Posted on: Friday, February 18, 2005
Measure would halt rate hike by HMSA
By Catherine E. Toth
Advertiser Staff Writer
A Legislature measure adopted by a Senate committee yesterday would effectively prevent Hawaii Medical Service Association, the state's largest health insurer, from raising rates until it has reduced its reserves, which total about $516 million.
The proposal by the Senate Commerce, Consumer Protection and Housing Committee differs from Gov. Linda Lingle's plan, which would require HMSA to reduce its reserves by refunding about $100 to each of its 688,000 members.
HMSA opposes both proposals, two versions of S.B. 760, saying that the reserves are needed in the event of emergencies and other contingencies.
A $40 million investment to upgrade HMSA's claims processing system and information management capabilities will be paid for entirely by HMSA's reserves, HMSA has said. The project, which began late last year, will take three to four years to complete.
HMSA also said it would voluntarily use 100 percent of its annual investment income from reserves to help keep coverage affordable. Under state law, health insurance plans are required to use 80 percent of their annual investment income from reserves to offset dues.
"Our original position has been and continues to be that we don't think the bill is necessary," said HMSA spokesman Cliff Cisco. "We've been saying all along that we don't believe the reserve is excessive."
State law allows a managed care plan to hold a surplus equal to 50 percent of its annual expenses. Any extra amount is to be refunded to health plan members or used to lower premiums and other rates. HMSA's $516 million in reserves equals about 35 percent of its annual expenses, Cisco said.
The bill passed by the Senate committee yesterday would reduce the amount managed care plans can keep in their reserves from 50 percent of their annual expenses to 30 percent.
Hawai'i's other major insurers — Kaiser Permanente Hawaii, Hawaii Management Alliance Association, University Health Alliance and AlohaCare — do not have surpluses that exceed 30 percent.
"I think this is very akamai," said Bev Harbin, president of the Employers' Chamber of Commerce and a small business advocate. "It's a real interesting way to approach this. Maybe this will start giving the small-business community some kind of relief. ... This is a bold step."
The bill as passed out of committee would allow managed care plans with excessive reserves to file for rate increases should they be in "imminent danger" of sustaining a negative cash flow due to a high amount of reimbursements.
The amended bill could be voted on by the Senate as early as next week.
"This is a major amendment," said Senate committee chairman Ron Menor, D-17th (Mililani, Waipi'o). "Under our approach, instead of giving all subscribers a relatively inconsequential amount in rebate, this bill will target where (relief) is needed the most — to businesses, especially small business owners, who struggle with rising premium costs."
Last week HMSA applied for an average 4.9 percent increase in health premiums for small businesses, those with fewer than 100 employees. If the Senate bill becomes law, HMSA could be denied that rate request.
Menor said he believes the bill will pass the Senate and that the House would be open-minded to the committee proposal.
Reach Catherine E. Toth at ctoth@honoluluadvertiser.com or 535-8103.
