Hawaii Medical Service Association, seeking its largest dues increase in 20 years, lost $13.9 million in the first quarter, even as it implemented cost-cutting measures to improve operating results.

The state's largest health-care provider—with 703,477 members—said yesterday its net loss widened to $13.9 million, from a loss of $10 million a year ago, as health-care costs continued to rise.

“;We are currently in a situation where double-digit increases in health-care costs are outpacing increases in member dues,”; said Steve Van Ribbink, HMSA vice president and chief financial officer. “;We're working hard to keep our administrative expenses low, increase our operational efficiencies and generate the greatest value for our members.”;

Last month, HMSA filed an application with the state Insurance Division for an average 12.7 percent rate increase for its 11,000 small-business members. Those businesses, which have fewer than 200 employees, encompass more than 100,000 employees.

If approved, the rate increase for the Preferred Provider Plan—HMSA's most popular plan—would be the largest since an 18.6 percent increase in 1989.

Gordon Ito, the state chief deputy insurance commissioner, said he expected the agency to issue a decision on the request next month, since it is scheduled to go into effect on July 1.

HMSA, whose $35.8 million loss in 2008 was its second worst in history, reduced its budget during the last six months, implemented a hiring freeze and restricted travel to reduce costs.

The insurer said cost reductions improved efficiency during the first three months, as 95 cents of every dues dollar was paid to physicians, hospitals, pharmacies and other health-care providers.

Administrative expenses decreased more than $2 million, or 5.1 percent, to $38.9 million from $41 million.

Still, HMSA said, benefit costs rose 10.8 percent, to $378.1 million from $341.4 million.

Revenue from member dues rose 8.9 percent, to $398.6 million from $366.1 million.

HMSA's investment gain was $4.1 million in the quarter versus $5.9 million a year ago.

The insurer's operating loss widened to $18.5 million from $16.3 million.

HMSA's reserve at the end of the quarter was $380.6 million, down from $540.7 million a year ago.