The Hawaii Medical Service Association continued its profit streak in the second quarter, posting a $9.4 million net gain, up from $5.8 million in the year-earlier period.
Through the first half of the year, HMSA has reported profits of $22.2 million, compared with $14.15 million in the first half of 2011. The increased profits have come after HMSA raised rates and worked to keep costs down.
"Premium increases are starting to keep pace with rising health care costs," said HMSA Chief Financial Officer Steve Van Ribbink. "We are projecting gains for the remainder of the year but at lower levels than in the first half of 2012."
Meanwhile, Kaiser Permanente Hawaii posted a $200,000 loss in the second quarter, reversing gains of $2.8 million a year ago, as more West Oahu residents turned to its Moanalua Medical Center and Clinic in the wake of the closure of Hawaii Medical Center in West Oahu.
"We've been seeing higher patient volumes in the emergency department following HMC's closure," said Kaiser spokeswoman Laura Lott.
HMSA increased rates by an average 3.6 percent in January for 84,000 members who work at large companies and by an average 3.7 percent in July 2011 for 89,000 members who work at small companies.
HMSA said people are using fewer health services and that hospital admissions continue to be flat, which help to keep costs down. Also people are making more use of preventive benefits, Van Ribbink said.
While HMSA's financial position is strengthening, the rate increases have been hard for businesses to absorb.
"All businesses should be in business to make money. No company should be in business to lose money but they need to justify their (rates) ... when they're pretty much a monopoly," said Mike Tory, owner of Tory's Roofing and Waterproofing Inc., who pays $20,000 a month to HMSA for roughly 50 employees. "If you're only one of a few service providers like HMSA and the majority of the people on the island are dependent on your service because they have really no other choice, then the state needs to regulate them and be more stringent on them. Just because they say they have to increase their fees, they have to legitimately show why -- they have to show a loss."
As recently as 2010, HMSA had losses. But with the increase in rates and clamping down on costs, HMSA was able to turn a profit.
Asked whether the recent string of profitable quarters means HMSA will not need a rate hike in January, Van Ribbink said, "We won't comment on that specifically."
HMSA is the state's largest health insurer with 699,771 members and $431.3 million in reserves. It collected $610.7 million in revenue and spent $554.1 million in medical expenses in the quarter ended June 30. Administrative expenses totaled $52.4 million, resulting in an operating gain of $4.2 million. After other items, including investment gains of $4.6 million, HMSA's profit grew to $9.4 million.
HMSA said profits are added to the reserve, which breaks down to $616 per member.
"Every year, we challenge ourselves to make the high-quality health care our members deserve accessible without taxing their already strained budgets," Van Ribbink said.
A new payment system that reimburses hospitals and doctors based on quality rather than volume is helping to keep overall costs down, he said.
In the year-earlier quarter, HMSA generated $518.2 million in dues revenue and spent $475 million on benefits and $42.6 million in administrative expenses. That resulted in an operating gain of $697,077. Investment gains totaled $4.3 million, resulting in a profit of $5.8 million.
Kaiser said its loss was in part due to the December closure of Hawaii Medical Center-West in Ewa. Kaiser said it has seen a 9.5 percent increase in the hospital's average daily census in the first six months of the year compared with the same period in 2011.
The state's largest health maintenance organization, with 226,461 members as of June 30, collected $281.8 million in revenue in the quarter ended June 30, and spent $283 million on medical expenses, resulting in an operating loss of $1.2 million. Net investment income of $1 million reduced the bottom-line loss to $200,000, or 0.1 percent of revenue.
By comparison, the HMO generated $266.2 million in revenue the year-earlier quarter and spent $264.7 million, generating operating income of $1.5 million. Combined with $1.3 million in investment income, Kaiser's profit was $2.8 million, or 1 percent of revenue in the second quarter of 2011.
Credit: Kristen Consillio