HMSA warns of insurance rate increase next year
The state's largest insurer brought in $6.4 million in net income last quarter
HAWAII MEDICAL Service Association, cautioning that it could seek another rate increase next year, said net income declined 38.7 percent in the third quarter as hospital services drove up health-care costs.
The state's largest health insurer posted earnings of $6.4 million compared with $10.4 million a year earlier. HMSA said health-care costs rose 7.8 percent last quarter after increasing 9.1 percent in the second quarter and 7.6 percent in the first three months of the year.
"If this trend continues, we will be forced to look at higher health plan rates in 2006," said Steve Van Ribbink, HMSA's executive vice president and chief financial officer.
HMSA lifted rates 4.9 percent on July 1 for its small-business groups, which have fewer than 100 employees.
The increase covers prescription drug, dental and vision coverage for HMSA's Preferred Provider Plan, the most popular plan among the insurer's members.
Businesses with 100 or more employees renew their insurance at different times of the year and saw their premiums rise an average of 5 percent beginning in January.
HMSA's revenue, or premiums collected from its 695,842 members, rose 7 percent last quarter to $439.3 million from $410.7 million.
The insurer's operating income, or the money it receives from premiums minus what it pays out for benefits and operating costs, plunged 81.6 percent to $779,256, or 0.2 percent of dues revenue, from $4.2 million, or 1 percent of dues revenue, a year earlier.
Van Ribbink said the big drop in operating income was a reflection of "fairly low" rate increases this year and benign and consistent health-care trends during the last couple of years.
"We've been able to more accurately predict our premium increases with health-care trends, which resulted in a lower operating gain," Van Ribbink said.
Benefit expenses, which includes payments to hospitals and physicians, gained 7.8 percent to $405.3 million from $375.9 million.
Administrative expenses climbed 8.9 percent to $33.2 million from $30.5 million
HMSA said it paid physicians, hospitals and other providers more than $135 million per month last quarter, nearly $10 million per month above what it paid in the year-earlier period.
HMSA's investment income, which it generates from its reserves, jumped 40.1 percent to $6.9 million from $4.9 million a year ago.
The insurer said the investment gain was "a little better than expected."