The Hawaii Medical Service Association is raising health insurance rates by an average of 9.4 percent for large employers renewing policies this month in what is the biggest increase in January renewal rates in four years.

HMSA said the rate hike is needed as it pays for increased payments for hospitals and to cover rising healthcare costs. It also has filed for an average 8.7 percent increase for large employers renewing contracts starting in March.

"It's gone up this year because we passed on a fairly large reimbursement increase to the hospitals," said Steve Van Ribbink, chief financial officer of the state's largest health insurer.

The average 9.4 percent increase applies to 120 companies that employ about 106,500 workers, while the proposed 8.7 percent average increase affects 38 companies with about 26,000 workers.

Individual companies may see higher or lower increases depending on healthcare usage by their workers.

Last year HMSA's January rate increase for large employers was less than half this year's, or 4.4 percent.

Van Ribbink said he couldn't speculate whether similar rate hikes can be expected the rest of this year for other large companies and for the largest group of small businesses, which have rates adjusted in July.

But the bulk of HMSA's merit-rated large employer groups renew during the first five months of the year.

He said the increases come after hospitals won higher reimbursements from HMSA in negotiations last year.

"The fee reimbursement they got is significant," Van Ribbink said. "They are being underpaid by government payers (Medi-care, Medicaid and Quest). They are really looking to HMSA to make up for that shortfall."

Hawai'i's hospitals have complained the cost to provide care exceeded payments by $150 million in 2006 because Medicare, Medicaid and Quest only cover about 80 percent of the expense to provide the care.

Doctors also have complained that reimbursements aren't enough. HMSA said it has increased the amount it reimburses physicians to 120 percent of what Medicare pays for similar service. That was up from 118 percent it reimbursed previously.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.