The increase would affect 9,600 businesses with 200 or fewer workers if approved
POSTED: 01:30 a.m. HST, Mar 22, 2011
Hawaii Medical Service Association, the state's largest health insurer, is seeking to boost premiums 4.2 percent in July for its 89,110 small-business members.
The increase would apply to all three HMSA plans — Preferred Provider Plan; Health Plan Hawaii Plus, its health maintenance organization plan; and CompMED plan, a program that features higher deductibles and lower benefits.
Last year, HMSA increased rates 7.6 percent for its Preferred Provider Plan and 15.5 percent for its HMO plan.
"We're requesting this rate increase based upon our recent experience with health and drug cost trends, and we are cautiously optimistic that we can sustain sub-double-digit rate increases prospectively," HMSA Chief Financial Officer Steve Van Ribbink said.
While much smaller than last year's increase, the 4.2 percent rate hike exceeds Honolulu's 1.7 percent inflation rate over the past year.
If approved by the state Insurance Division, the rate increase would match the lowest increase in five years for the Preferred Provider Plan.
HMSA, which filed the increase with the state yesterday, said for the first time it is unifying rate increases of its three health plans to limit volatility that had been prevalent in recent years.
HMSA is putting all three plans into one big risk pool "so that we have one universal increase (that) will allow us to have greater stability in rate increases across all product types so we don't have that volatility," Van Ribbink said.
HMSA, which had 693,683 members at the end of February, said the rate increase would affect 9,600 small businesses with 200 or fewer employees whose plans renew on July 1. Overall, HMSA has 10,300 small-business groups which employ 124,236 members.
"The reason this is an important filing is because it affects approximately 93 percent of the (small-business) groups," Van Ribbink said.
HMSA also serves larger business groups, as well as members of Medicare, Quest and the Hawaii Employer-Union Health Benefits Trust Fund.
The insurer is coming off a year in which its fourth-quarter profit of $14.3 million boosted it into the black for the full year with earnings of $5.3 million. In 2009 the insurer lost $64.4 million.
"My hope is that future increases will be no more than 6 to 7 percent — the historical trend — because of what we've been able to accomplish in terms of our reimbursement provider payment model which encourages quality and not quantity," Van Ribbink said. "I think we are better able to bend downward the health care cost trend into the future. At the same time, we also would expect to improve the quality of health of our members."
Gary Hanagami, executive director for the Hawaii Food Industry Association, said owners of his 200 member businesses won't like the increase but will be pleased it wasn't higher.
"I can almost hear a collective sigh of relief when this number comes out," said Hanagami.
Business owners have come to expect medical rate increases because of the aging population and Hawaii being in the middle of the Pacific.
"We don't get as many younger transient workers who would offset some of our population base," said Hanagami.
HMSA said the proposed 4.2 percent increase incorporates a 4.4 percent rate hike for its medical plans and a 3.4 percent rate increase for its drug plans.