Kaiser health plan loses $2.8 million in 2002

By John Duchemin
Advertiser Staff Writer

A poor fourth quarter pushed the Kaiser Foundation Health Plan, Hawai'i's second-largest insurer, into losses for 2002, adding pressure to the nonprofit company's bottom line as it seeks to raise its insurance rates.

Kaiser lost $2.8 million in 2002, compared with a $12.9 million profit in 2001, according to its annual financial statements filed with the state Insurance Commissioner.

A Kaiser official blamed the losses on higher medical expenses, increased contributions to the employee pension fund and some multimillion-dollar, one-time charges that caused Kaiser to report a $5.9 million fourth-quarter loss.

The increased costs are one reason Kaiser is seeking a rate increase, spokeswoman Jan Kagehiro said. The rate proposal, now pending with the Insurance Commission, would raise plan members' rates by an average of 9 percent.

Kagehiro said Kaiser, a health maintenance organization with 233,000 members at year's end, had to spend millions of dollars to upgrade new computer systems and train staff to comply with the Health Insurance Portability and Accountability Act, a 1996 federal law setting strict guidelines to protect patients' medical information.

The organization also suffered losses to its pension fund because of the poor stock market, and had to increase payments to make up the difference, she said.

These one-time items pushed Kaiser's administrative expenses to $18.7 million in 2002, up from $10.7 million the year before.

Meanwhile, increased medical and hospital costs eroded overall profitability. Kaiser's revenues rose to $626 million for the year, up from $545 million the year before. The revenues rose because Kaiser membership increased by 8,000 last year, Kagehiro said. But the organization's medical and hospital expenses rose faster — to $610 million for the year, up from $522 million in 2001.

Kagehiro blamed the increased costs on greater-than-expected demand for "outside services," which includes case referrals to local or U.S. Mainland hospitals outside the Kaiser network. With the Kaiser-owned Moanalua Hospital frequently full, the organization was forced to pay for lodging many of its patients in other hospitals, Kagehiro said.