The Hawaii Medical Service Association, the state’s largest health insurer, is requesting an average rate increase of 14.8 percent for its large employer groups that come up for renewal in January.

The rate request, which must be approved by the state Insurance Division, covers about 77,500, or 11 percent, of HMSA’s 680,000 members. The new rates would take effect in January.

HMSA officials said the increase is needed to counter a rise in medical costs, and hospital costs in particular.

It’s not certain the same rates would apply when other large employer groups come up for their renewal.

"The rate request is necessary to cover rising health care costs — particularly hospital costs — and to move HMSA toward a break-even operation," said Steve Van Ribbink, HMSA’s executive vice president and chief financial officer, in a news release.

HMSA has been locked in a negotiating stalemate with Hawaii Pacific Health — which operates Straub Clinic & Hospital, Kapiolani Medical Center for Women & Children, Pali Momi Medical Center and Kauai’s Wilcox Memorial Hospital — over a new contract that would include how much HMSA reimburses the hospital system for services.

Earlier this month, HMSA issued a statement warning that unless negotiations can be concluded successfully by Jan. 31, Hawaii Pacific Health and its facilities might leave the HMSA network, requiring its members to seek services elsewhere.

Yesterday’s release announcing the proposed increase for large employer groups did not mention the Hawaii Pacific Health dispute directly.

However, the release does state that to reduce health care costs, "HMSA is aggressively pursuing a new methodology of provider reimbursement that rewards health-care providers for quality rather than volume." The release also refers to an agreement reached in June between HMSA and the Queen’s Health Systems that would have the health insurer pay the hospital group based on quality and efficiency, known as a "pay-for-performance" model.

"We know it’s very difficult for business owners right now during the current economic downturn, and the last thing we want to do is make things more difficult," Van Ribbink said. "But health care costs continue to rise and in the last five years HMSA incurred $289.8 million in operating losses because we’ve chosen not to pass these excessive increases on to our members. We can’t afford to continue doing that."

Elisa Yadao, HMSA’s vice president of community affairs, said yesterday she could not say immediately if a similar increase would be asked of other large employer groups when they come up for renewal down the line.