HMSA’s bid to raise rate cut to 10.4%

The state's largest health insurer gets approval for an average 10 percent jump

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More than 11,000 small businesses will see lower premium rate increases than had been proposed when renewing health insurance policies on July 1.

The Hawaii Medical Service Association's proposed 12.8 percent rate increase was denied yesterday by the state Insurance Division, which instead approved a 10.4 percent rate increase. The higher rate will affect about 88,750 HMSA members and small companies with fewer than 200 workers.

HMSA, which cited soaring medical costs in 2007 in filing the latest rate proposals affecting 144,000 total members, could not justify premium increases filed for eight separate health plans, the state said.

As a result, the division lowered HMSA's proposed increases across the board, authorizing the insurer to boost rates an average 9.9 percent to 11.6 percent for the different plans.

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RATE INCREASES Hawaii Medical Service Association's most recent average rate increases for its preferred-provider plan for small-business groups.* The rates, which go into effect July 1, include drug, dental and vision coverage. Year Rate 2008 10.4% 2007 6.7% 2006 3.8% 2005 5.0% 2004 7.7% * Small-business groups, also known as community-rated groups, are those with fewer than 200 employees.

The state denied an average 12.8 percent rate increase proposed by Hawaii Medical Service Association for more than 11,000 small businesses renewing health insurance policies on July 1.

Instead, the Insurance Division approved a 10.4 percent rate increase, which will affect about 88,750 HMSA members in its most popular preferred-provider plan.

HMSA, which cited soaring medical costs in 2007 in filing the latest rate proposals affecting about 144,000 total members, could not justify premium increases filed for eight separate health plans, the state found.

As a result, the division lowered HMSA's proposed increases across the board, authorizing rate increases ranging from 9.9 percent to 11.6 percent, said Insurance Commissioner J.P. Schmidt.

"We did not agree with them on their allocation of administrative expenses and the investment credit that they applied to the rating," he said. "The small-employer group (companies with fewer than 200 employees) covers the most people of any group in the state of Hawaii, and it will be a significant savings for them during these difficult times."

The state also rejected the health plan's proposed 14.3 percent rate increase for another 51,250 members in its Health Plan Hawaii, a health maintenance organization, instead approving an 11.6 percent premium increase. The division also turned down a 14.8 percent rate increase for about 4,400 members in HMSA's CompMed plan, approving an 11.4 percent increase.

HMSA had not heard anything definitive from the Insurance Division regarding the status of the requested rate filings, Steve Van Ribbink, HMSA's chief financial officer, said last night.

The state's largest health insurer, which had 701,527 members as of March 31, reported last month a more than fourteenfold net-loss increase to $10 million in the first quarter due to rising medical costs, compared with $687,382 in the year-earlier period.

In filing its rate requests in March, HMSA said inadequate government reimbursements have forced the health plan to pay more to physicians, hospitals and other medical providers, resulting in higher rates for consumers.

However, HMSA's benefit expenses — the amount paid to physicians, hospitals, pharmacies and other health care providers — declined 18.5 percent to $341.4 million from $418.7 million in the first quarter. HMSA attributed the lower expenses to a decision by the Hawaii Employer-Union Health Benefits Trust Fund last July 1 to switch to a self-funded arrangement with HMSA.