Some to take hit, others will save

Obamacare will mean higher premiums for thousands of Hawaii individuals and small businesses and lower premiums for thousands of others when major provisions of the federal health reform law begin Jan. 1.

The state’s dominant health insurer, Hawaii Medical Service Association, notified individuals and small groups in recent weeks of the changes they will see in premiums under the new federal Patient Protection and Affordable Care Act.

About half of the 8,000 small businesses affected will see rates increase next year, and half will see them go down, HMSA said. The rate hikes could be reduced by subsidies and tax credits, but small businesses facing a jump in premiums were not pleased.

Hawaiian Brian’s, a pool hall and concert venue, will see its health insurance cost rise 27 percent, or $1,500 per month, next year, according to co-owner Lee Anderson.

Anderson, who runs Hawaiian Brian’s with his father, said he was paying $5,500 a month this year to cover his 15 employees with a plan that included drug, dental and vision. After Jan. 1 he’ll be paying $7,000.

"Every dollar counts when you’re a small family business. My father and I each put in about 80 hours a week," Anderson said. "To see your hard work go towards something that doesn’t benefit the business, it’s a tough pill to swallow."

Tuesday marks the first day for open enrollment nationwide in the health insurance exchanges set up under Obama­care. All Americans must have health insurance by Jan. 1 or face possible tax penalties. Most Hawaii residents will not be directly affected by the new law because they are already covered through a large employer, Medicare or Medicaid.

Individuals who buy their own insurance, or have no coverage, and small companies are most affected by the change coming Jan. 1. They will be able to use the Hawaii Health Connector’s website (hawaiihealthconnector.com) and call center (877-628-5076) starting Tuesday to find out their options, compare premiums for different plans, calculate subsidies and enroll in a plan. So far only HMSA and Kaiser Permanente Hawaii have agreed to offer plans via the Hawaii Health Connector.

The majority of HMSA’s 720,000 members have coverage through large companies or Medicare and Medicaid. HMSA members affected by the rate changes total 14,000 individuals and 8,000 small businesses with roughly 42,000 employees. For most small businesses, rates will change on the July 1 policy renewal date.

When asked about concern that Obama­care will lead to significantly higher rates for some individuals and small businesses, Hawaii Connector Executive Director Coral Andrews said the exchange is there to help and provide consumers with additional health insurance options.

"We are aware that there is a lot of information out there right now," Andrews said in an email. "Our contact center opened last week to answer any questions that consumers may have about their health insurance options. (This) week we will begin a new phase of education and outreach, where consumers can meet with trained and certified Kokua (marketplace assisters) in their communities and learn what options are available to them."

HMSA’s letters to individuals and small groups said existing policies won’t meet Obama­care requirements next year and that premiums could be "significantly different from what you’re paying now." The premium differences also are the result of a different way of calculating premiums based in part on age and the addition of certain benefits required under the federal law, including prescription drug coverage and pediatric dental and vision and other services that weren’t previously part of Hawaii insurance plans.

Under Obamacare, insurers can no longer deny coverage or charge more to consumers with pre-existing medical conditions, one of the factors that could drive up costs for the insured population.

Insurers also are passing along fees associated with implementing Obama­care and participating on the exchange in next year’s rates, HMSA said.

"In the past, we were able to give you a single average rate that applied to all your employees and their dependents," HMSA said in a letter this month to small businesses. The Affordable Care Act now requires health insurers to rate each individual separately by age.

"People who are paying now are going to have to pay a little more," HMSA President Mike Gold said. "But people who didn’t have coverage, now they have a route to, whether it’s affordable or not, coverage that they didn’t have before."

The age-rating of insurance premiums will result in "large fluctuations and huge increases" for small businesses with older employees, said certified public account Mari­lyn Niwao, who currently pays $575 per month for each of her eight employees, many of whom are in their mid-50s or older at Niwao and Roberts CPA in Wai­luku.

"If age rating for small businesses goes into effect … there will be age discrimination in Hawaii," she said, adding that the situation will drive companies to hire younger workers in hopes of lower premiums.

On the opposite end, HMSA and Kaiser say some businesses will see reduced rates based on workforce composition.

"That (rate) shock will go up and down depending upon where you are and what your age is," HMSA Chief Financial Officer Steve Van Ribbink said. "Some of them are going to see possibly some fairly large increases. There’s going to be some people who are going to be delighted, I think, by what their rate adjustment’s going to be, and there’s some people who are going to be very disappointed."

Businesses and individuals opting to purchase insurance on the exchange will have an option to apply for government subsidies, in the form of tax credits, to reduce premiums.

Niwao said few companies will apply or qualify for tax credits because of the complexity of the law and the time it will take to complete the application.

The exchange will offer varying plans with a wide range of benefits, co-insurance and deductibles. The lowest monthly "Bronze" plan, for a 21-year-old nonsmoker at HMSA starts at $128, with the highest deductible, at $6,350, and 60 percent of medical costs covered. Its "Platinum" plan for the same person, with the highest monthly cost at $291 and the lowest deductible of $100, covers 90 percent of benefits.

The lowest "Bronze" and "Silver" plans aren’t available to small groups in Hawaii because the coverage doesn’t comply with the state’s 1974 Prepaid Health Care Act, which requires employers to provide insurance covering no less than 80 percent of benefits for full-time workers.

"Obamacare is turning into very expensive alternatives rather than lowering the cost of health care for all," said Hono­lulu small-business attorney Russel Yama­shita, 60. "I am afraid that sole proprietors like me who are in the oldest age brackets could see their health care premiums triple under Obama­care. This is a very frightening picture for the elderly."

The premium changes will affect Kaiser’s 9,600 individuals and 4,800 groups representing roughly 26,200 members, some of whom will see "significant increases" in costs or "their rates greatly reduced," said Kaiser spokes­woman Laura Lott.

"We are mapping both individuals and small groups to the plans that are closest to their existing coverage, but they will also be given a choice of any new plan they want, if they prefer a different option," she said. Kaiser, the state’s largest health maintenance organization, with 224,643 members, won’t release rate information until Tuesday, but has notified affected consumers and groups of changes in rates at the start of next year.