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The Honolulu Advertiser
Posted on: Wednesday, May 9, 2001

State regulator keeps tabs on University Health Alliance

By Frank Cho
Advertiser Staff Writer

The state's chief insurance regulator has placed University Health Alliance under supervision after the company's reserves fell below required levels.

State insurance law required University Health Alliance to have 8 percent of its expected medical and administrative expenses in reserve.

The company had only about $885,551 in reserves at the end of last year, about $1.225 million short, according to the state.

Insurance Commissioner Wayne Metcalf said the company agreed to yesterday's action.

"The state will be sending a team to more precisely determine UHA's assets and obligations in order to determine the best course of action," said Insurance Commissioner Wayne Metcalf.

Metcalf said the company agreed to yesterday's action.

The action is not expected to affect the company's ability to pay claims, the company said.

Founded in 1996 by University Health Care Associates, the company picked up its initial membership by buying the defunct Hawaii Dental Service Medical Plan for $5.2 million.

Since then, the company said, its financial performance has been borderline, but 2000 was the first year it experienced serious financial losses.

"We doubled in size last year and had some extraordinary one-time expenses," said Frank Appel, executive vice president and chief operating officer.

University Health Alliance picked up 14,000 members from the Queen's Health Plans after Queen's decided to leave the health insurance market, Appel said.

Appel said University Health Alliance reported a $1.1 million loss in 2000 because of higher-than-expected medical claims.

The company provides insurance coverage for 32,000 people in Hawai'i and processes claims for about 1,800 companies and some union trust funds.

Appel said the company is planning to increase rates this year between 6 percent and 10 percent to cover the shortfall and is seeking equity investors.

He said that despite last year's shortfall, the company continues to pay claims and is profitable.

In the first quarter of 2001, University Health Alliance had a $600,000 surplus that will be applied to reserves, Appel said.

Appel said the company expects a $3 million profit this year, but he could not say when the reserves might be fully funded and the order lifted.

Frank Cho can be reached at 525-8088, or by e-mail at fcho@honoluluadvertiser.com