Hawaii Medical Service Association ended 2008 with its second-worst loss in history after suffering a $14.2 million fourth-quarter loss and said yesterday that due to economic reasons, it was freezing the base salary of its chief executive officer for this year.

Blaming a significant portion of its red ink on increased reimbursements to hospitals and physicians, the state's largest health insurer finished last year with a $35.8 million loss that marked its worst year since 2002, when it posted a net loss of $46.7 million.

Meanwhile, Kaiser Foundation Health Plan Inc., the state's largest health maintenance organization, ended both the quarter and the year with gains. Kaiser's fourth-quarter earnings fell 44.8 percent to $3.2 million en route to ending 2008 with net income of $7.3 million.

Steve Van Ribbink, HMSA's executive vice president and chief financial officer, said provider reimbursements increased last year to 95.2 percent of total revenue from the insurer's historical average of 93 percent. HMSA paid $364.7 million for members' health-care services in the fourth quarter and $1.4 billion for the year.

“;When a greater percentage of dues revenue is spent on health-care services, it puts considerable pressure on the health plan,”; he said. “;But on a positive note, it means our members are receiving an outstanding value for their dollar.”;

HMSA, which had 705,249 members at the end of 2008, saw its fourth-quarter loss more than double from the $6.6 million it lost in the fourth quarter of 2007, while its full-year loss widened from $22.6 million in 2007.

Dues revenue rose 6.3 percent in the fourth quarter to $385.2 million from $362.3 million. For the year, revenue fell 8.5 percent to $1.51 billion from $1.65 billion.

In a horrific year for the stock market, HMSA managed a net investment gain of $6.6 million in the quarter and a staggering gain of $47.8 million for the year. But Van Ribbink cautioned about reading too much into the numbers.

“;We balanced our equity portfolio several times during 2008 and were able to lock in some gains,”; he said. “;That's why we realized investment income as large as it is. But when you combine our investment with unrealized gains and losses, our investment return for the year was a negative 13.4 percent.”;

HMSA's reserve, which is used to protect members from financial losses, community health emergencies and to fund health initiatives, declined 26.1 percent to $420.7 million at year-end 2008 from $569.1 million in 2007.

The insurer, in disclosing its executives' 2008 compensation, said Chief Executive Robert Hiam had total compensation of $1.3 million in 2008 but did not break out his base salary. Michael Gold, HMSA's executive vice president and chief operating officer, earned $965,219, and Van Ribbink earned $633,660.

Kaiser, which has 223,000 members, partly attributed its positive fourth-quarter and full-year earnings to efforts it has made in prevention and early treatment that helped avoid unnecessary health complications for its members.

“;Also, investments in technology using our electronic medical record and online access for our members, combined with the integration of our business model, have significantly reduced administrative costs,”; Kaiser CFO Dave Delaney said.

A year ago, Kaiser had net income of $5.8 million in the fourth quarter and $10.9 million for all of 2007.

Kaiser's revenue last quarter rose 4.7 percent to $225.1 million from $215 million, while full-year revenue increased 4.2 percent to $900.3 million from $864.2 million.