Insurers seek approval to raise healthcare rates
By Frank Cho
Advertiser Staff Writer
Hawai'i's largest healthcare plans want to raise their rates and are seeking approval to raise premiums for the first time under the state's new health insurance rate regulation law.
Kaiser Permanente, Hawai'i's second-largest health insurer and No. 1 health maintenance organization, has filed with the state insurance division a request to raise its base rates an average of 9 percent. The state has 90 days to rule on the request, but Kaiser could implement the higher rates while its request is pending.
The higher rates will have an impact on businesses, which are required by state law to provide health insurance for their workers, and employees, whose share would also likely increase.
The average monthly premium for an employee insured by Kaiser is about $205 for a single person and about $615 for a family.
Also seeking higher rates are University Health Alliance, which wants to raise its base rates an average of 10 percent, and the Hawaii Medical Service Association, which is seeking approval for a 5.5 percent rate increase it implemented in July for small businesses.
Despite recent rate regulation, experts say insurance premiums are now rising at their fastest clip in a decade, fueled by increased demand for hospital services and prescription drugs.
"This is about what we were projecting. But I think what we are going to see at least for the next two years is probably going to be double-digit increases in the base rates," said Paul Tom, president of Benefits Plan Consultants Hawai'i Inc., a health insurance plan consultant.
Under a law passed last year, the state can regulate premiums by requiring health insurers to submit rates to the insurance commissioner for approval. The law, which has an expiration date of June 2006, prohibits companies from setting rates that are deemed to be excessive, inadequate or unfairly discriminatory and allows oversight similar to that of auto insurance and worker's compensation rates in Hawai'i.
The state regulator has approved UHA's request, but Kaiser's and HMSA's requests are pending. Hawai'i Management Alliance Association is the only Hawai'i-based insurer that has not filed.
"The new law took effect on Jan. 1; insurers have 30 days after that date to get their filings in," said Gordon Ito, the acting insurance commissioner.
HMSA said it plans to make a second filing this month that would most likely seek a single-digit increase on average for its large employer groups.
"Hopefully, the good thing, and maybe I am being naive, is that these filings will communicate to people what is driving our costs up and that we are not raising their rates just because we want to," said Steve Van Ribbink, HMSA's chief financial officer.
Hawai'i is one of about 40 states that have started regulating health insurance more closely in an effort to keep rates stable.
But unlike the Mainland, where businesses simply pass on much of the rate increase to employees, Hawai'i businesses are bound by a 1974 law requiring employers to pick up most of the cost.
It is not clear yet whether rate regulation will be able to keep insurance costs down in Hawai'i as falling stock market returns and years of competition have led several of the larger plans to underprice their products and absorb millions of dollars in losses, experts said.
"The insurance plans need to catch up (financially) so insurers are going to ask for higher rates. Some of this process is going to be obscured to the consumer until we get a good base rate," Tom said.
University Health Alliance, which has about 25,000 members, is under state supervision because of financial troubles. A company representative declined to comment about its filing.
Kaiser, which last raised premiums an average of 8.7 percent a year ago, also declined to comment about its rate request.
"It's the first time that they are filing and everyone is waiting to see how the insurance division looks at this," Tom said. "So the consumer is not going to see what this all means for a while."
Reach Frank Cho at 525-8088 or at fcho@honoluluadvertiser.com.
