Prompted by HMSA's request to increase individual insurance premiums by 49%, the Legislature held a hearing on July 23 to explore the Insurance Division's rate review process. Insurance Commissioner Gordon Ito and Tammy Tomcyzk, an actuary hired by the State, testified during the briefing.
Commissioner Ito explained that he reviews health insurance rates to ensure that they are not "excessive, inadequate, or unfairly discriminatory" and are "reasonable in relation to the costs of the benefits provided." See Haw. Rev. Stat. 431:14G-103. The rate review process includes an evaluation of factors such as: actual loss costs (medical expenses paid by insurers), projected expenditures, projected trends, claims administration costs, administrative overhead, and net income. Rates are reviewed to balance excessive rates to the consumer and to prevent the insurer's insolvency.
Commissioner Ito further explained that issues impacting individual rates include:
- Limited number of insurers writing individual plans. (In Hawaii, only HMSA and Kaiser offer plans to individuals).
- Small individual pool. (Approximately 30,000 individuals obtain insurance through the individual market. By comparison, the small group (employers with less than 50 employees) has approximately 160,000 participants and the large group (employers with 50 or more employees) has upwards of 600,000 participants.)
- Smaller pool can mean more volatility [in rates]. (Larger risk pools can more easily absorb the pressure on rate increases than smaller risk pools.)
- Pent up demand by those with pre-existing conditions. (Individuals who did not have health insurance prior to implementation of ACA's guaranteed issue requirements may have had the medical treatments they needed or wanted soon after enrolling in an ACA plan which no longer prohibits coverage of pre-existing conditions).
- Prepaid population healthier than non-insured population. (The individuals receiving insurance through their employer, as required by the Prepaid Health Care Act, tend to by healthier than the previously uninsured population that enrolled in ACA individual plans).
- ACA improved health benefits coverage.
During the briefing, the Commissioner explained that HMSA will revise their rate increase request and that Kaiser requested a rate increase of 35%. The Commissioner will complete his review of ACA plans in late August. Health Rate Review and ACA Individual Plans