Health plan profits down
By Frank Cho
Advertiser Staff Writer
The state's two largest health plans are reporting lower profits this year because of higher medical costs and increased utilization by Hawai'i's aging population.
The Hawaii Medical Service Association, the state's biggest health insurer in terms of revenue, reported profits for the three months ending Sept. 30 of $4.2 million, according to filings this week with state regulators.
Kaiser Foundation Health Plans Inc., Hawai'i's biggest health-maintenance organization and No. 2 insurer, said its quarterly profit was $2.4 million.
For the first nine months of 2002, HMSA lost $9.5 million while Kaiser had a profit of $3.1 million, compared to profits of $13.3 million and $7.7 million, respectively, in the same period a year ago.
Both companies are planning to seek approval in January from regulators to increase rates to consumers to cover rising healthcare costs, but neither has said exactly how large a rate increase they will seek.
HMSA and Kaiser have pointed to Hawai'i's growing population, rising prescription drug use and physician costs as the prime drivers of increased healthcare expenditures.
In the third quarter, HMSA recorded an operating loss of $13.1 million in its health insurance business because of rising claim costs, but that was more than offset by investment income and realized gains from its investment portfolio. The company reported a $12.2 million net investment gain in the period, compared to an $8.2 million net investment loss in the second quarter.
Kaiser reported to revenue of $463.6 million while HMSA said it collected more than $953.7 million in revenues year to date.
The financial reports were filed this week with the state insurance commissioner's office, which will regulate health insurance premium rates starting Jan. 1. Unlike typical accounting procedures used by public companies, these reports used statutory accounting principles to help regulators determine the ability of the company to pay claims and other expenses.
HMSA's capital surplus, or the money it has in reserves to pay claims, fell to $409.1 million, down roughly 5 percent from $430.6 million at the end of 2001. Were it not for a one-time accounting adjustment of $32.9 million, the reserve would have dipped to $376.2 million in the third quarter.
