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The Honolulu Advertiser

Posted at 12:07 p.m., Tuesday, May 7, 2002

HMSA raises rates 5% for small businesses

By Frank Cho
Advertiser Staff Writer

Barely a week after reporting a $19 million operating loss in its health insurance business, the state's biggest medical insurer said it will raise rates by an average of 5 percent this year for thousands of small businesses.

The Hawaii Medical Service Association said today that rising drug costs are behind the rate increase, which will affect about 10,000 local businesses, primarily those with fewer than 100 employees.

"Medical costs are continuing to outpace health plan rates," said Cliff Cisco, senior vice president for HMSA.

Cisco cited factors such as Hawai'i's aging population, increasing prescription drug costs and the use of new, expensive medical technology as the primary drivers of rising medical care costs.

The rate adjustment, which begins July 1, will directly affect about 20 percent of HMSA's 630,000 covered members who work for small businesses. The other 80 percent of HMSA's members may see similar increases this year.

This is the fifth consecutive year of rate increases by HMSA to combat rising drug and claims costs. But today's rate increase announced by HMSA is about half the size of last year's 9 percent average increase.

Today's rate decision will not be affected by a measure passed last week by the state Legislature to being regulating health care premium rates. Gov. Ben Cayetano is expected to sign the bill, but it would not take effect until next year.

HMSA reported revenues of $1.22 billion in 2001, but the company said payouts to doctors and hospitals rose 1.6 percent, or $1.24 million, from a year earlier. That contributed to an operating loss of more than $19 million. After gains from its investments are factored in, HMSA had a net profit of $6.5 million, up 38 percent from $4.7 million the previous year.

Businesses are required to provide health insurance for workers, but coverage for dependents, plus drug, vision, and dental coverage is not part of that requirement.

Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com.