News Release
August 19, 2008
Cost of care continues to outpace HMSA dues revenue
Laura Lott
(808) 952-7566
laura_lott@hmsa.com
The Hawaii Medical Service Association (HMSA) today announced it fell short of breakeven
by 4.5 percent of dues revenue in the second quarter of the year. HMSA reported
a second-quarter net loss after taxes of $16.69 million, compared to a net loss
of $4.34 million in the second quarter of 2007. In all, member health care services
accounted for 97.7 percent of second-quarter dues revenue.
HMSA Revenue and Benefit Expenses
Second-quarter dues revenue was $373.76 million, and benefit expenses were $364.94
million. For the same period last year, revenue was $460.76 million, and benefit
expenses were $437.05 million. Administrative expenses for the health plan were
$38.21 million in the second quarter of 2008, compared to $40.48 million in 2007.
This represents a reduction in administrative expenses of 5.6 percent.
On average, HMSA paid physicians, hospitals, pharmacies, and other health care providers
nearly $121.66 million per month during the second quarter of 2008. This is nearly
$8 million per month more that the first quarter of 2008.
With today’s announcement, the nonprofit health plan has now experienced eight straight
quarters of operating losses.
Operating Losses and Investment Income
“In the first six months of 2008, HMSA experienced a net loss of $26.70 million,”
said Steve Van Ribbink, executive vice president and chief financial officer. “Health
care costs are rising faster than HMSA dues revenue in large part because we are
paying higher hospital and physician fees in 2008.”
“The second-quarter loss would have been even larger without the $12.32 million
in investment income from the HMSA reserve,” said Van Ribbink. “As a
result of escalating health care costs, we’ve seen our financial safety net
– the HMSA reserve – shrink by nearly $57 million since this time last
year.”
The HMSA reserve is maintained to fund special initiatives and protect members,
employers and providers from losses and emergencies. Investment income from the
reserve is also used to help subsidize health plan dues rates. On average, the reserve
stood at less than $770 per HMSA member at the end of the second quarter.
A Historical Perspective
“Our health plan reserve has been accumulated entirely from investment activities
over HMSA’s 70-year history,” said Van Ribbink. “It provides great
value to our members year after year, and is the result of prudent financial practices
over many decades.”
In its 70 years of operations, HMSA has paid 93 cents of every dues dollar to health
care providers for delivering benefits to members. Few health plans in the country
can meet or exceed the value that HMSA offers its members.
HMSA is a nonprofit, mutual benefit association founded in Hawaii in 1938. It is
governed by a community board of directors that includes representatives from health
care, business, labor, government, education, clergy, and the community at large.
HMSA is an independent licensee of the Blue Cross and Blue Shield Association. Nationally,
HMSA and 38 other Blue Cross and Blue Shield plans provide worldwide coverage to
more than 100 million members.
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