Businesses brace for 11.5 percent HMSA rate hike

By John Duchemin
Advertiser Staff Writer

With Hawai'i health insurers raising their rates, businesses are cringing as they see their costs about to rise in the midst of an uncertain economy.

Small business owners would likely bear the brunt of an average 11.5 percent rate increase proposed by the Hawaii Medical Service Association, the state's largest health insurer.

The new rates, which represent the largest HMSA increase since 1990, would take effect July 7, pending approval by the state, and would apply to about 138,000 HMSA members.

"We were expecting a rate increase, so that's not surprising, but the magnitude of this increase could be overwhelming," said Linda Sasaki, executive director of the Kona-Kohala Chamber of Commerce.

With health maintenance organization Kaiser Foundation Health Plan Hawai'i also raising average rates about 9 percent, many small businesses face thousands of dollars in additional premium costs this year if the higher rates take effect.

The proposed rate for HMSA's most popular preferred provider plan will be $293.54 per month for single employees. That's an increase of more than $30 per month from the typical 2002 premium.

If an employer has 25 workers using that plan, they would need to pay about $750 more per month, or $9,000 more per year.

Most owners will have to bear the entire amount of the increase, business leaders said. A 1974 Hawai'i law caps an employee's contribution to insurance premiums at 1.5 percent of salary; because few salaries are rising in an economy still recovering from the post-Sept. 11 shock, few employees will end up paying more money for their insurance, said Gregg Yamanaka, chairman of the small business council of the Chamber of Commerce of Hawaii.

"This is a significant increase," Yamanaka said. "With this economy, small businesses don't have the capacity to keep absorbing these costs. They just don't have that discretionary cushion."

Businesses facing the increased premiums will likely take a hard look at their insurance plans, and may shop around for cheaper rates, said Scotty Bell, owner of Big Island charter sailboat company Body Glove Cruises.

"Employers can't be complacent; they have to go out and do their research," said Bell, who recently switched his 25-employee from HMSA to a cheaper insurance plan, saving $60 per month.

9 percent Kaiser rate increase went into effect in January

Kaiser Foundation Health Plan has received informal approval from the state to increase its average rates 9 percent, said Janice Head, president of Kaiser in Hawai'i.

The rate increase went into effect beginning in January, but state regulators had the right, under health insurance rate regulation laws passed last year, to demand an adjustment to the rates. Head said the insurer is awaiting final written approval from the state.

State insurance officials did not return phone calls requesting comment.

— John Duchemin