HMSA raising
rates 9 percent for
small businesses
as of July 1

Basic monthly dues will near
$183 for singles, $549 families

By Lyn Danninger
Star-Bulletin

The state's largest medical insurer, the Hawaii Medical Service Association, is raising rates for small-business customers by an average of 9 percent, effective July 1.

The rate increase, announced yesterday, will affect 137,000 HMSA members, or about 22 percent of its total membership.

Rate renewals for large employer groups, the majority of HMSA's membership, take place throughout the year. Those groups can expect similar increases, HMSA Vice President Cliff Cisco said.

"Generally, the trends are the same for the larger groups," Cisco said.

The latest rate increase comes on the heels of HMSA's announcement last week of a $49 million operating loss for 2000.

About 10,000 small-business groups, each with 100 employees or less, fall into HMSA's smaller community-rated employer groups.

Of those businesses, about 62 percent are enrolled in HMSA's Preferred Provider Plan.

Average monthly dues for the Preferred Provider basic medical plan will increase by 8.5 percent to $182.88 for a single person and $548.64 for a family plan.

Members with drug, dental and vision riders added to the basic medical plan will see a 9 percent increase.

Dues for small-business customers who selected the company's health maintenance organization, known as Health Plan Hawaii, will rise an average of 14.2 percent to $182.88 for single basic medical coverage and $548.64 for a family plan.

Additional drug, dental and vision riders will increase 13.5 percent, raising monthly dues to $227.96 for a single plan and $683.88 for family coverage.

HMSA said skyrocketing drug costs, which have risen between 18 percent and 22 percent over the past few years, as well as increased member usage are mostly responsible for the increases.

Cisco said it is likely drug costs will continue to rise for the foreseeable future. For that reason the company has taken steps to modify its existing three-tier drug plan to encourage members to opt for less costly generic drugs.

Co-payments will increase from $5 per prescription to $10 for preferred drugs and $15 for brand-name drugs. Co-payments for generic drugs will remain at $5, he said.

Whatever the reason for the rate increase, small-business owners say they are having a tough time keeping up with medical plan increases.

Last year, HMSA raised its rates by an average of 8.5 percent. The previous year, the increase amounted to 8 percent.

Glenn Tamura, president of Tamura's Wahiawa grocery store and Tamura's Fine Wine and Liquors on Pohukaina Street, said that after this year's increase he will likely shop around to see if it is possible to get a more competitive rate for his company health insurance.

"Any time you have a cost increase, you weigh your options," he said.

Still, Tamura is reluctant to cut back on employee medical benefits and does not like the idea of changing plans. "Medical is pretty high on my list, so I'll look to other companies with equal benefits and maybe reduced costs."

National Federation of Independent Business Hawaii Director Betty Tatum said Tamura's attitude is typical of many Hawaii small-business owners.

Most hate to make any cuts in employee medical benefits, she said.

But with premium increases common in recent years, she wonders how long that approach can prevail.

"I don't know how they do it," she said.

Tatum believes a fairer solution lies in increasing the portion of premiums that employees pay.

The law mandating how much an employee can contribute to medical plan premiums, 1.5 percent of an employee's monthly salary, was written almost 30 years ago. Since that time, medical costs have increased substantially, she said. But since any change to employee health premium contributions is likely to be unpopular with politicians, Tatum has a suggestion for small-business employers weary of health-care premium increases.

"If employers put a note in each paycheck showing just how much they pay for benefits, perhaps employees may better understand how much it costs," she said.