Posted on: Wednesday, March 30, 2005
Health insurer seeks to cut premiums 20%
By Deborah Adamson
Advertiser Staff Writer
A health insurance company that began operating in Hawai'i last summer has asked the state to approve an average 20 percent decrease in its rates, a move that could put pressure on other insurers to lower their prices.
If approved, Summerlin Life and Health Insurance Co. of Las Vegas will apply the new rates starting July 1.
Rising health insurance costs have been a chief concern among Hawai'i businesses and their employees. Many had hoped that the arrival of Summerlin, the first health insurer to enter the Hawai'i market in at least a decade, would spur competition and lead to lower rates.
Summerlin is the first health insurer to ask for a rate decrease since the state began regulating health insurance premiums in 2003, said Hawai'i Insurance Commissioner J.P. Schmidt.
"That's great," said Criz Cabigas, human resources manager for LDW Inc. in Honolulu, a franchisee of seven McDonald's restaurants on O'ahu that switched to Summerlin from Kaiser Permanente and a Mainland insurer. "Whereas Kaiser and HMSA (Hawaii Medical Service Association) are asking for a rate increase, that's going in the opposite direction."
In February, HMSA asked the state to approve a 4.9 percent rate increase for small businesses starting July 1. The insurer is still waiting for approval. Kaiser got approval to hike rates by 11 percent for 2005.
"Being new and coming into the market, (Summerlin) wants to be very competitive," said Schmidt. "I anticipate that others will get a hard look at this ... sharpen their pencils and come up with similar rates."
HMSA spokesman Cliff Cisco declined to comment on whether HMSA would match Summerlin's rates, but said the 20 percent decrease is "interesting news. We have to wait and see what comes out."
After the 20 percent decrease, Summerlin's rates for its Comprehensive Medical Plan with a $15 co-payment would average $240 per month for a single person, $490 for two and $720 for a family plan.
A roughly similar plan offered by HMSA, the CompMed plan, would charge $309.90 for singles, $619.80 for two and $929.70 for a family if its rate increase for 2005 is approved by the state.
Summerlin doesn't offer a health plan that competes with Kaiser's main plan.
Summerlin officials declined to comment about the application for a rate decrease, which was first filed with the state Insurance Division in December and revised earlier this month.
Schmidt, the insurance commissioner, said he believes Summerlin, as a new player in Hawai'i, has an incentive to find ways to offer a more competitive product.
Summerlin isn't taking a loss by lowering their prices, Schmidt said. The state would not approve a rate decrease if it appeared the company was losing money on the plan to increase market share, he said.
Summerlin is able to cut prices because it has gained more experience in Hawai'i's health insurance market since opening for business last year, said Paul Tom, chairman of the state's Prepaid Health Care Advisory Council, which scrutinizes all health plans in Hawai'i.
Previously, "they had no Hawai'i data. Their (actuary) was using Mainland pricing," Tom said.
Summerlin's request for a rate decrease comes in spite of the company having to pay a premium tax which its competitors, all nonprofit organizations, don't have to pay. As the only for-profit health insurer in the state, Summerlin pays a 4.265 percent premium tax. A bill aimed at killing the tax died in the Legislature last year, and an attempt to void the tax this year has not progressed.
Summerlin is a unit of Tempe, Ariz.-based I/MX Companies. It covers a million people in Illinois, Iowa and Nevada. HMSA, Hawai'i's largest health insurer, covers nearly 700,000 members. Kaiser is the second-largest state-wide with 231,000 members.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
