The state Insurance Division has reduced Hawaii Medical Service Association’s proposed 8.6 percent premium rate increase for small businesses renewing health policies on July 1.
The division, which regulates health plan rates, instead approved an average 6.8 percent rate hike for an estimated 118,000 Hawaii consumers, a move it said would save businesses about $10 million.
"Small business employers in Hawaii work hard to provide their employees with excellent health plans. We know this is a big expense and that’s why we’re working with doctors and hospitals to keep the cost of health care as low as possible," Steve Van Ribbink, HMSA chief financial and services officer, said in an email.
"While we believe premiums should be higher this year to cover expected health care cost trends and health care reform, we made small revisions to conform with the division’s medical cost assumptions. Both HMSA and the Insurance Division have the best interests of Hawaii businesses in mind."
The bump up in premiums — the largest in three years — applies to 8,800 companies with fewer than 100 workers. The health plans affected include HMSA’s most popular Preferred Provider Plan and health-maintenance offering, Health Plan Hawaii. Last year HMSA requested a 3.9 percent increase for small businesses, and the state approved 2.6 percent.
"The biggest issue we face with health insurance rates is the increases in health care costs," Insurance Commissioner Gordon Ito said in a news release. "Year over year, health care costs have risen on average 6 to 8 percent, far outpacing inflation and wages."
Costs are expected to substantially rise as the Patient Protection and Affordable Care Act, also known as Obamacare, rolls out beginning Jan. 1.
A report released in March by the Society of Actuaries estimates that health insurance premiums in Hawaii will rise as much as 21.9 percent under Obamacare in 2014.
Representatives of HMSA and other local health plans are designing the state’s health insurance exchange, the first major reform under Obamacare. They are setting up the Hawaii Health Connector, which is designed to provide residents access to affordable medical coverage, but insurers will likely foot a large part of the bill.
One factor in HMSA’s rates include fees associated with the federal health care reform accounting for 2 percentage points of the 6.8 percent rate hike.
"To make sure all people have coverage, somebody’s going to pay for their coverage," HMSA said. "Health care costs generally are going to go up. They’re going up more this initial year because of all the fees. The promise of health care reform … is that we can start mitigating those increases and bending the cost curve by getting people to take care of themselves."
HMSA has a total membership of more than 700,000 and controlled 77 percent of the isle health insurance market in 2010.
"Any time there’s a rise, especially for families with children, it’s a burden," said HMSA member David Heard, director of marketing for Hawaii DKI, a Honolulu restoration company. "For working-class families, it’s just one more expense that we have to cover. It sucks."
