HMSA reports income increase of 117 percent
By Deborah Adamson
Advertiser Staff Writer
The Hawaii Medical Service Association yesterday reported a 117 percent increase in its net income for the third quarter from the same quarter a year ago mainly because of investment gains.
The state's largest health insurer earned $9.1 million in the quarter compared with $4.2 million last year. Gains from investments accounted for $7.65 million of the net income. Without investment gains, HMSA would have earned $1.5 million.
"We're encouraged," said Steve Van Ribbink, HMSA's chief financial officer. "It's the first time in a long time we've had an operating gain."
Despite the strong quarter, HMSA says it still needs to raise rates next year to keep up with medical costs that are climbing by 8 percent to 10 percent a year.
"We're concerned that rates will not keep up with benefit expense trends," Van Ribbink said.
HMSA has asked the state to approve a 9.7 percent rate hike for 2004 affecting about half of its business clients.
Most of HMSA's 676,000 members should expect rate increases next year and for the foreseeable future as long as medical costs continue to rise, Van Ribbink said.
"This is ridiculous," said retiree Sam Chun, who just received a rate hike notice for next year. "They're raising us every year. They've got to give us a break, man, geez.
"They've got so much in excess. They're in the good, we're the ones that suffer," Chun added. "They're not in the hole. If they're in the hole, I can see. But they're not."
As of Sept. 30, HMSA had nearly $440 million in reserves, which are invested in stocks, insurance contracts, short-term government debt and fixed income securities.
Van Ribbink said the reserves came from accumulated profits since HMSA began in 1938 and are kept for emergencies and other unforeseen events.
Van Ribbink said he expects HMSA to break even or generate a small profit in the fourth quarter after excluding investment gains. But early 2004 should continue a trend of operating losses, he said.
From 1998 to the quarter just ended, HMSA has lost $204.6 million from its health insurance business, Van Ribbink said. However, if investment gains are added in, HMSA made $24 million.
"If it weren't for the reserves, we would have had a tremendous loss," the CFO said.
In the first nine months of 2003, HMSA lost $10 million without investment gains. In the like period in 2002, the insurer lost $21.8 million.
Revenue from health premiums collected in the quarter ended Sept. 30 came to $386.9 million, up 15 percent from $336 million last year.
Meanwhile, health-related expenses came to $358.9 million, compared with $325.7 million last year. Administrative costs subtracted another $26.5 million compared with $23.4 million in 2002.
Van Ribbink said 93 percent of the premiums collected went toward paying doctors, for hospital services and other medical benefits.
Van Ribbink said the one group that will not see rates rise is the 24,000 people renewing individual policies in January. They will get an average rate decrease of 4 percent.
Reach Deborah Adamson at email@example.com or 525-8088.