Posted on: Wednesday, March 2, 2005
HMSA, Kaiser report fourth-quarter financial results
The Hawaii Medical Service Association, the state's largest health insurer, posted lower profits for the fourth quarter and 2004. While medical costs grew at a slower-than-expected pace, they still were higher than a year ago. Investment gains also were smaller.
NUMBER HIGHLIGHTS
- 4th qtr revenue: $401 million, up 6% from a year ago
- 4th qtr net income: $10 million, down 72% from year ago
- 2004 revenue: $1.6 billion, up 9% from a year ago
- 2004 net income: $45.45 million, down 3% from year ago
- Reserves: $541 million, up 11% from a year ago
- Reserves per member: $781, up 8% from a year ago
REASONS
- HMSA, a nonprofit, said it is trying to operate at break-even. Since it was founded in 1938, operating gains have totaled $27.94 million, or 0.13 percent of dues.
- While healthcare costs grew at a slower-than-expected pace, they still came in higher last year than in 2003.
- Investment gains were smaller in the fourth quarter than the same period a year ago.
WHAT THEY'RE SAYING
"Looking back at 2004, there was some good news and some bad news. The good news is that costs rose at a slower pace than expected. ... The bad news is that healthcare costs in general are not going down — they are continuing to rise."
— Steve Van Ribbink | Chief Financial Officer
WHAT'S NEXT
- HMSA plans to use all of its 2004 investment income to subsidize rates in 2005. Last month, it asked the state to approve a 4.9 percent average rate hike for small businesses.
- HMSA is upgrading its computer systems at a cost of $40 million, which it plans to finance from its reserves.
- State lawmakers have proposed lowering HMSA's reserves, which make up about 34 percent of annual expenses, to 30 percent.
Kaiser Foundation Health Plan, Hawai'i region, made a profit in the fourth quarter, but it was mainly because of investment income and other one-time items. Otherwise, Kaiser would have had an operating loss because of higher costs.
NUMBER HIGHLIGHTS
- 4th qtr revenue: $200.7 million, up 7% from a year ago
- 4th qtr net income: $2.9 million, up 26% from a year ago
- 4th qtr operating loss: $1.1 million vs. loss of $1.4 million
- 2004 revenue: $786.3 million, up 11% from a year ago
- 2004 net income: $12 million, up 26% from a year ago
- 2004 operating income: $5 million, up 9% from a year ago
REASONS
- Kaiser turned a profit in the fourth quarter with help from investment income and other one-time items. Excluding them, Kaiser recorded an operating loss of $1.1 million.
- Kaiser said it was concerned about the operating loss in the fourth quarter, which was partly because of increasing medical costs.
- Kaiser's 2004 net income equaled 1.5 percent of revenue.
WHAT THEY'RE SAYING
"While we're pleased that 2004 was a positive year for us, our operations remain challenged by the costs for outside services, pharmacy and clinics. We still experienced a fourth-quarter operating loss and remain concerned about achieving financial targets."
— Arnold Matsunobu | Vice president, finance
WHAT'S NEXT
- Kaiser continues with the implementation of its new electronic medical record system, KP HealthConnect, a three-year project that began last year.
- Kaiser opened two new clinics in 2004, one at Maui Lani in Wailuku, Maui, and the other in Waipi'o Gentry on O'ahu.
- Kaiser plans to break ground later this year on its Moanalua Medical Center tower expansion project.
