Officials defend the request
by pointing to burgeoning costs
Kaiser Permanente, Hawaii's second-largest health insurer, has asked the state Insurance Division for an average 14.5 percent rate increase.
If approved, the rate would take effect Jan. 1.
This is the second year medical insurers have been required to gain approval for rates prior to implementation. Last year, Kaiser requested and was granted a 9.75 percent rate increase. Its major competition, the Hawaii Medical Service Association, requested a rate increase for its small-business customers of 11.5 percent earlier this year, but received approval for a 9.9 percent increase. That increase took effect July 1.
Kaiser President Janice Head said the rate hike is needed to cover growing costs associated with more elderly members, new technology and drug innovations, personnel shortages in some areas and increased government regulation. The organization, which provides insurance and medical care for 235,000 people in Hawaii, also has launched a variety of new building projects, including a new Waipio clinic that will cost $32 million as well as another $11.9 million for its new Maui Lani clinic.
Kaiser said 2004 premiums will cost an average of $240 a month for a single plan including medical, drug and vision coverage if the rate is approved. A family will pay about $720 a month.
The state Insurance Division has 90 days to rule on the rate increase.
Kaiser and other insurers are getting an earful from their customers about the increasing cost of health care premiums, which are borne in large part by Hawaii employers, said Claudia Schmidt, Kaiser's vice president for business development.
"The pressure from the payers creates responses that push premiums down. That lasts while you either absorb the losses or burn off your reserves," she said. But despite that pressure, she said, the latest increases are needed to offset losses and increasing costs.
Schmidt said Kaiser has been working with the state Department of Labor and Industrial Relations to come up with a wider array of options for its customers. Likewise, HMSA is looking at a variety of cost-control options and has submitted alternatives for consideration to the department, said HMSA Vice President Cliff Cisco.
The state Insurance Division is also concerned about rising premium costs and says a re-examination is in order because of the way the Pre-Paid Health Care Act has been interpreted. The law, enacted in the mid 1970s, governs how much an employee may be asked to contribute toward monthly premiums.
In the past, plans submitted to the Department of Labor and the Pre-Paid Health Care Advisory Council have been judged on how they stack up against the two dominant plans offered by Kaiser and HMSA.
"It had become rather a rigid process, which is something that is normal in the evolution of dealing with a statute," said Insurance Commissioner J.P. Schmidt, no relation to Kaiser's Schmidt. "Certain policies become rules and are set in concrete, and when that happens, it becomes necessary to take another look as to the way it is interpreted."
Commissioner Schmidt said the intent of the law was never to restrict choices in health insurance.
"In the legislative history, the Legislature stated that they didn't want it to be locked in to only certain plans. They still wanted to provide other options to the consumer," he said.
One possibility would be to allow plans with lesser benefits or higher cost sharing with the employee as a way to reduce monthly premiums, Schmidt said.
Both Kaiser and HMSA have prepared plan alternatives for the Department of Labor and its advisory council to consider, he said. Those plans would offer the same types of benefits employees have under existing plans, but increase the out-of-pocket expenses for that coverage.
Kaiser's Schmidt said a return to slimmer benefit plans with higher cost sharing is happening nationally.
"There is a proliferation of skinny health plans with higher cost sharing and upfront deductibles. The industry as a whole is cycling back. Our sister regions are competing routinely with insurance companies that are saying 'Fine, if you need the premium to go down, the benefits go down,' " she said.
But Schmidt believes that the Pre-Paid Health Care law also has provided a certain amount of stability for Hawaii consumers.
"I think we have valued the stability and universal coverage it gave," she said.
With the pressure to decrease premiums, the challenge will be to reconcile that stability with providing more plan alternatives, she said.
"Nobody wants to throw the baby out with the bath water, but we need to find some flexibility," she said.