HMSA reduces amount of rate-increase request
By Deborah Adamson
Advertiser Staff Writer
Hawaii Medical Service Association, the state's largest health insurer, said yesterday profits rose nearly five-fold in the first quarter and the company will not need as large a rate increase as previously expected.
The insurer has reduced its request for a small business premium increase to 7.8 percent in its Preferred Provider Plan instead of the 9.6 percent it applied for February. For Health Plan Hawaii Plus, the insurer is now requesting an increase of 7.4 percent down from 11.6 percent. The rates, which affect businesses with fewer than 100 employees, should kick in on July 1 if the state approves them. About 140,000 people are covered by these rates, which also reflect prescription drug, dental and vision benefits.
"Yahoo!" said Stephany Sofos, sole proprietor of SL Sofos, a real estate consulting firm in Kaka'ako. "There are a lot of costs in small business that are creeping upon us.The fact that HMSA is not increasing as much is a good thing. Every little bit counts."
The lower rate increase means the average monthly premiums for a family would rise to $935.70 for PPP instead of $951.36. Under Health Plan Hawaii Plus, the same family would pay a monthly premium of $855.42 instead of $889.02.
HMSA said it was able to lower its rate increase in part because it had a net income of $17.5 million in the first quarter, up from $3.7 million in the year-ago period. Operating income — healthcare premiums minus the cost of care and administrative expenses — came to $13.6 million compared with a loss of nearly $372,000 a year ago.
HMSA also said it earned more than $7 million on investments, a net gain of one-fifth. Under state law, health insurers must give back to members 80 percent of their average investment gains over a rolling three-year period. Last year, HMSA said it reduced total premiums by more than $20 million as a result of investment gains.
HMSA reserves rose by 3.5 percent to $505.86 million in the first quarter compared with the fourth quarter. Nearly 80 percent of HMSA's reserves are held in stocks, bonds, cash and short-term investments. The reserves are enough to pay for about four months of operating expenses, the insurer said.
"It's one of the best operating quarters we've ever had," said Steve Van Ribbink, chief financial officer of HMSA. "Healthcare (costs), over the last six to nine months, have been increasing but not at the steepness they have been earlier."
More than 88 percent of premiums went towards healthcare costs while 8 percent was spent on administrative and other operating expenses. HMSA's trend has been paying out over 90 percent of premiums for healthcare costs.
As for rates at companies with more than 100 employees, Van Ribbink said HMSA is interested in lowering premium increases approved by the state since last fall by 2 to 2.5 percentage points. But whether rates would go down this year depends on how quickly the state can approve a new filing, he said. There are 225,000 people at larger businesses covered by HMSA. The rate increases vary by company, but generally are comparable to the small business group.
HMSA also said it will lower its initial premium for its new CompMED plan. The monthly rate for a family would be $885.84 and not $901.44. The new health plan, which would lower employer premiums by an average of 7 percent compared with current HMSA plans, but would increase the upfront cost to workers, was unveiled last month. HMSA said many employers have expressed interest in CompMED, which will begin July 1.
The rate decreases come as a third insurer, Las Vegas-based Summerlin Life & Health Insurance Co., prepares to enter the Hawai'i market later this year. Its mid-summer launch — in time for small business policy renewals on July 1 — has been delayed because a bill that would have waived a 4.265 percent tax on for-profit health insurers was killed and the company has to revise its business plan.
Hawai'i's current health insurers are all nonprofit firms and as such don't have to pay the tax. Summerlin argued it would be an unfair advantage and would hamper its entry into Hawai'i. Summerlin is owned by I/MX Companies of Tempe, Ariz. I/MX has three other companies in the state: HMA, a third-party health plan administrator, R/xx, a pharmacy benefit management firm, and Health Management Network, a provider contractor.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
