Wednesday, July 21, 2004 — Time: 9:45:16 PM EST

Analysis of costs showed Kaiser rate hike request to be excessive

A July 13 article in The Maui News reported that Kaiser Permanente may delay the opening of its new clinic "as a result of Kaiser's requested rate increase being turned down by the state insurance commissioner."

I was well aware of Kaiser's plans for new capital improvements, including improvements to and openings of new clinics. I disapproved Kaiser's request to charge their members a very large 14.5 percent increase in rates because it was excessive and not supported by our analysis.

I approved an increase of 11.7 percent because our analysis determined that it provided a rate that was adequate to ensure that Kaiser had sufficient reserves to provide the services and coverage promised to members in their plan as well as the necessary improvements to clinics and other infrastructure.

I have no power over the main causes of premium increases, which are rapidly rising costs of new medical equipment, hospital and drug costs and litigation costs. But by creating more competition among insurers, more alternatives for consumers and by fighting insurance fraud, we can significantly lower premiums consumers have to pay.

We have convinced a new health insurer to do business in Hawaii to provide more competition. We have worked with the Prepaid Health Care Advisory Council to approve alternative plans to give people choices. We convinced the Legislature to pass the Trade Association Health Plan Bill so companies could band together and negotiate better rates through their trade associations. We were unable to get a fraud bill passed this year, but we will pursue it again next year because we know that states that have aggressively pursued fraud have have seen a significant reduction in premiums.

I always keep in mind the tremendous impact that rising health insurance rates have on the people of Hawaii, our families and our businesses. That is why we take a very hard look at any request for a rate increase and do a very thorough analysis of the request to ensure that any increase is absolutely necessary.

J. P. Schmidt

State Insurance Commissioner

Department of Commerce and Consumer Affairs Honolulu

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