HMSA reports
$47M net incomeA company official calls the
investment returns "unexpected"
In a nearly $90 million turnaround, the state's largest health insurer, Hawaii Medical Service Association, said yesterday it finished 2003 with a net income of $47 million. In 2002, the company reported $41 million in losses.
HMSA, which earlier this year asked the state for permission to raise its insurance premium rates nearly 10 percent, said the financial turnaround was mainly due to investment gains.
The nonprofit's investments grew nearly $36 million, while its insurance underwriting portion gained more than $18 million.
HMSA Chief Financial Officer Steve Van Lier Ribbink described the results as "unexpected."
"This is the first year in six years where we had an operating gain," he said. "No one thought we'd have the kind of investment returns we did."
The company also benefited from two nonrecurring adjustments totaling $13.3 million. Of that amount, a one-time reimbursement of $3.8 million was related to a federal contract for Medicare members. There was also an additional $9.5 million that came from a fund set up the previous year to help offset losses.
HMSA reported net income from premiums of almost $1.5 billion, a 13.7 percent increase from the previous year. Of that, it paid out just more than $1.3 billion in health care expenses, up from $1.2 billion in 2002. Administrative expenses totaled more than $112 million for the year.
With last year's performance, HMSA's reserves now stand at $488.6 million, a 19.9 percent increase from the previous year's reserves of $407.6 million. The figure is well ahead of what is required by both the state to maintain solvency and the Blue Cross Blue Shield Association, of which HMSA is a member.
By year-end, HMSA had 677,140 members, a 1.3 percent gain from the previous year.
The company increased premium rates for its 11,000 small-employer group customers by an average of 9.6 percent in July after originally asking the state Insurance Division for an 11.5 percent increase. This year, it has asked the division for a 9.6 percent increase. If approved, the new rates will take effect July 1.
Van Lier Ribbink said HMSA's reserves will help subsidize rates in the future.
As part of the state law that regulates health insurance rates, HMSA said it is required to apply 80 percent of its investment income to help moderate future rate increases. Van Lier Ribbink said a credit from last year's investment gains has already been applied to its requested rate increase for this year.