Kaiser gets OK to raise its rates

An estimated 162,000 Kaiser Permanente Hawaii members are poised to see their medical premiums rise 8.8 percent on Jan. 1 amid a series of increases for other types of consumer services.

The state Insurance Division, which regulates health plan rates, has approved Kaiser’s increases, which include an average 9.1 percent hike for another 14,400 individuals the same day.

The largest health maintenance organization in the islands said that escalating medical costs are driving the surge in premiums in recent years.

Nonetheless, the HMO isn’t getting sympathy from the business community: 68,000 companies will absorb the bulk of the higher premiums.

"It’s a continuation of rate increases, and for small businesses in Hawaii particularly, it’s death by a thousand cuts," said state Sen. Sam Slom, president and executive director of Smart Business Hawaii. "It’s not one thing necessarily that puts them over the top. Just in the last couple months, businesses have gotten rate increases for electricity, water, sewer and motor vehicle fees."

Insurance Commissioner Gordon Ito said Kaiser’s rate hikes are justified because it continues to post operating losses in its insurance business as a result of people using more health care and driving the growth in medical costs.

"We had asked our actuary twice to take a second look at their rate increase," Ito said. "We continue to look at the health care cost trend, which continues to escalate. That is something that everyone needs to be concerned about because heath care costs continue to outpace inflation and wages."

Kaiser ended the third quarter with an $800,000 loss, down from a $3 million profit in the same period a year ago. However, its year-to-date earnings total $4.8 million.

The HMO’s rates jumped an average 12.6 percent at the beginning of this year and an average 10.7 percent in 2010. Kaiser’s projected rate increases do not include how much medical services a group uses or demographics — including age, sex and family content — which affect the final renewal rate.

"Because health care costs continue to rise, rate adjustments are necessary to maintain our health care infrastructure and provide quality care to our members," Kaiser spokeswoman Laura Lott said in an email. "As a nonprofit health plan, our margins have been modest."

Tommy Silva, president and CEO of T&T Tinting Specialists, said it will be "really difficult to continually swallow these increases from all the way around."

"It’s hard. Employees are going to absorb some of it, too," said Silva, whose company has been in business for 30 years. "It’s very frustrating — we’re helpless. As business owners, we’re required to provide medical (to full-time workers), and the options are just so slim. It’s really difficult to provide something that’s economical and good quality. It’s pretty much a monopoly."

Passing on growing health insurance costs to full-time workers is difficult for businesses because of limits built into Hawaii’s Prepaid Health Care Act, which requires an employee’s health premium contribution — not including add-on coverage such as dental, drug and vision — be no more than 1.5 percent of gross wages.

To circumvent the burdensome requirement, some companies hire part-time workers so they don’t have to provide insurance, or owners will go without medical coverage themselves.

"It’s just getting more and more expensive," Silva said. "There’s no options for anybody to jump into another plan that’s more affordable. They keep jacking up the prices. When will it end?

"Everything is going up and we can’t raise our prices. If we do, we’d price ourselves out of business."

In addition to insurance, Kaiser operates a hospital and 18 clinics across the state. The company, which has more than 227,000 members, also insures roughly 25,000 members each in Quest (Hawaii’s Medicaid program) and Medicare Advantage.