HMSA posts another loss, but Kaiser profits
By Greg Wiles
Advertiser Staff Writer
The state's largest health insurer continued to struggle with rising costs during the second quarter, posting its sixth consecutive net loss over an 18-month period.
The Hawaii Medical Service Association had a net loss of $16.7 million during the three months ended June 30, as reimbursements paid to hospitals and physicians rose faster than what it collected in premium revenue. That was nearly four times more than the $4.34 million loss it reported a year earlier.
The results differed from those at the Hawai'i region of Kaiser Foundation Health Plan, which was able to boost members and revenue faster than expenses rose. Kaiser said it swung to a profit of $1.5 million after reporting a net loss of about $400,000 a year earlier.
Both HMSA and Kaiser, the state's largest health-maintenance organization, have been fighting rising costs as Hawai'i's population ages and uses more healthcare services and as the expense for new medical technology and drugs grows. HMSA, a nonprofit that strives to break even by balancing increases in member dues against what it pays to service providers, has been under pressure from physicians and hospitals to increase what they're paid.
"In the first six months of 2008, HMSA experienced a net loss of $26.7 million," said Steve Van Ribbink, chief financial officer, in a statement.
"Healthcare costs are rising faster than HMSA dues revenues, in large part because we are paying higher hospital and physician fees in 2008."
HMSA, which has health plans covering about 700,000 people, reported dues revenue of $373.8 million, or about 19 percent lower than last year. Much of the decline was attributable to the loss of a client, the State of Hawaii Employer-Union Health Benefits Trust Fund, which now self insures, though runs claims processing through HMSA.
HMSA, which last reported a net profit in the 2006 fourth quarter, also reported:
HMSA Vice President of Marketing and Communications Michael Stollar said the insurer in part maintains its reserves to cover losses.
"That's what the reserve is all about," Stollar said. There should be no concerns about HMSA's financial capabilities since the reserves are stable, he said.
HMSA also may see dues revenue rise more in coming quarters. In July it instituted an average 10.4 percent rate increase for small-business employers that offer coverage to about 144,000 workers and their dependents.
Kaiser said it faced a challenging environment, but was able to maintain its work to pare costs and become more efficient. That includes moving resources where they were most needed and better met member needs, Kaiser said.
"The downturn in the economy and weakness of the financial market made our efforts to maintain our expense trends a challenge this quarter," said Dave Delaney, the Hawai'i region's chief financial officer, in a press statement.
The HMO had an operating loss of $600,000 versus a loss of $5 million a year earlier as operating expenses reached $224.3 million and staffers worked to control expenses, such as trying to reduce electricity consumption.
At the same time, operating revenue was $223.7 million.
Net investment income of $2.1 million, when added to the operating loss, resulted in a net profit.
The profit only amounted to 0.7 percent of revenue. The company said the modest earnings would allow it to continue to invest in health programs and services.
Kaiser had 222,000 members at the end of the quarter, the same as a year earlier.
Correction: The Hawaii Medical Service Association's reserves totaled $536.3 million at the end of the second quarter. A previous version of this story listed an incorrect amount.
Reach Greg Wiles at gwiles@honoluluadvertiser.com.
