The Hawaii Medical Service Association, or HMSA, said it is the nonprofit's lowest rate increase since 1998 for businesses with fewer than 100 workers on its Preferred Provider Plan.

Small businesses on the CompMed plan, which was introduced last year, also would see an average 4.9 percent hike while those on Health Plan Hawaii Plus would see an average 4.5 percent increase.

The new rates would affect 11,000 small businesses employing 141,000 people. HMSA covers nearly 700,000 members.

Monthly dues for a family on the Preferred Provider plan would increase to $981.30 while those on Health Plan Hawaii Plus would see the rate go up to $893.88. For CompMed, the rate would be $929.70. Rates include medical, drug, dental and vision benefits.

HMSA has said it was able to ask for a smaller rate hike this year in part due to lower-than-expected increases in medical costs. Last year, HMSA rates rose by an average of 7.8 percent for small businesses on its Preferred Provider Plan with medical, drug, dental and vision benefits.

HMSA said it would voluntarily use 100 percent of its annual investment income from reserves to offset dues for the next 12 months. By state law, health insurance plans are required to use up 80 percent.

HMSA also said it would use its reserves to pay for a $40 million investment to upgrade the nonprofit's claims processing system and information management capabilities.