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The Honolulu Advertiser
Posted on: Wednesday, September 3, 2003

Kaiser asks for 14.5% rate hike

By Deborah Adamson
Advertiser Staff Writer

Kaiser Permanente Hawai'i yesterday said it plans to raise rates across the board by an average of 14.5 percent, the highest hike requested since 1989.

Costs to members

Kaiser's proposed rate increase would raise rates for people paying for their own health insurance:

• Single Person: To an average of $240 a month

• Married: To an average of $720 a month

• Married, two children: To an average of $720 a month

• Single parent, two children: To an average of $720 a month

If you get insurance through your employer, your monthly healthcare insurance payment would vary, depending on the benefits you receive.

If approved by state regulators, the new rates would start Jan. 1, 2004. Premiums would cost $240 a month for individuals and $720 for families. For most workers, the bulk of the cost would continue to be paid by employers.

Kaiser, the state's second-largest health insurer, said the rate increase is needed because of rising healthcare costs, the growth in the number of patients, purchase of a medical records system and the need to build new facilities or renovate existing clinics.

Healthcare costs are projected to increase by 9.3 percent in 2004.

"It's a sad state for everyone of all ages," said Alicia Maluafiti, associate state director of advocacy and communication at AARP Hawai'i. "The biggest driver of healthcare costs is prescription drugs. With the aging population in Hawai'i, seniors are disproportionately impacted by rising drug costs."

However, while drugs are helping to drive up costs, Kaiser is asking for a bigger increase in premiums next year than previous years because of the added expense of construction projects. Kaiser said it needs to ease crowded conditions at some of its clinics.

"We need to invest in our infrastructure and facilities," said Janice Head, president of Kaiser Permanente Hawai'i, a nonprofit health maintenance organization. Premiums "are the source of our revenue. We have not diversified our business. Our profits are not going to shareholders."

The five-year construction project is expected to cost $200 million. Kaiser also anticipates it will spend $12 million a year from 2004 to 2006 to install a new system that would provide real-time access to patient records. The system should minimize errors and boost efficiency, Kaiser said.

Retiree Corrine Goldstick of Queen Emma Gardens, a longtime Kaiser member, doesn't think patients should pay for new facilities.

"I think Kaiser is out of line when we, the longtime users, are expected to pay for expansion of facilities. It doesn't seem fair," she said. "They should not accept new members if those members' dues are not sufficient for building new facilities ... We are not in a position to help Kaiser become more of an oligopoly than it already is."

Harris Sukita, a Kaka'ako small-business owner, said he will have to absorb the costs of the higher premiums since there are only two major health plans in town and they're both raising rates.

"Our hands are tied," he said.

Unlike HMSA, Kaiser provides direct medical care through its own clinics and hospitals. Kaiser officials said they want to make sure that its medical centers are up-to-date and large enough to accommodate a growing number of patients.

Since 1985, membership has risen by 70 percent to 235,000. Some facilities are so crowded that two or three doctors might share one office and a limited number of examination rooms, Head said.

Patients often jostle for parking at the Moanalua Medical Center on O'ahu and pharmacy lines snake across the lobby at the Wailuku clinic on Maui.

In late 2004, Kaiser is scheduled to finish building its $32 million Waipi'o clinic on O'ahu and the $11.9 million Maui Lani facility in Maui. It's also renovating several clinics around the Islands.

The Ceridian building on Paa Street in Mapunapuna that Kaiser bought last year will be converted into a primary care clinic, to serve people from Moanalua Medical. By the end of 2004, internal medicine, obstetrics and pediatrics will move to several floors of the Ceridian building from Moanalua. The rest of the building will be converted as leases lapse.

The Moanalua facility is expected to be completely converted into a specialty care center by 2005. In addition, Kaiser plans to increase the number of acute beds available at the medical center.

To pay for its renovations and new clinics, Kaiser needs to be profitable, Head said. Last year, Kaiser lost $2.8 million, the first time it has done so in recent history. In the first and second quarters of 2003, Kaiser recorded net income of $3.1 million and $1.79 million, respectively.

Thus far into the third quarter, Kaiser is on budget, Head said.

Since 1994, Kaiser has increased premiums in every year but two.

In 1996 and 1997, Kaiser did not raise rates because of a price war in the Hawai'i healthcare market.

There were nine major health maintenance organizations at the time compared with two private, nongovernmental plans today. Some newer health plans offered discounts to win a larger share of the market.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.