Investment Returns Help Ease the Burden Of Rising Health Care Costs For HMSA Members

Members of the Hawai‘i Medical Service Association (HMSA) stand to benefit from the company’s financial success in 2012. HMSA announced today that it earned an investment gain of $25.8 million dollars last year. The company’s operating gain of $8.6 million, or 0.3 percent of the $2.5 billion in dues it collected last year, gives members further assurance that the dues they’re paying are only enough to cover the cost of their own health care and the expense of making sure their medical bills are paid in a timely manner. This operating gain with investment and other income resulted in an additional $36 million dollars after taxes for HMSA’s reserve account, or rainy-day fund.

“We are doing exactly what our members expect of us,” said HMSA Chief Financial and Services Officer Steve Van Ribbink. “We are keeping dues as low as possible with the goal of breaking even and we are earning investment returns to help compensate for the rising cost of health care.”

The money HMSA spent in 2012 to cover the cost of our members’ health care increased by 20.8 percent compared to 2011. Some of that is because HMSA has more members (an increase of 20.4 percent). The high cost of research and development of medical technology are also contributors. HMSA paid physicians, hospitals, pharmacies, and other health care providers an average of $188 million per month last year. In 2011,that number was $156 million.

“HMSA was founded 75 years ago on the idea that our members deserve excellent value for the money they entrust to us,” says Van Ribbink. “Through out history, we’ve been a national leader in being financially responsible to our members and I’m very pleased that we outperformed the federal standard for health care expenditures on our members in 2011 and 2012.”

HMSA spent $2.3 billion or 90.9 percent of dues on health care services for its members last year, surpassing the minimum 80 percent to 85 percent required by the Affordable Care Act’s medical loss ratio provision. Administrative costs of $217.4million represented 8.8 percent of dues revenue in 2012. Investment and other income totaled $27.9 million.

The operating gain of 0.3 percent went into HMSA’s reserve, which is used to cover unexpected health care costs by members or occasional losses by HMSA.

Membership and the HMSA Reserve

At the end of 2012, HMSA had 708,378 members and maintained a health plan reserve of a little more than $452.2 million or $638 per member.

The HMSA reserve is used to protect members from financial losses and community health emergencies, such as a disease outbreak or natural disaster.

HMSA is a nonprofit, mutual benefit society founded in Hawaii in 1938. Its mission is to provide the people of Hawaii access to a sustainable, quality health care system that improves the overall health and well-being of our state. It is governed by a community board of directors that includes representatives from health care, business, labor, government, education, clergy, and the community. HMSA is an independent licensee of the Blue Cross and Blue Shield Association.