HMSA seeks major rate hike


POSTED: Thursday, April 09, 2009

Hawaii Medical Service Association is seeking an average rate increase of 12.7 percent for small-business members enrolled in its most popular Preferred Provider Plan for the upcoming fiscal year.





        Hawaii Medical Service Association's most recent average rate increases for its preferred-provider plan for small-business groups.* The rates, which go into effect July 1, include drug, dental and vision coverage.








        * Small-business groups, also known as community-rated groups, are those with fewer than 200 employees.

        ** Requested rate awaiting approval.



In addition, HMSA has requested a 4.5 percent increase for those enrolled in its Health Plan Hawaii Plus, and a 12.7 percent increase for those enrolled in its CompMED plan.

The state's largest health insurance provider filed the proposed rates with the state Insurance Division late yesterday afternoon. A letter dated April 7 also went out to about 11,000 companies (with fewer than 200 employees) informing them of the changes. In preparation for upcoming open enrollment, members are expected to receive renewal rates in early May.

The proposed increases would affect about 103,000 employees, more than a third of whom are enrolled in the Preferred Provider Plan, although another 35,000 are on other enrollment schedules. If approved, the new rates would go into effect on July 1.

Last year, HMSA sought a 12.8 percent increase, but was only granted an average 10.4 percent by the state.

The request, if approved, would be HMSA's largest increase since raising rates 18.6 percent in 1989.

HMSA Chief Financial Officer Steve Van Ribbink said it was not an easy decision, but keeping pace with double-digit health care cost trends was the main reason for the proposed rate increases.

“;It couldn't have happened at a worse time,”; said Van Ribbink. “;We understand how difficult things are for small businesses, particularly in this environment. But we have been trying to keep our health care premiums as low as we can and, unfortunately, health cost trends have been in the double digits.”;

Van Ribbink said 95 percent of dues last year were used to pay providers. HMSA's total payments to health care providers amounted to $1.44 billion, averaging more than $120 million per month.

“;We're chasing an operating loss, and we need to adjust rates to break even,”; he said.

HMSA ended last year with a $35.8 million loss, which it attributed to increases in hospital and physician reimbursements. HMSA experienced net losses in three out of four quarters last year.

At the same time, HMSA subsidized premium increases in years past with investment income, he said, but cannot do so this year due to losses in its portfolio. Employers are being encouraged to consider enrolling in HMSA's Health Plan Hawaii as a lower-cost option.

HMSA has 705,249 members statewide.

Gordon Ito, chief deputy insurance commissioner, said the division will review the filing closely over the next 60 days.

Lawmakers passed a bill in 2007 that restored rate-approval oversight to the state Insurance Division, effective Jan. 1, 2008.

That was the case from Jan. 1, 2003, until the end of June 2006, when the 3-year-old state regulation expired and was not extended by the Legislature. In the 18 months that followed, health insurers were able to determine their own rates without oversight.

Small businesses in Hawaii are required by state law to provide medical insurance for full-time employees. New legislation this year may extend that requirement to part-time employees as well.

“;Small businesses are getting hit every day with new increases,”; said Sen. Sam Slom (R, Diamond Head-Hawaii Kai), president of Small Business Hawaii. “;Fees are going up, charges are going up, costs are going up, and the Legislature is poised to raise taxes on small businesses even more.”;

On top of that, more employer mandates are also in the works, he said.

“;When you take all of these together, they don't spell mother, they spell distress,”; said Slom.