Hawaii Medical Service Association is lowering health insurance rates on Jan. 1 for individuals covered under the federal Affordable Care Act, also known as Obamacare, by an average 3.3%, but is increasing rates by 2.5% for those covered under small businesses.

The rates affect about 19,000 individual plan members and 17,000 small group members.

“Like much of the nation, we now have a better understanding of the health care needs of our members with ACA plans. We’ve been able to stabilize premiums and in some cases, even lower costs for HMSA members,” said Gina Marting, HMSA’s chief financial officer. “Stabilizing our ACA plans can be attributed largely to the work that we’re doing with our hospital and physician partners, because improving health and health care is key to controlling rising costs.”

The rates for individual plans follows a decrease of 0.4% this year and rate hikes of 19.8% and 35% in 2018 and 2017, respectively.

The state’s largest health insurer, with 729,068 members, reported a profit of $18.6 million in the third quarter, a substantial drop from the $46.7 million in the year-ago period. The reason for the huge swing in profitability is related to ACA taxes and fees, which were in effect last year but not this year. HMSA recorded the fees in last year’s first quarter and recouped them throughout year, which is why the 2018 third-quarter profit is significantly higher.

The health plan collected $865.3 million in premiums, down from $878.3 million, and spent $783.3 million on medical benefits, up from $774.8 million. Administrative expenses totaled $79.5 million, up from $74.9 million. An operating gain of $13.7 million was boosted by investment gains of $6.3 million. That compares to an operating gain of $38.3 million and investment gains of $9.2 million in the year-earlier quarter.

“Much of our financial success can be attributed to the excellent physicians, hospitals, and pharmacies in the HMSA network who are keeping our members healthy and to the employer groups who work with us to make sure their employees and families have access to the care they need,” Marting said.

Meanwhile, Kaiser Permanente Hawaii is also lowering rates by 5.4% for ACA individual health plans based on lower market risk. It is, however, raising rates by an average 7.5% for small-business members.

“Kaiser Permanente continues to work to be more efficient and deliver value to our customers. It is our mission to provide affordable, high-quality health care,” said spokeswoman Laura Lott.

Kaiser reported a $79.8 million loss, compared to a loss of $600,000 in the third quarter of 2018. Revenue from premiums totaled $411.9 million, up from $394.3 million, while health care expenses grew to $491.8 million from $394.7 million. Investment gains totaled $100,000, reversing losses of $200,000. The quarterly results include a premium deficiency reserve, Lott said, or the projected money needed to cover future claims and expenses if premiums are inadequate.

“These results are not unexpected for Kaiser Permanente Hawaii, and we’re taking steps to address them,” she said. “We are developing a long-term strategic plan to lower our costs and ensure that we’re meeting and exceeding our members’ expectations for quality, serv­ice and affordability.”

Insurance Commissioner Colin Hayashida, who regulates health plan rates, said the fact that overall rates are trending downward is “hopefully a sign of stabilization in the individual marketplace.”

“The decreased trends in medical costs, expected lower hospital utilization, and more accurate risk adjustment estimates may have positively impacted rates which is good news for consumers,” he said. “However, Hawaii residents are still encouraged to shop and compare plans across various offerings. Remember that plan coverages and costs can change every year.”

The Insurance Division is still reviewing non-ACA health plan rates for 2020. Open enrollment for ACA medical coverage began Nov. 1 and runs through Dec. 15.