Health premium hikes jolt workers

Advertiser Staff and News Services

Say goodbye to a chunk of that raise you're expecting. Double-digit health insurance increases will take a bite — sometimes a huge one — out of next year's paychecks.

With open enrollment for insurance under way at many companies, workers who get insurance through employers are starting to get their first look at next year's health costs. And they're ugly.

Some employees are seeing increases of as much as 22 percent — or $1,000 more a year for family coverage.

Experts say insurance premiums are rising at their fastest clip in a decade, fueled by increased demand for hospital services and prescription drugs. Premiums are expected to leap an average 15.4 percent for employers next year.

In Hawai'i, healthcare costs are not bucking the trend.

In July, the Hawaii Medical Service Association started raising rates an average of 5 percent for businesses, primarily those with fewer than 100 employees.

HMSA, Hawai'i's biggest health insurer, said increases in drug costs were the primary reason for the rate increase that affected about 20 percent of its 630,000 members. HMSA said larger employers also would see similar increases, depending on their loss experiences.

Kaiser Permanente Hawaii, the biggest health maintenance organization in the Islands, increased rates on its most popular small-group plan by an average of 8.7 percent Jan. 1.

Unlike on the Mainland, however — where employees are seeing many companies pass along much, if not all, of the increases — local employers must operate under the 1974 Prepaid Health Care Act.

That means Hawai'i employers can only pass along up to half of the premium charged by health insurers, as long as it does not exceed 1.5 percent of a worker's gross monthly salary — except for employees covered by collective bargaining agreements. So in Hawai'i, in many cases, employers will be absorbing some of the increased costs.

"In terms of projections on rate increases, we have been telling employers to budget between 8 and 10 percent, but it will vary by each employer depending on size, type of business and utilization patterns," said Paul Tom, president of Benefit Plans Consultants (Hawaii) Inc., an employee benefit consulting and actuarial firm.

Tom said what the actual increase, if any, might be next year is still not clear yet since state officials will be able to regulate healthcare insurance premiums starting Jan. 1 under new legislation that will require all insurers to refile their healthcare rates with the state insurance commissioner for approval.

Hewitt Associates estimates that the amount employees will pay in premiums and other costs next year will rise by an average of $342, to $1,753. If a worker gets a 4 percent raise next year — and earns the national median weekly wage of $597 — healthcare costs will eat up 28 percent of the raise.