Both of Hawaii's principal health insurance providers experienced financial losses in the past year as layoffs caused by the recession reduced the pool of employer-based health plans. The shortfall is a strong indication of the need for universal health care.

Hawaii Medical Service Association reported a $64.4 million loss last year in asking the state insurance commission for an average 7.8 percent increase of premiums for employees of small businesses — those with fewer than 200 employees.

Kaiser Foundation Health Plan experienced a $7 million loss in last year's fourth quarter.

The miserable economy has resulted in layoffs that have left many residents without health insurance. Most often they are young and were at the bottom of seniority rolls, enrolling in the government-sponsored Quest program or figuring they are healthy enough to do without health insurance until the economy improves.

“;We experienced reduced revenues as more of our members lost employer-sponsored coverage and enrolled in Quest,”; said Thomas Risse, Kaiser's chief financial officer.

Quest reimburses Kaiser or HMSA at a lower cost, causing them to absorb unpaid costs.

HMSA says it will pursue reduced costs by changing its provider reimbursement “;fee for service”; policy to a “;quality outcome and efficiency model,”; known also as a “;pay for performance”; program. Under the latter system, health insurance companies reward health care providers according to performance results, not for the number of procedures they perform.

Minnesota Gov. Tim Pawlenty said his state has begun changing its system, which “;encourages unnecessary tests that increase costs,”; to one designed “;to measure and set performance metrics for providers and make the results public.”; In an op-ed piece in Sunday's Washington Post, the Republican governor wrote, “;We are changing our payment system to reward quality rather than quantity.”;

Minnesota's pilot program is commendable, but deeper changes are needed in the nation's health care system. HMSA has five such programs in various stages — two on Oahu and one each on the Big Island, Maui and Kauai.

Steve Van Ribbink, HMSA's chief financial officer, said the transition to the policy will be completed some years from now. Meanwhile, it will seek the increase in premiums for its most popular health plan for employees of small businesses. Kaiser increased the cost of its premiums by 10.7 percent at the beginning of this year.

Hawaii will continue to have among the lowest health insurance premiums in the country, with nonprofit insurers operating under an employer-mandated care system. Universal health care would serve to expand coverage to all Americans and, in doing so, bring premium prices under better control.