Despite a meltdown in the financial markets, the Hawaii Medical Service Association recorded a $23 million gain in its investment portfolio, boosting the health plan's third-quarter earnings and reversing a year-earlier net loss.

The state's largest health insurer posted a $5.1 million profit, compared with a net loss of $10.9 million in the 2007 period.

“;We ended up rebalancing our equity fund prior to the real bad downturn,”; selling $66 million in equities, said Steve Van Ribbink, HMSA's chief financial officer. “;Prior to the adverse downturn, we were able to lock in some gains. However, we didn't escape the entire market downturn.”;

HMSA reported a year-to-date net loss of $21.6 million and said its reserve shrunk by $94.5 million, or 16 percent, over the past year to $489 million due to escalating health care costs and a decline in the value of its investment portfolio. Investment income from HMSA's reserve is used to subsidize health premium rates.

Third-quarter revenue was $389.8 million, while expenses totaled $371.7 million.

That compares with revenue of $370.9 million and expenses of $356 million in the same period last year. HMSA's net operating loss was $18.9 million.

Meanwhile, administrative expenses fell 3 percent to $37 million in the quarter from $38.2 million a year earlier.

The health plan expects an operating and net loss in both the fourth quarter and for the year, partly due to “;the fact that we are paying higher hospital and physician fees than in recent years,”; said Van Ribbink.

HMSA said it paid physicians, hospitals and other health care providers on average nearly $124 million per month, or $2.3 million more per month than in the preceding quarter.

Conservative investment restrictions placed on local health plans have kept Hawaii's health insurers in strong fiscal shape compared with other companies battered by the nation's financial crisis, according to J.P. Schmidt, state insurance commissioner.

“;The insurance companies will not be completely immune to the financial crisis,”; he said. “;You will see the investment portfolios of insurance companies go up and down to some degree, but they're far more stable than financial services companies.”;