Hawaii health insurance premiums are projected to skyrocket to $14,000 per person and $42,500 for a family of four in the next eight years.

Massive rate increases for Hawaii residents will be unsustainable, with premiums doubling every 10 years and outpacing inflation and wages, Insurance Commissioner Gordon Ito is warning. Health care costs took a 14.7 percent chunk of employee wages in 2015.

“We’re at a crisis point and people don’t realize it. We’ve really got to start focusing our attention to bending the cost curve,” Ito said. “The house is burning. We’re on the verge of cardiac arrest. That’s something that we really got to take to heart.”

The underlying problem is medical costs that are rising 6 percent to 9 percent a year, he said. Escalating costs resulted in rate hikes ranging from an average 5.9 percent to 24.1 percent for more than 360,000 Hawaii residents on Jan. 1. Monthly premiums average $650, or $7,800 per person per year.

“It’s taking more of your household income,” Ito said. “Wages are really being depressed because more and more is going to pay for health care premiums. Besides mortgages, health premiums are probably taking the biggest part of your budget. Health care costs are really impacting the entire state.”

Premiums totaled more than $7 billion and are set to increase by another $2 billion in several years. Among the main cost drivers are an aging population, prescription drugs, expensive technology and procedures, as well as unhealthy lifestyles that lead to costly chronic illnesses such as diabetes and heart disease.

Healthy living

Ito said while medical inflation must be brought down to a sustainable rate, estimated at 3 percent, residents must do their part to improve their own health.

“The decision to be healthy and living a healthy lifestyle is very personal and you can’t make anybody do anything they don’t want to do. If I want a full-size plate lunch instead of a mini that’s my business. It’s hard to legislate that,” said Dr. James Ireland, a community physician. “Hawaii is a generous culture. We share food, there’s a lot of parties and a lot of family get-togethers so there’s a lot of opportunities to overeat. How do you change that? Everybody wants to live a long, healthy life so we need to figure something out.”

Employers’ burden

If the state stays on course, premiums could eventually affect Hawaii’s Prepaid Health Care Act, which requires employers to provide coverage for full-time workers, Ito said. The law is credited for Hawaii having one of the lowest uninsured rates in the nation.

“The worst-case scenario is that Prepaid disappears where it’s so costly that employers say it’s time to repeal,” Ito said. “They’re the ones bearing the burden.”

Stephen Nii, owner of Nii Superette in Waipahu, pays $650 per person in monthly premiums for his seven employees.

“If businesses can no longer fund health care, where are these people going to get the $14,000 it takes to afford health care? They’re not,” he said. “That’s (like) buying a car every year.”

The Prepaid Health Care Act would likely be destroyed if businesses are not able to afford full-time employees, and would only hire part-timers they aren’t required to cover, Nii said.

“If the case is that health insurance is unaffordable … then we must abandon that model,” he added. “We should go to a model like universal health care.”

The next steps

The Insurance Division will lobby for legislative funding to study health care cost drivers and build a claims database that can be used to target the biggest issues in the community. Taxes on unhealthy products such as soda are also needed to raise awareness about its effects on the overall health of the population, Ito said.

In an effort to contain costs, the Hawaii Medical Service Association is replacing its current fee-for-service model, which reimburses doctors based on the number of patient visits and type of service, with one that reimburses a fixed monthly rate for each patient in a practice, whether or not the patient visits the doctor. The goal is to reward doctors for improving the health and well-being of their patients.

“It’s just trying to change people’s mindset. It’s just taking little steps,” Ito said. “I’m hoping people start realizing before it’s too late.”