Kaiser reports $11M profit
By Deborah Adamson
Advertiser Staff Writer
The state's second largest health insurer, Kaiser Foundation Health Plan, earned a profit of nearly $11 million last year and said it expects to ask for a rate increase to cover rising medical costs.
Kaiser, which insures 235,000 Hawai'i residents, has asked the state for a rate increase this year of as high as 14.5 percent retroactive to Jan. 1.
"Again? We've just had two increases," said Lucille Gibson, an 81-year-old retiree in Kailua whose premiums have risen by 37 percent in less than two years. "We're on a very limited budget, and we're eating into our reserves now."
Last week, Hawaii Medical Service Association reporting a profit of $47 million for 2003 and said it plans to ask for a rate increase.
Arnold Matsunobu, Kaiser's vice president of finance, said higher healthcare costs continue to push insurance rates up. "Medical inflation is projected to go up. Based on that, and just to keep up, I think there will be an increase" in rates for 2005, he said.
He expects medical inflation to rise in the "low-double digits."
Kaiser has raised rates every year since 1994, except 1996 and 1997.
In 2003, Kaiser reported a net income of $10.8 million compared with a net loss of $2.8 million in the year before. Operating revenues came to $710.5 million, up 13.5 percent from 2002's $626 million as the insurer added 1,500 members.
Kaiser has a 20 percent share of the health insurance market. HMSA has about 677,000 members, or about a two-thirds share.
Kaiser's operating gain —premiums minus medical costs and $18 million in construction costs — came to $2.1 million.
An accounting change added $2 million to profits and the remaining $6.7 million came from the re-evaluation of real estate assets.
Kaiser said it has reserves of $106 million, of which $40 million is in cash.
Kaiser, which is headquartered in Oakland, Calif., with independent, regional operations in Hawai'i, said all profits are plowed back into the company through opening and upgrading of clinics, implementation of new technology and equipment purchases.
At mid-year, Kaiser plans to launch its new electronic medical record system that automates record keeping at a yearly maintenance cost of $12 million a year. It is a 10-year, $3 billion project for the entire Kaiser group nationwide.
Two clinics are slated to open by fall — the $11.9 million Maui Lani in Wailuku and a $32 million Waipi'o Gentry clinic on O'ahu. The Waipi'o opening could be delayed by the concrete workers strike. Kaiser is also considering a proposed five-year $200 million construction program primarily for expanding its Moanalua Medical Center.
Unlike HMSA, Kaiser provides direct medical care through its own clinics and hospitals. Company officials have said that they want to make sure medical centers are up-to-date and large enough to accommodate an increase in members.
But retiree Lucille Gibson is more concerned about her rates.
"We shouldn't have to pay" to open clinics, she said.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
