2016 financial performance is a welcome change for HMSA after three years of operational losses

Members of the nonprofit Hawai‘i Medical Service Association (HMSA) can be assured of the health plan's continued financial stability.

HMSA announced today that it will use $28 million to replenish its financial reserves and help offset three previous years of operational losses totaling $172 million, largely attributed to changes due to the Affordable Care Act (ACA), lower Medicare reimbursements, the increasing health needs of Hawaii’s aging population, and rising costs from prescription drugs and new medical treatments. The $28 million represents about 1 percent of HMSA’s premium revenues last year. The company reported its financial earnings to the state Insurance Division today.

“This year’s financial performance is a reflection of the hard work and collaborative efforts of our hospital and pharmacy partners, physicians, employer groups, and HMSA employees,” said Michael A. Gold, HMSA’s chief executive officer. “As health care costs continue to rise, we’ve been challenged to find innovative ways of working with our partners to manage expenses without compromising the high quality care our members expect.”

HMSA paid physicians, hospitals, pharmacies, and other health care providers a total of $2.8 billion last year, or 87.9 percent of dues, surpassing the minimum 80 percent to 85 percent required by the ACA’s medical loss ratio provision. Administrative costs of $276.2 million represented 8.7 percent of premium revenue in 2016. ACA taxes and fees totaled $65.7 million.

Membership and the HMSA reserve

HMSA’s reserve helps to protect members and the community from financial loss because of unexpected situations, such as a disease outbreak or natural disaster. At the end of 2016, HMSA had 734,075 members and maintained a health plan reserve of slightly more than $417.6 million or $569 per member. In total, last year's gain would pay for less than four days of health care claims for members.

About HMSA

Caring for the people of Hawaii is our promise and our privilege. Working together with employers, partners, and physicians and other health care providers, we promote well-being; develop reliable, affordable health plans; and support members with clear, thoughtful guidance.

HMSA is the most experienced health plan in the state, covering more than half of Hawaii’s population. As a recognized leader, we embrace our responsibility to strengthen the health and well-being of our community.

Headquartered on Oahu with centers and offices statewide to serve our members, HMSA is an independent licensee of the Blue Cross and Blue Shield Association.

Summary of HMSA Operating Results

Comparison of Annual Results for 2016 and 2015

  2016 2015
Annual total premium revenue 100% $3.16 billion $2.98 billion
Annual total benefit expense 87.9% $2.78 billion $2.68 billion
Annual administrative expenses 8.7% $276.20 million $258.50 million
Annual ACA taxes and fees 2.1% $65.65 million $74.27 million
Annual operating gain/(loss) 1.3% $39.55 million $(29.33) million
Annual net investment gain $19.22 million $42.66 million
Annual other income $144,780 $65,951
Annual net gain/(loss) after tax $28.49 million $4.00 million
Q4 total premium revenue $793.48 million $753.90 million
Q4 total benefit expense $688.22 million $637.33 million
Q4 administrative expenses $64.85 million $70.38 million
Q4 ACA taxes and fees $2.45 million $4.41 million
Q4 net operating gain (loss) $37.97 million $41.78 million
Q4 net investment gain $4.17 million $21.61 million
Q4 other income $30,981 --
Q4 net gain/(loss) after tax $28.72 million $50.28 million
Total members 734,075 726,487
Total HMSA reserve $417.64 million $371.89 million
Reserve per member $569 per member $512 per member