HMSA likely to raise rates
By Glenn Scott
Advertiser Staff Writer
The Hawaii Medical Service Association posted a $49 million operating loss last year, offset by the strong performance of its investments, association leaders said yesterday.
But last year's financial performance, in which HMSA's operating losses were $31 million more than in 1999, points to the likelihood that the association will raise its rates.
Cliff Cisco, an HMSA senior vice president, said the association will soon be advising many member employers by letter of rate changes that will go into effect July 1.
HMSA, the largest medical services provider in the state, finished 2000 with a $4.7 million gain in net income largely because of its $66 million in investment earnings, chief financial officer Steve Van Ribbink told members at the association's annual meeting at the Ala Moana Hotel in Honolulu.
Last year was the third consecutive year of operating losses for the nonprofit association, which has been paying out more for its members' medical services than it has been collecting in dues, or premiums.
The association said it paid $97 million more last year to physicians and hospitals than in 1999, an increase of 11 percent.
But Robert Hiam, association president and chief executive officer, assured members at the luncheon meeting that the statistical dip is a normal part of an insurer's underwriting cycle.
He noted that the three down years followed nine years of operations gains that helped the association build up its reserves.
"The bottom line is that no matter how the underwriting cycle fluctuates from year to year, HMSA is able to protect our members and pay their claims," Hiam said.
Cisco said the association's forecasts for 2000, however, underestimated the growing costs of prescription drugs, which rose about 20 percent, and the increased use of health-plan benefits. Both, he said, were powered significantly by the rising average age in the state.
"Hawai'i is aging faster than other states," he said. "And as people grow older, they see the doctor more often."
The association held $637 million in investments at the end of last year, according to its annual report.
The largest portion was $303 million in mutual funds. Cisco said the stock portfolio, though meant to be conservative, took a predictable dip during the first quarter this year, reflecting the general drop in the market.
"HMSA is in it for the long haul," he said. "We strive to balance several years of losses against several years of gains without placing the security of our membership in jeopardy and without having to make abrupt adjustments to health plan dues year after year."
