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The Honolulu Advertiser
Posted on: Friday, March 3, 2006

Healthcare costs bring down HMSA's net income in 2005

Advertiser Staff

The Hawaii Medical Service Association, the state's largest health insurer, reported 2005 net income tumbled 44 percent from a year earlier as premium revenue grew more slowly than healthcare services costs. HMSA ended the year with 700,500 members.


Revenue: $1.72 billion vs. 2004's $1.60 billion.

Healthcare costs: $1.57 billion vs. 2004's $1.44 billion.

Administrative costs: $141.6 million vs. 2004's $132.5 million.

Investment income: $29.1 million vs. 2004's $26.7 million

Net Income: $25.5 million vs. 2004's $45.5 million

Reserves: $556 million vs. $541 million a year earlier


  • Premium revenue grew 7 percent while increased doctor visits and hospital use drove healthcare services costs up by 8.8 percent.

  • HMSA spent about 92 percent of every premium dollar on members' healthcare. Most of the remainder of what it collected went to administrative costs.

  • The nonprofit's reserves as a percentage of annual costs fell to 32.5 percent from 34.3 percent.


    "It's something we're paying close attention to. ... Our operating gain was only 0.3 percent of every dues dollar."

    Steve van ribbink
    HMSA chief financial officer, talking about rising healthcare services costs. The member benefit costs rose an average of 8.8 percent for the year, with fourth-quarter costs rising 10.6 percent.


    HMSA is seeking a 3.8 percent rate hike for about 11,000 small businesses with 142,000 workers. State Insurance Commissioner J.P. Schmidt is reviewing the request.

    Health plan reserves are forecast to decline this year in relation to the cost of claims paid for members. Part of the decline will be caused by the new Medicare Part D program, which will add $40 million to the nonprofit insurer's costs.