The state's largest health maintenance organization intends to boost rates for thousands of businesses already tightening their belts to survive the economic downturn that is expected to worsen in the next year.

Kaiser Permanente Hawaii is seeking a 4.9 percent rate hike that will affect 6,000 companies and 167,232 members renewing their health plans on Jan. 1. The HMO also filed a 6.1 percent increase for 4,400 individual plans with the state Insurance Division, which is reviewing both proposals.

Kaiser's increase for businesses and government employers is the highest since 2005, when its group rates jumped 11 percent. It raised rates by an average 2 percent this year - the smallest hike since boosting premiums 2 percent in both 1998 and 1999.

“;At this point with the economic happenings, all businesses are sitting on the edge waiting for the sky to fall,”; said Tim Lyons, executive director of Hawaii Business League, which represents about 1,500 small businesses. “;This could very well be part of that trend because you're going to get a lot of businesses that have increased costs and lower revenue.”;

Meanwhile, the Hawaii Medical Service Association has received state approval to raise premiums roughly 13 percent for 22 large employers on the same day, according to the division. The state's largest health insurer is in the process of submitting more rate adjustments for its merit-rated groups, which renew policies throughout the year. The division is reviewing rate adjustments for another 15 to 20 groups. HMSA would not disclose how many members will be affected by the rate hike or the number of groups in total renewing policies in January until it receives state approval.

More than 11,000 small businesses saw an average 12.8 percent spike in HMSA's health insurance premiums on July 1. Rates also rose 14.3 percent this year for another 51,250 members in HMSA's Health Plan Hawaii, a health maintenance organization.

Health insurance costs have been trending upward for years now, partly due to a push to increase compensation for doctors and hospitals, said Insurance Commissioner J.P. Schmidt.

“;We need to balance that with the rising costs of health insurance because they're directly connected,”; he said. “;We also have to balance this against the loss of doctors who provide the services.”;

Health care costs are the No. 1 concern among businesses, according to Melissa Pavlicek, Hawaii state director for the National Federation of Independent Business. Rising health insurance premiums put a strain particularly on small businesses who are forced to provide medical insurance for full-time employees under state law.

“;It is very alarming to know those rates are going up,”; Pavlicek said.

Businesses cannot redirect resources or pass along health insurance costs to customers, which means they have to cut elsewhere in wages and other employee benefits, Lyons said.

“;If you can't increase your sales, you have to cut your costs or you go out of business,”; he said. “;This is just not that kind of economy that you're able to increase prices; people are at their limits when they're even buying.”;

Kaiser has worked hard not to pass rising health costs on to members and has begun to see a payoff on its disease prevention programs and electronic medical records system, said Bill Corba, Kaiser's chief marketing officer.

“;We've worked hard over the past few years to keep costs in line,”; he said. “;We anticipate going forward to continue to have lower cost trends.”;

The health plan managed to record its third consecutive profitable quarter through June 30, following a major restructuring to control costs, including the elimination of 144 positions in the past two years.