Small businesses
to see HMSA hike

Health insurance rates will rise
5% for about 10,000 companies

By Lyn Danninger

The state's largest health insurer, Hawaii Medical Service Association, plans to raise premium rates for its small employer group customers by an average of 5 percent.

The rate increase, announced yesterday, goes into effect July 1.

HMSA said about 10,000 business with 100 employees or less will be affected by the increase. About 136,000 members, or 21 percent of the HMSA's membership, are covered under HMSA's community-rated employer group plans.

At its annual membership meeting last week, HMSA officials warned that rate increases were on the way. The company reported operating losses to its members of $19 million for 2001, offset by $27.8 million earned on investments for a profit of $6.5 million. But in a filing with the state Insurance Division, HMSA reported it earned $19.1 million for 2001, under more strict accounting rules.

Last year, HMSA raised its rates for community-rated groups by an average of 9 percent. In 2000, the rate increase averaged 8.5 percent.

Monthly premium rates for HMSA's most popular Preferred Provider Plan will rise an average of 5.6 percent to $193.12 a month for a basic single plan and $579.36 for a family plan.

With drug, dental and vision riders, coverage will increase by an average of 5.8 percent to $263.18 for a single plan and $789.54 for a family plan.

The premium rates for Health Plan Hawaii, HMSA's HMO plan, will see larger raises compared to the Preferred Provider Plan, with the basic plan this year surpassing it for the first time.

Health Plan Hawaii, with more managed HMO features such as restricted doctor choices and fixed co-payments, has historically been a lower-cost option for most Hawaii businesses.

But this year, basic medical plan increases for HPH will average 7 percent, rising to $195.68 for single coverage and $587.04 for families. Drug, dental and vision riders will mean average premium increases of 8.2 percent, pushing the price of a single plan to $246.70 and $740.10 for family coverage.

HMSA officials attributed the Health Plan Hawaii increases to higher member usage of the plan and a rise in membership.

At the end of March, HPH's membership had risen to 130,000, up from 110,000 at the end of 2000, said Cliff Cisco, HMSA senior vice president.

But Cisco said drug costs, traditionally one of the most difficult areas for an insurer to control, had not risen as dramatically this year, in part due to HMSA's introduction of a three-tiered plan with higher co-pay costs for premium and name-brand drugs. Still, he said, such a plan is not a long-term answer to rising drug costs -- eventually, inflation catches up. "Whenever you make a benefit change like that, it generates some one-time cost reductions," Cisco said.

Other contributors to rising health care costs include Hawaii's aging population and the availability of new costly technology, Cisco said.

Health care scene observers said they were not surprised at this year's premium increases.

"I could have imagined worse," said Karen Bauder of Bauder & Associates, a health insurance consulting firm. "If anything, I'm pleased the increase was not any higher."

But Bauder said she was surprised to see Health Plan Hawaii's rates surpass the Preferred Provider Plan.

"Usually what we've seen is that healthier people are more attracted to the HMO whereas sicker people who want open access to specialists would want the Preferred Provider Plan."

Still, in spite of relatively modest increases compared to some mainland plans, Bauder said any increase will be difficult for smaller businesses.

"The increases are reasonable and below the trend, but when you think about what the average person can afford, it's going to be very difficult."

Yesterday's rate increase announcement will not be affected by the recent passage of a bill that would regulate health care premium rates. After signature by the governor, the law takes effect next year. After that, health insurers will have to submit future rate filings to the state Insurance Division for approval.

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