Kaiser Permanente Hawaii is seeking double-digit rate hikes for most of its members under proposed increases pending before the state Insurance Division.

The state's second-largest health plan yesterday said it is seeking an average 10.7 percent rate hike to cover rapidly rising medical costs. The increase would affect 150,000 members and take effect as commercial accounts renew agreements next year.

The Hawaii Medical Service Association also yesterday said it has filed to increase premiums for large corporations that renew their policies in January, but declined to disclose the average amount it is seeking.

Both health plans have been hit with increasing costs and losses because of escalating medical and drug costs. Kaiser yesterday said it has worked to keep its costs low, but could not overcome rising costs associated with providing care.

Kaiser's proposed increase is the largest since 2005, when it raised rates by 11 percent.

The rate hikes will sting local businesses, which have been hurt by the state's economic downturn and also face a huge jump in unemployment insurance taxes next year. Businesses typically shoulder most of the health care insurance premium costs for employees.

"In this economy, any increase in anything is bad news," said Tim Lyons, head of the 1,200-member Hawaii Business League. "It's almost as simple as that."

State Insurance Commissioner J.P. Schmidt said his office has 60 days to review the filing and issue a decision, unless more information is needed. Schmidt in 2004 denied a 14.5 percent Kaiser rate increase, forcing it to come back with a lower proposal.

"Obviously given the burdens on businesses we are looking at these very closely," he said. "We don't take these filings lightly."

But he also noted health care costs have been rising faster than inflation over the past decade and that his office also has a duty to make sure insurance companies remain financially sound.

Kaiser reported about $1.9 million in losses through the first six months of 2009, even as it implemented a 4.9 percent increase in rates for this year. It will announce its financial results for the July-to-September period later this month.

HMSA, the state's largest health insurer, also has reported losses, recording red ink in nine of the past 12 quarters. In July, HMSA put a 12.1 percent increase into effect for its small-business group.

Its pending increases would affect larger companies that were hit with double-digit percentage increases at the beginning of this year.

COST-CUTTING

Kaiser yesterday said it tried to keep its costs low so it wouldn't have to raise rates as much.

"Kaiser Permanente has worked aggressively to manage expenses by consolidating and selling facilities, implementing new technologies to reduce costs and implementing mandatory hiring freeze for nonessential positions," Catherine Bailey, acting chief marketing officer, said in an e-mail.

She said the company has tried to offer more medical coverage options and has expanded its individual and family-plan options. It also has limited business travel and executives have forgone salary increases, Bailey said.

Kaiser's rate request would affect those who are employed by large and small companies, and the federal and state governments.

Kaiser, which has 224,000 total members in Hawaii, also has made a separate filing to increase rates 12.8 percent for 14,000 members who seek coverage individually.

Schmidt said his office also had received a rate increase filing from University Health Alliance, or UHA, that seeks to raise rates for existing customers by 8.7 percent for medical coverage and 14.1 percent for drug coverage.

A request from Summerlin for a 2009 increase is still pending, Schmidt said.

Lyons said the rate hikes may cause employers to furlough workers or cut hours to cope with the higher costs. Under Hawaii's landmark Prepaid Health Care Act, companies must make coverage available to employees who regularly work 20 or more hours.

He said his association offers a group plan for members that costs about $1,000 a month for families. He said a 10 percent increase would amount to $100 tacked on to the costs.