HMSA posts profit, gains more members in quarter

Aug. 15--Hawaii Medical Service Association, the state's dominant health insurer, reported a $21.8 million profit in the second quarter, compared with losing $2.3 million in the same period a year ago.

The health plan collected $730.4 million in premiums, up 8.3 percent from $674.2 million, and spent $652.3 million, a 2.9 percent increase from $634.2 million in the second quarter of 2013. Administrative expenses totaled $54.8 million, down 10.2 percent from the $61 million it spent a year earlier.

HMSA's $17 million operating gain was augmented by $4.8 million in investment income, resulting in earnings of $21.8 million. A year earlier, investment gains of $15.4 million reduced the insurer's $21 million operating loss to a $2.3 million deficit.

At the end of the second quarter, HMSA's membership grew to 730,745, up from 719,977, and its reserve stood at $391.7 million, or $536 per member per month.

In July, HMSAboosted rates by 8.9 percent for 110,000 consumers and 8,500 small businesses. HMSA had originally sought a rate hike of 13.1 percent, but that was lowered by the state Insurance Division, which regulates health plan rates.

"It's a struggle to live in Hawaii and make ends meet for businesses and individuals," Steve Van Ribbink, HMSA's chief financial officer, said in a statement. "When we set premiums, we put every effort into making sure we collect only what's necessary to cover the cost of making sure our members' health care needs are met."

Beyond the written statement, Van Ribbink was not available to answer questions about the quarterly earnings.

HMSA said the second-quarter gain helped the company recoup some of its losses in the first quarter, which totaled $30.1 million. It attributed much of the first-quarter loss to $46.1 million in fees related to the Affordable Care Act, also known as Obamacare.

While the ACA fees will be paid to the federal government in September, all insurers, including HMSA, were required to set money aside and record it in financial reports Jan. 1, Van Ribbink said.

"The gain we reported for the second quarter can be attributed in part to collecting ACA fees from our members in the second quarter and recognizing those fees as revenue without recording the related expense, since the related expense was previously recorded on Jan. 1," Van Ribbink said.

The not-for-profit mutual benefit society will pay $65.4 million in ACA fees this year, with the remaining Obamacare fees -- about $19.3 million -- to be expensed throughout the year.

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