HMSA reports $17.5 million in losses
By Frank Cho
Advertiser Staff Writer
The Hawaii Medical Service Association said losses in the company's health insurance plan operations more than tripled during the second quarter to the highest level since it started making the quarterly reports public more than a year ago.
HMSA's reported losses widened to nearly $17.5 million for the three months ended June 30, up from a net loss of $4.2 million during the same period a year ago.
The insurer said the increased losses were because of poor investment performance and an accounting change that excluded certain lines of business while reducing total revenues and expenses during the period.
"HMSA, from the members' point of view, is still financially sound," said Cliff Cisco, a senior vice president with HMSA. "But like other institutions, it has seen the value of its reserves reduced significantly. The report is a reflection of that."
Despite the losses in its health plans over the past several years, HMSA has remained profitable because of gains in its investment portfolio. But with the stock market in retreat and medical costs continuing to rise, those gains have slowed.
The Hawaii Medical Service Association said its investments lost $8.2 million in the second quarter of 2002, compared with a gain of $3.1 million in the same quarter a year ago. The higher losses has the company looking to make a change in its investment portfolio.
"The board is currently reviewing investment strategies to improve performance," Cisco said.
HMSA, which is organized as a not-for-profit mutual benefit society, raised rates for its members about 9 percent on average last year and another 5 percent this year to combat the rising costs of healthcare. It was the fifth straight year the company raised insurance premiums.
Despite the increased premiums, the company collected only $263 million in premiums during the second quarter of 2002, down nearly 3 percent from $271 million in the same quarter last year, according to the quarterly financial report it filed with the state insurance division yesterday.
HMSA, whose financial results from its for-profit subsidiaries are not included in the filing, is the state's leading provider of fee-for-service medical insurance, and is the No. 2 provider of HMO coverage, behind Kaiser Permanente.
HMSA reported that its reserve fund, which is used to pay expenses not covered by premiums, shrank by about 6.3 percent to $403.3 million as of June 30, down from $430.6 million just six months ago. The money, which is invested in stocks and bonds, could cover about four months of expenses for HMSA at current levels.
According to HMSA's financial report, HMSA's payments to hospitals and physicians were $118.5 million in the quarter, down from $206.4 million the same quarter a year ago. HMSA paid other professionals such as dentists, optometrists and chiropractors $10 million in the quarter, down from $13 million a year ago. HMSA said pharmacy claims for the quarter totaled $51.6 million, up 23.4 percent from $41.6 million a year ago.
State insurance regulators, concerned about HMSA's effort to increase rates, pushed through legislation earlier this year that would require HMSA to seek approval for rate increases from regulators. The company is also facing two lawsuits from doctors over physician reimbursement levels.
The state insurance commissioner, whose office will begin regulating health insurance premiums next year, could not be reached for comment yesterday.
Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com.
Correction: The Hawaii Medical Service Association said its investments lost $8.2 million in the second quarter of 2002, compared with a gain of $3.1 million in the same quarter a year ago. HMSA’s payments to hospitals and physicians were $118.5 million in the quarter, down from $206.4 million the same quarter a year ago. HMSA paid other professionals such as dentists, optometrists and chiropractors $10 million in the quarter, down from $13 million a year ago. HMSA said pharmacy claims for the quarter totaled $51.6 million, up 23.4 percent from $41.6 million a year ago. A previous version of this story contained incorrect information because of a reporter’s errors.
