HMSA entities lose $1.5M
By Frank Cho
Advertiser Staff Writer
Hawaii Medical Service Association, the state's biggest health insurer, said its two for-profit subsidiaries collectively lost $1.5 million last year mostly from increased claims in its workers' compensation business.
HMSA's two wholly own-ed subsidiaries, Benefit Services of Hawaii Inc. and Integrated Services, together reported an operating loss of $4.1 million last year, compared to a gain of $971,876 in the previous year.
But those losses were partially offset by $1.6 million in investment income last year, down from $2.1 million in 2000, and $936,000 from income-tax benefits. Revenues were $26.4 million, up from $19.8 million the previous year.
"Last year was a difficult one for a lot of workers' comp insurance companies," said Steve Van Ribbink, HMSA's chief financial officer.
Van Ribbink said nearly all the net operating losses in 2000 and 2001 were attributable to underwriting losses by Benefit Services' two subsidiaries, WorkComp Hawaii Insurance Co. Inc. and WorkComp Hawaii Select Insurance Co. Inc.
"It is our understanding that during 2001, five carriers left the Hawai'i workers' compensations market," Van Ribbink said. Those companies are Fremont, Eagle Pacific, HIH America Insurance Co. of Hawaii Inc., Medical Assurance, and Reliance.
HMSA, the state's largest medical services company with more than 630,000 members and $1 billion in revenues, is organized as a not-for-profit company but created Integrated Services and Benefit Services in 1974 and 1992, respectively, as for-profit entities.
The insurer has invested about $15.2 million in the two companies, which have earned just $1.8 million collectively since their inception.
Van Ribbink said Benefit Services and Integrated Services Inc. are for-profit for tax purposes only, but they are operated by HMSA as not-for-profit to maximize value to HMSA members.
With $26 million in revenues, the for-profit operations account for just 2.1 percent of HMSA's total revenues.
In HMSA's not-for-profit health insurance business, the company reported revenues of $1.22 billion in 2001, but increased payouts to doctors and hospitals contributed to an operating loss of more than $19 million.
After gains from its investments and a one-time accounting change are factored in, HMSA had a net profit of $6.5 million, up 38 percent from $4.7 million the previous year.
Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com.
