HMSA, Kaiser earnings rose in second quarter

Aug. 16--The state's top health insurers both earned profits in the second quarter despite higher claims and medical costs.

Hawaii Medical Service Association, with 722,634 members in the quarter that ended June 30, reported a $14.4 million profit, down from $56.8 million a year ago, while Kaiser Permanente Hawaii posted $1.4 million in net income, reversing a $40.4 million year-earlier loss.

HMSA collected $890.1 million in premiums, down from $894.3 million, and paid $806.7 million for medical benefits, up from $768.7 million. The insurer also spent $83 million on administration, up from $80.1 million, resulting in an operating gain of $10.1 million, down from $45.5 million. Investment gains of $6.8 million, up from $5.8 million, increased HMSA's profit to $14.4 million.

HMSA said its net income decreased primarily because the federal government is not charging health insurers this year with fees and taxes associated with the Affordable Care Act. Those costs had been passed on to members.

"This filing shows that we're close to breaking even, and as a nonprofit company, that's essential to our financial sustainability," said Gina Marting, HMSA senior vice president and chief financial officer. "This ensures that our members can continue to receive care from Hawaii's top-ranked doctors and hospitals and that we have the resources to support our members at every stage of their lives."

Kaiser, the state's largest health maintenance organization with 252,840 members, said higher claims and outside medical costs affected second- quarter financial results. The HMO -- both a medical provider and health insurer -- generated $418.3 million in premium revenue, up from $380.2 million, and paid $417.7 million in benefit expenses, down from $420.6 million. It reported $600,000 in operating income, reversing a $40.4 million operating loss. Investment gains of $800,000 helped boost the bottom line to $1.4 million.

Kaiser spokeswoman Laura Lott said it is heavily investing in expanding care. The HMO recently broke ground on a $60 million medical office building in Kapolei to expand care for West Oahu residents. The 40,000-square-foot facility will include primary, specialty and urgent care as well as wellness and prevention programs.

Kaiser is also embroiled in a federal lawsuit against The Queen's Health Systems over unfair billing practices, after the hospital said it intended to directly bill health plan members who receive emergency medical services at its facilities. Queen's provides emergency services for hundreds of Kaiser members each year at a cost of several million dollars, according to the health plan, whose contract with Queen's expired in May. The hospital now plans to bill higher rates for out-of-network services provided to Kaiser members, which could negatively affect the insurer's finances.

HMSA

Second-quarter net

$14.4 million

Year-earlier net

$56.8 million

KAISER

Second-quarter net

$1.4 million

Year-earlier loss

$40.4 million

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