The Hawaii Medical Service Association, the state’s largest health insurer, is requesting an average rate increase of 14.8 percent for its large employer groups, saying the increase is needed to counter a rise in medical costs.
The rate request, which must be approved by the state Insurance Division, covers about 77,500, or 11 percent, of HMSA’s 680,000 members. The new rates would take effect in January.
“The rate request is necessary to cover rising health care costs – particularly hospital costs – and to move HMSA toward a break even operation,” said Steve Van Ribbink, HMSA’s executive vice president and chief financial officer, in a news release. “Unfortunately, health care costs continue to outpace our rate increases resulting in an operating loss of $29.86 million for the year-to-date through September 30, 2010. The operating loss for the third quarter alone came to $12.86 million with health care costs accounting for 94.3 percent of member dues.
“We know it’s very difficult for business owners right now during the current economic downturn, and the last thing we want to do is make things more difficult,” said Van Ribbink. “But health care costs continue to rise and in the last five years HMSA incurred $289.8 million in operating losses because we’ve chosen not to pass these excessive increases on to our members. We can’t afford to continue doing that. If Hawaii is going to have an economically sustainable health care delivery system, it is imperative that we bend the health care cost curve,” Van Ribbink added.
The news release said that to reduce health care costs, “HMSA is aggressively pursuing a new methodology of provider reimbursement that rewards health care providers for quality rather than volume. This pay for performance model is at the core of a new contract HMSA reached with the Queen’s Health Systems earlier this year.”
In the news release, HMSA also said it had 680,278 members and a health plan reserve of $356 million at the end of September. HMSA is a member of the Blue Cross and Blue Shield Association.