HMSA pursues 12.8% rate hike for small businesses

The Hawaii Medical Service Association said costs related to Obama­care are responsible for the bulk of a 12.8 percent proposed rate hike for most of the 77,000 small-business workers covered by the insurer.

If approved by the state, health insurance premiums are set to rise for roughly 8,100 employers renewing health plans July 1.

The rate increase request is the largest in at least five years for HMSA’s dominant Preferred Provider Plan members, with Affordable Care Act fees accounting for 60 percent of the hike and higher medical and drug costs the remainder, the company said.

This is the first full year that HMSA factored in costs related to the ACA, including a 2 percent fee to pay for the Hawaii Health Connector, the state-based insurance exchange that has experienced significant problems since its rollout in October.

"We understand that regardless of where the money is going, these increases are a financial challenge for all small businesses," HMSA said in a letter sent last week to small businesses.

John Roberts, a certified public account who pays $575 per month for each of his eight employees at Niwao and Roberts CPA in Wai­luku, said higher premiums means he won’t be able to hire the additional worker he planned on picking up this year.

"It will put a severe burden on small businesses still trying to recover from the (recession)," Roberts said. "Many small-business owners withdrew money from their personal pension plans and borrowed money from relatives in order to keep their businesses going. The proposed insurance rate increase could be a one-two knockout punch for these businesses."

Roberts estimates a 13 percent boost in rates would mean paying $7,000 more in employee premiums each year.

"That does not include the much greater increase in premiums that I was told to expect next year with age-rating for employees of my firm, many of whom are experienced professionals," he said.

Health industry officials told the Washington, D.C., publication The Hill that Obama­care-related premiums will double in parts of the country, particularly because of the fumbled start of the nation’s health insurance exchanges, including in Hawaii.

Some of HMSA’s health plans were set to end last year under the Affordable Care Act, but a policy shift by President Barack Obama and state officials allowed small businesses to keep their existing plans for another year.

Insurance Commissioner Gordon Ito said the state division is reviewing HMSA’s proposed adjustments and its impact on consumers and businesses.

"We are analyzing the filing to determine a justifiable rate that balances the consumers’ best interest and HMSA’s financial solvency," Ito said. "The key to avoiding large increases in the future will require finding a way to address rising health care costs, which continue to increase at a rate of 6 to 8 percent a year, while inflation has been averaging less than 3 percent over the last four years."

Last year the state Insurance Division reduced HMSA’s proposed 8.6 percent premium rate increase for small businesses renewing health policies to 6.7 percent. The division said the move would save businesses about $10 million.

HMSA member Thomas Wang, who has seen his premiums rise each year, said the insurer would raise rates with or without the new health care reform law.

"Insurance companies would increase rates when a rat poops in the lab," Wang said. "Claiming it is due to Obama­care is irresponsible. It sounds politically motivated."

Elisa Yadao, HMSA senior vice president of consumer experience, said the insurer is trying to control costs.

"We’re very sensitive to the impact that rising health care premiums have on our small-business groups and individual members," she said. "HMSA has one of the lowest operating costs of any insurer in the country, and in 2013 we dedicated 95 cents of every dollar to our members’ health care."