Kaiser medical costs
go up for self-employed

Kaiser is the latest insurer to
end its plan for sole proprietors

By Lyn Danninger

The last time Cheryl Tsutsumi visited her doctor at Kaiser Permanente, it cost $8. A few years ago, when she had surgery, she paid nothing for her hospital stay.

But as of Jan. 1, Tsutsumi and others like her who are self-employed will be paying for a greater share of their medical care. For Tsutsumi the change will mean an increase to $15 for doctor's visits, $200 per day if she is hospitalized and the loss of her dental plan.

Tsutsumi is one of about 4,500 people who recently received a letter from Kaiser informing her of the change. She said she would have rather paid the extra money and kept her benefits.

Sole proprietors have found it increasingly difficult in recent years to find affordable and comprehensive health insurance coverage as the state's insurers either eliminate such plans or gradually cut benefits.

Kaiser is just the latest insurer to eliminate its remaining plan offered to the self-employed. Instead, it has offered affected members an individual plan that will cost about $15 less per month but has far fewer benefits.

Under the new plan, Tsutsumi will lose her dental benefits, which had been provided through an arrangement with Hawaii Dental Service.

Tsutsumi, a freelance writer who contributes a travel column to the Star-Bulletin, said she had noticed her health plan premiums edging up over the years but was willing to pay for the services she considered an integral part of maintaining a healthy lifestyle.

But she is afraid the latest cuts in benefits and higher out-of-pocket costs foreshadow the eventual elimination of a health plan option for people like her.

"I have been happy with Kaiser's care and have been with them for 15 years, and I love my doctors. I'm disappointed and discouraged, however. At some point I'm very worried I'll be abandoned."

In recent years it had become a challenge for Kaiser to keep the sole-proprietor plan affordable, said Claudia Schmidt, director of business development. The only option was to remove some benefits, she said.

"Typically in the individual health plan marketplace, it's absolutely critical to keep the premium low, and in this case the pool of prospects for individual plans is relatively small because of the Pre-Paid Health Care Act. We have a real struggle to offer it at all," she said.

Because individuals like Tsutsumi are not subject to mandatory insurance required of the state's employers, it is a relatively small and less stable group to insure, Schmidt said. That pushes premiums up over time.

She likens the reduction of health care benefits to adjusting the deductible on car insurance to lower a premium.

"The reason you reduce any benefits is the same reason you adjust your deductible on car insurance to get the premium down and make the choice to pay as you go," she said.

Schmidt said Kaiser hopes to continue being able to at least offer some coverage to people like Tsutsumi, but there are no guarantees.

"One of the things we try very hard to do is to keep individual health plans on the shelf outside of what the law requires," she said.

HMSA has made adjustments to similar plans in the last couple of years, according to Vice President Cliff Cisco.

"Our benefit now is not dissimilar from what Kaiser has. A couple of years ago, we increased co-pays per visit and things like that. At a certain point no one is going to join, so you have to keep it affordable, and to do that you would have to reduce benefits," he said.

Milton Kwock, manager at the Business Action Center, says he has watched plans and benefits disappear over the years and heard the complaints of the self-employed.

"It's always been an issue with small-business owners, whether they have employees or not," he said. "Many sole proprietors rely on either a spouse or a second job, if they have it, to cover them for health care."

Sole proprietors lack political pull and have no protection under the Pre-Paid Health Care Act, and insurers have no incentive to cover them, Kwock said.

"There is no industry group for sole proprietors. ... Legislators aren't being lobbied, and that's the way you affect change," he said.

State Sen. Sam Slom, president of Small Business Hawaii, predicts more benefit reductions and fewer choices in the future for both small businesses and sole proprietors, in part due to lack of competition in the health care arena.

"The insurers say they lost a lot of money, but I think the truth is somewhere in between. I think we can expect more of this," he said.

Moreover, with large groups to pursue who are covered by the Pre-Paid Health Care Act, no one is that interested in the individual entrepreneur's plight, he said.

But there may be some relief on the horizon for sole proprietors, according to Paul Tom, president of Benefit Plan Consulting. His firm negotiates health benefits for large businesses and union trust funds.

Several years ago, the HMSA Foundation established the Hawaii Uninsured Project to identify and eventually address the needs of the uninsured and underinsured in Hawaii. Now the project includes stakeholders from various parts of the community and has attracted several research grants. The program has already identified the self-employed as one of the target groups that could eventually benefit from the creation of some kind of health plan for the uninsured.

Tom believes there may be as many as 12,000 to 14,000 people in Hawaii who could be considered sole proprietors. Combine that with those already known to be uninsured or underinsured, and it will likely mean a sizable group of people to insure.

"The goal is to look at some kind of pool that would cover both the uninsured working population not covered under Pre-Paid Health Care and also sole proprietors.

"They are working to see if they can come up with some kind of recommendation in the next 12 to 18 months," he said.

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