Kaiser wants 11%
rate hikeThe health provider files the
request with the state and
delays opening two clinics
Kaiser Permanente Hawaii is seeking an average 11 percent rate increase for 2005 and is delaying the opening of two clinics that were scheduled to accept patients this fall.
The rate request, filed this week with the state Insurance Division, would apply to approximately 210,000 of the health maintenance organization's 235,000 members and go into effect Jan. 1. The request comes on top of an 11.7 percent rate increase that the state's second-largest insurer implemented this year. That increase, which was applied retroactively, was reduced by the Insurance Division earlier this year from an initial request of 14.5 percent.
The 11 percent rate increase request is for the medical plan only and does not include prescription drugs and vision.
Kaiser spokeswoman Alison Russell said the HMO examined its current costs and financial projections for 2005 in deciding what to seek from the Insurance Division.
"We looked at the revenue side, meaning membership, and all the sources of income we have," she said, "and we looked at the expense side. We have the two new clinics in Waipio, and Maui Lani in Wailuku, and we have to incur all the expenses to open and operate them. There also is a projected 9.6 percent increase in basically the cost to deliver medical care."
Unlike HMSA, whose core business is providing the financing to pay members' medical claims, Kaiser needs to pay for its facilities and health-care personnel.
"The costs continue to increase, but even with the increase in costs, we're looking at everything that we can to reduce the costs for purchases and members," Russell said. "We're looking at cost-sharing plans that have a higher co-pay at the point of service."
Kaiser members not affected by the increase are those in federally reimbursed programs such as Medicare or QUEST, Hawaii's version of Medicaid.
State Insurance Commissioner J.P. Schmidt said yesterday he hopes to make a decision on Kaiser's request before the end of the year. Kaiser's 2004 rates were not final until March of this year -- and thus applied retroactively -- because of a back-and-forth between the parties that spilled over to early this year. Russell said Kaiser submitted its request more than a month earlier this time than in 2003 so that the rate increase could be in place by the beginning of 2005.
Schmidt said his agency will make every effort to review the filing in a timely manner.
"I can't say at this point whether the requested rate increase is reasonable," he said. "We have to do a thorough analysis of the filing because rate filings are quite complex.
"On the one hand, we don't like to see these continuing large increases. On the other hand, we have to recognize that the medical costs and drug costs and other costs involved are escalating rapidly, and that is going to drive up insurance costs as well."
Russell said Kaiser is hoping to partly open the Waipio and Maui Lani clinics at the end of this year and that both are in the final stages of construction. She said, though, that Kaiser does not have the money it needs to offer full service at the two clinics.
"It takes money to open them and staff them and operate them, and we just don't have the money to do that right now," she said. "It's not a decision we made lightly, because our members need them."
She said Kaiser hopes that its rate request will be granted and not reduced as it was for 2004.
"(A reduced rate increase) would be a problem," she said. "We looked at all the different types of things that we wanted department by department -- all the new technology and equipment -- and we pared it down to what we needed."
Hawaii Medical Service Association, the state's largest health insurer with more than 679,000 members, had its average 7.8 percent rate increase for its most popular small-business health insurance plan approved last month. That increase, which went into effect on July 1, was amended by HMSA from a 9.6 percent rate increase it initially sought at the start of this year.
Las Vegas-based Summerlin Life & Health Insurance Co., which is in the process of becoming the state's fifth health insurer, filed a rate request earlier this month that Schmidt said is under review.
"Unlike HMSA and Kaiser, who already have a rate in place and are asking for an increase of a certain percentage to that rate, this is the first filing for Summerlin of its first rate, and it has essentially five pages of tables (for various groups) that we need to analyze to come up with a particular premium."
Schmidt said the addition of Summerlin will benefit Hawaii's health insurance industry.
"One of the things that we believe will help mitigate the increase in costs is increased competition," Schmidt said. "So we're happy that we have another company willing to do business in the Hawaii market to provide additional competition."
The other two health insurers in the state are Health Management Alliance Association and University Health Alliance.