The increase by Hawaii's largestBy Rob Perez
medical insurer is targeted
at 12,000 small businesses
Like many small business owners, Earl Terao is reluctant to raise prices, fearing a loss of business in a market already bitten by the state's sour economy.
So when the state's largest medical insurer announced yesterday that it was raising premiums roughly 8 percent for many small businesses, Terao figured his dental lab business had only one option: Swallow some of the increase. And pass the rest on to his 38 employees.
"We're already taking it in the shorts," said Terao, co-owner of Honolulu Dental Laboratory Inc. "This is just going to add a little more to the misery."
Largely because of rising medical costs and increased usage by an aging population, Hawaii Medical Service Association said it was raising premiums July 1 for about 12,000 small employers, mostly businesses with 100 or fewer workers.
The increase will affect about 120,000 of HMSA's 600,000 members statewide.
Cliff Cisco, HMSA's senior vice president, said the premium hikes come as members' use of medical services has increased, especially for costly high-tech procedures. In addition, drug costs have risen about 18 percent locally, he said.
"More members are seeking medical services, and they're seeking them more often," Cisco said.
News of the increase comes just a week after HMSA announced an operating loss of $37 million for 1998 on revenue of nearly $1.04 billion. It reported net income of about $10 million.
Cisco noted the insurer has kept premium increases to no more than about 2 percent over the past five years, with some years seeing rates unchanged. But with usage surging and medical inflation rising locally at 4 percent to 6 percent, HMSA had to pass along a larger increase, he said.
Monthly rates for its most popular health plan, the Preferred Provider Plan, are rising 8 percent to $160.22 for an individual and $447.02 for family coverage. Members that also have drug, dental and vision coverage on that same plan will see their rates rise 6.8 percent.
For Health Plan Hawaii Plus, its most popular managed care plan, rates also will jump 8 percent to $144.52 for a single plan and $403.22 for family coverage. Rates for the expanded coverage are going up 7.6 percent.
Another plan, the Premier Plan, one of several choices offered to certain employer groups, is seeing its basic rates rise 8.5 percent, with expanded coverage going up only 4.6 percent.
The increases are bound to hurt many small businesses struggling in today's economy, owners say.
Hawaii small businesses identified rising medical insurance costs as one of their top concerns in a recent survey, according to Bette Tatum of the National Federation of Independent Business.
Businesses have a tough time passing added expenses to customers, so they typically lay off workers, cut costs or trim what slim profits they may be making, Tatum said. "These businesses can't take it anymore," she said.
Cisco said the announced increases won't affect large employers. Those businesses, unions and government groups individually negotiate contracts with HMSA, and some have had their premiums go down or remain unchanged, while others have seen increases, he said.