Hawaii consumers, already struggling in an economic recession that has brought soaring foreclosures and job layoffs, now will have to deal with rising health care costs beginning in January.

The state's two largest health insurers are seeking rate increases for next year as rising medical costs continue to outpace their revenue.

Hawaii Medical Service Association, the state's largest insurer with just under 700,000 members, has filed a request with the state Insurance Division to raise premiums an average of 9.9 percent for its large businesses that consist of more than 200 employees. This year, HMSA's average rate increase for its large businesses was 11.4 percent, while in July of this year, HMSA raised rates an average of 12.1 percent for small businesses on its most popular preferred provider plan.

Kaiser Permanente Hawaii, which lost $1.9 million through the first six months of this year, is seeking a 10.7 percent rate increase that would be the largest by the health maintenance organization since 2005. Kaiser, which overall has 224,000 members, also is requesting a rate increase of 12.8 percent for 14,000 members who seek individual coverage. The proposed increases do not apply to Kaiser's Medicare and QUEST (Medicaid) members.

HMSA, which lost $30.7 million through the first six months of this year, declined yesterday to disclose the average amount of its request, but the number was confirmed by state Insurance Commissioner J.P. Schmidt, whose agency regulates rates for Hawaii's insurance industry.

“;The reasons for the increase is health care costs and increased utilization,”; HMSA spokeswoman Laura Lott said.

  Kaiser said its new rate request would affect 150,000 business and government employees and begin to take effect Jan. 1.

Catherine Bailey, acting chief marketing officer at Kaiser, said the health provider has worked aggressively to manage expenses by consolidating and selling facilities, advancing new technologies to reduce costs and implementing a mandatory hiring freeze for nonessential positions.

“;In 2009 most business travel has been replaced by video and teleconferences and webinars,”; she said. “;Also in 2009, Kaiser Permanente executives across the program agreed to forgo salary increases.”;

Kaiser's previous highest increase was in 2005 when it raised rates 11 percent. Following that increase, Kaiser was able to keep rate increases to single digits, including the 2 percent increase that went into effect in 2008 which marked the smallest hike since boosting premiums 2 percent in both 1998 and 1999.

Kaiser boosted rates 4.9 percent in 2009.

Schmidt said Kaiser's single-digit rate increases were largely due to the reorganization and cost-saving measures they implemented prior to 2005.

“;That helped mitigate the continued rising cost of health care and enabled them to file for smaller increases than many of the other plans,”; Schmidt said. “;It appears that the continued rise in health care costs has now passed the savings they achieved in that, and at this point it appears that health care costs will continue to rise precipitously.”;

Schmidt said the Insurance Division is working with insurers in several areas to try to reduce rising costs. He cited the use of electronic medical record systems, paying providers based on good outcomes rather than on piecework, and the promotion of healthy lifestyle programs and discounts to businesses with employees who use them.

“;Businesses that have a program where the employees have good eating habits and exercise to promote a healthier lifestyle have seen those programs result in significant savings to those businesses,”; Schmidt said.

Bailey said Kaiser, taking into account the challenging economy, has expanded its individual and family plan options and now offers four plans, with monthly premiums based on benefits offered.

Schmidt said even though the Insurance Division will look at HMSA's large business rate increase request “;very closely,”; he said to some degree that increase is negotiated with the actual businesses “;so there tends to be more dialogue and negotiation on those rates.”;

In addition, University Health Alliance, also known as UHA, has applied to increase rates for existing customers by 8.7 percent for medical coverage and 14.1 percent for drug coverage.