Kaiser sees $1.5M upturn in profit

Kaiser Foundation Health Plan Inc.'s Hawaii region swung to a $1.5 million profit in the second quarter, reversing a year-earlier loss after two years of cost-cutting throughout the health maintenance organization.

Second-quarter net: $1.5 million Year-earlier loss: $400,000

The net gain, which represents a 0.7 percent return on revenue, compares with a $400,000 net loss - representing a minus 0.2 percent return - in the same quarter last year.

"Our efforts to reduce our costs and target our care specifically to our members' needs today has continued to moderate our expenses," spokeswoman Lynn Kenton said. "However, it is still a very difficult time for the health-care industry as a whole."

The economic downturn and weakness of the financial markets made it difficult for Kaiser to maintain expenses in the quarter, according to Dave Delaney, the region's chief financial officer.

However, the health plan managed to record its third consecutive profitable quarter, following a major restructuring to control costs in the volatile health-care market. The "modest earnings" will allow the HMO to invest in health programs and services, said Janet Liang, president of the Hawaii region.

The company, which raised rates for businesses and government employers by an average 2 percent in the beginning of the year, hasn't determined what the rate adjustment will be come Jan. 1.

"We take many factors into consideration when determining our premium hikes," Kenton said. "It's our best intention to pass along as little as possible of an increase to our members."

Kaiser will continue to control costs by as asking staff and physicians to lower electrical usage as a personal effort to help reduce these growing costs, she said.

While Kaiser eliminated 144 positions during the past two years as part of its restructuring, the HMO has no immediate plans for further reductions, Kenton said. The health plan has 222,000 members statewide and 4,400 employees at its Moanalua Medical Center at 17 clinics on Oahu, Maui and the Big Island.

Kaiser reported $223.7 million in operating revenue in the quarter ending June 30, up from $218.3 million in the year-earlier period. Operating expenses totaled $224.3 million, an increase from $223.3 million a year ago.

The insurer posted a $600,000 operating loss, down from a $5 million loss a year earlier. Net investment income fell to $2.1 million, from $4.6 million at the end of June 2007.