Kaiser raises
rates 2 percent

The increases for Plans A and B
are the first since 1995

By Russ Lynch
Star-Bulletin

Kaiser Permanente, the state's second largest health insurer, plans a nearly 2 percent increase in the premiums that Hawaii employers pay for its most popular plans.

The health maintenance organization said the increase -- its first since 1995 -- goes into effect Jan. 1.

Kaiser, which has 203,000 members in Hawaii, said an increase that low after two years of no increases shows that the company is keeping its promise to hold the line on premiums.

The cost of Kaiser's Plan B, which provides comprehensive medical care but does not include added benefits such as drug, vision and dental coverage, will go to $132 a month for an individual and $402 for a family of three or more.

Kaiser also has a cheaper plan, Plan A, in which members pay half the cost of laboratory and X-ray services. That plan goes to $113 for an individual and $339 for a family.

Dee Jay Mailer, Kaiser senior vice president and regional manager, said three factors went into calculating the increase: a look at what it costs to provide care and and how customer groups use the plans, factoring in savings the organization has achieved by improving efficiency and cutting costs, and increased competition, a relatively new factor.

Smaller competitors include Queen's Island Care, Kapiolani Health Hawaii and the University Health Alliance.

Mailer said the question Kaiser asked itself was: "Is this price competitive?"

Some newer health plans are offering discounts to grab business, but Mailer said some of the pricing may not be realistic. "You've got to ask yourself, how long is that sustainable?" she said.

Medical costs in Hawaii soared in the 1980s and early 1990s to the point where all medical insurers and providers realized something had to be done, Mailer said.

"There was a realization that the market couldn't bear the increase in costs."

Duane Feekin, executive vice president and human resources director at one of Hawaii's biggest employers, Pacific Century Financial Corp., said he thinks the medical industry has realized that if it didn't get costs under control, some government authority would step in and do it for them.

"In the first part of this decade, the cost was rising at a rate that was alarming," said Feekin, whose company's Bank of Hawaii subsidiary and other businesses employ about 4,000 in Hawaii and 5,500 worldwide.

Projecting those double-digit increases out into the future showed the possibility of impossibly high rates, Feekin said. In the years 1990 through 1994, Kaiser's rates went up an average of more than 13 percent a year, then rose another 4 percent in 1995.

The state's top health insurer, Hawaii Medical Service Association, increased its premiums 2.2 percent increase in July. Unlike Kaiser, the 639,000-member HMSA does not have its own hospitable but allows members to visit any physician and pays about 80 percent of the bill.

The July increase was for the rate that covers most HMSA members, those in the plans offered to some 11,000 businesses with 110 or less employees, said Fred Fortin, an HMSA spokesman.

HMSA raised its basic rates 3 percent in 1995 after several years of double-digit increases.

When the 1996 rate period came around, HMSA calculated it had made enough money to afford a refund in the form of a rate rollback, so customers in the fiscal year that started July 1, 1996 ended up paying about 1 percent less for the year.

"All the rates paid by Pacific Century have moderated significantly in the last three years," Feekin said.

But he added that he continues to watch health care costs just as closely as when the rates were soaring, "because it is indeed a very large ticket" in business expenses.

Feekin said "wellness" programs are a critical part of containing costs these days. If employees can be encouraged to quit smoking or eat a healthier diet, the end costs are lower, he said. That may not pay off for a business for a decade or more but it's worth it, he added.

Mailer said prevention is a big part of what Kaiser does itself to hold costs in line.