Thursday, May 3, 2001

Health Alliance
falls below
mandated reserve

The health plan is $740,000
short of the required safety surplus

By Lyn Danninger

In another sign that it has been a tough year for the state's health care industry, health insurer University Health Alliance has fallen below the minimum reserve required by the state to support its insurance plan.

In a quarterly filing required by the state's insurance division, UHA reported a shortfall of around $740,000 in reserves for the period ending March 31, 2001.

State Insurance Commissioner Wayne Metcalf said the company would need to show it had around a $2.2 million capital surplus to meet the state's reserve requirements. UHA has until Monday to bring the reserves up to the minimum level, Metcalf said.

The reserves are mandated to protect subscribers should the plan become insolvent.

UHA Executive Vice President and Chief Operating Officer Frank Appel said the company's extraordinary growth in a short period, coupled with a costly conversion to a new computer system in 2000, helped contribute to a loss of about $1.2 million last year.

"We almost doubled in size between October and April and had some extraordinary one-time expenses," Appel said.

But Appel believes UHA is on the way back up. In the quarterly filing with the commissioner, the company reported a gain of almost $600,000, he said.

The company has been working with the insurance commissioner and expects to be in compliance with the minimum reserve requirements, Appel said.

Metcalf said it is not the first time a health insurer has fallen below the reserve requirement.

"This has happened in the past with other plans. However they have always infused the requisite amount of capital when directed to by the division," Metcalf said.

UHA, a non-profit mutual benefit society, currently has around 29,000 members.

From the last quarter of 2000 through the first quarter of 2001, UHA picked up 14,000 of those members from the Queen's Health Plans, after it decided to exit the health insurance market.

UHA also processes claims for several union trust funds in Hawaii. Those funds are separate from and not related to the company's insurance business.

UHA was formed in 1997 by University Health Care Associates, who are University of Hawaii-Manoa medical faculty. The company picked up its initial membership by buying the now-defunct Hawaii Dental Service Medical Plan for $5.2 million.

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