to be inadequate. Premium and investment income increases did not keep up with costs and HMSA recorded a net loss of $22.6 million.
"We're trying to make rates affordable for our members, but pay our providers what's necessary for quality care," said Steve Van Ribbink, HMSA's chief financial officer. "We're just trying to balance the two."
HMSA typically increases rates for certain companies on an annual basis, with the single largest group being the 11,000 businesses with less than 200 employees who face premium adjustments each July. The rate increases being requested apply to insurance coverage for 144,000 workers and their dependents.
HMSA said three requests for increases for small businesses were filed with the Insurance Division. They include:
HMSA rate increases in recent years have generally been lower than the national average for employer-sponsored health insurance.
The Kaiser Family Foundation last year reported its premiums for family coverage rose by an average 78 percent nationally between 2001 and 2007. HMSA's increases for the Preferred Provider Plan for small businesses totaled less than 60 percent during that period.
The issue has been of sufficient concern that the state resumed regulating health insurance rates this year. Schmidt said the proposed increases will be scrutinized to see if they are justified and are in keeping with cost trends over the past five years.
"We do look at them very carefully because of the impact it has on everybody," he said.
During the state's previous oversight of rates, between the years 2003 and 2005, there were instances where Schmidt disagreed with rate requests and insurers had to accept lower increases than they wanted.
Schmidt said his office also will look at how HMSA has been increasing reimbursements to physicians and hospitals, since the subject received so much attention during this legislative session. Medical providers have complained about reimbursements and say it's one reason some doctors leave the state.
HMSA noted it had increased its hospital fee schedule under its commercial plan to 42 percent above what Medicare pays and that physicians are getting about 20 percent above the Medicare schedule.
"We expect approval given the substantial fee increases we've made to providers — particularly hospitals — and the impact this has on healthcare costs, which comprise 94.4 percent of our members' dues," Van Ribbink said in a statement.
He said the company has been working to keep down premiums, including applying investment income to its operating costs, an income source it had historically used to build up its reserves. Van Ribbink said the insurer will again take this step in trying to hold down increases.
"As in 2007, we are again applying 100 percent of our investment income to subsidize our members' dues rates," he said. "This helps protect our members from experiencing higher dues adjustments."
Reach Greg Wiles at gwiles@honoluluadvertiser.com.
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