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The Honolulu Advertiser
Posted on: Thursday, August 17, 2006

HMSA profit helped by $10.4 million tax settlement

Advertiser Staff

Hawaii Medical Service Association's April-to-June profit more than doubled from the same period a year earlier, helped by a $10.4 million gain from a tax settlement. The settlement offset a 6.7 percent rise in healthcare services costs and a decline in investment income.


Net income: $12.6 million vs. $4.85 million

Premium Revenue: $450 million vs. $425.2 million

Healthcare Service Cost: $416.9 million vs. $390.6 million.

Administrative Expense: $37.6 million vs. $33.8 million

Operating Loss: $4.53 million vs. gain of $830,900

Investment income: $6.27 million vs. $7.05 million


  • The tax settlement came in a dispute over how assets should be depreciated.

  • Without the settlement, profit was $2.14 million, or lower than a year earlier.

  • Services costs rose 6.7 percent, or faster than premium revenue at 5.8 percent.

  • HMSA's operating margin, or operating profit as a percentage of premiums, was negative 1 percent compared with positive 0.2 percent a year earlier.


    "We saw healthcare costs rise at a faster rate than dues income. ... Benefit costs for medical, hospital and prescription drugs were also above last year's second-quarter level."

    Cliff Cisco
    Senior vice president


    HMSA is monitoring how the new Medicare Part D drug plan is increasing its revenue and costs.

    The tax settlement also will have an affect in upcoming quarters, though it won't be as large.

    Revenue is projected to rise because of a 3.8 percent rate increase that went into effect July 1, covering 11,000 small businesses with about 142,000 employees.