The Hawaii Medical Service Association has asked to increase health insurance premiums on small businesses July 1 by an average 8.5 percent, its largest rate increase in four years.
HMSA, the state’s largest health insurer, said Monday it needs the increase in part due to costs related to the new national health care reform law.
"Costs are increasing this year, partially due to health care reform," HMSA spokeswoman Elisa Yadao said in an email. Assessments and taxes related to health care reform account for approximately 23 percent of the rate request, she said.
The rate increase would apply to approximately 8,800 small businesses with fewer than 100 employees, Yadao said. HMSA said there are about 81,000 individuals affected. The state Insurance Division put that number at 118,000.
The Insurance Division has to approve HMSA’s rate request before it can take effect. Last year HMSA asked for a 3.9 percent increase for small businesses, and the state approved 2.6 percent.
The 8.5 percent increase is for members in HMSA’s preferred provider plan, which is the most common plan. HMSA is asking for a 9.1 percent increase for small-business employees on its health maintenance organization plan, HPH Plus.
"We know cost increases are a hardship on businesses," Yadao said. "That’s why we’re focusing efforts on rewarding doctors and hospitals for putting patients first, delivering preventive care that lowers health care spending."
Insurance Commissioner Gordon Ito couldn’t be reached for comment.
HMSA has a total membership of more than 700,000. It controlled 77 percent of the Hawaii health insurance market in 2010. HMSA posted a profit of $36 million in 2012 on the strength of its investments.
Warren Orikasa, owner of Abbey Carpet of Maui and an HMSA client, said while there may be a cost increase, most employers will pay the price to have their workers covered under a health plan.
"Most of the businesses would prefer to have coverage for their workers rather than having premiums in their pockets just from a humanitarian perspective," he said. "While the employers look at health care as a big expense, they also have some sense of satisfaction that their workers are covered. But it’s unfortunate that the cost is accelerating."
The Patient Protection and Affordable Care Act, also known as Obamacare, was signed into law by President Barack Obama in 2010, but the biggest reforms will take place in January.
Representatives of HMSA and other Hawaii health insurers are designing the state’s health insurance exchange, the first major reform under Obamacare. They are setting up the Hawaii Health Connector, which is designed to provide residents access to affordable medical coverage, but insurers might have to foot part of the bill.
The nonprofit Connector announced Monday it had won $128 million in federal funds to develop the exchange but hasn’t determined how it will pay for its operations after 2014. Some states are assessing fees on insurance carriers.
As the health care reform law is implemented over the next few years, consumers and businesses can expect to see higher rate increases, said Gary Lee, a Honolulu-based principal with Mercer, a New York human resources and benefit plan consultant.
"I suspect in the short term that’s going to be the case, unfortunately," he said. "It’s not only Hawaii; it’s across the United States. … That’s the reality of the times we are living in. That’s the hand we’ve been dealt. It’s equivalent to the price of oil going up that’s affecting our gasoline and electricity costs."
HMSA said despite increases from the implementation of Obamacare, it has been able to negotiate a new agreement with CVS Caremark, parent company of Longs Drugs, that helped bring down prescription drug costs for many employers.
