The Hawaii Medical Service Association (HMSA) Wednesday announced its annual operating results for 2003 exceeded financial projections for the year. It was due in large part to the stock market rebound in the fourth quarter that generated significant investment income
The Hawaii Medical Service Association (HMSA) Wednesday announced its annual operating results for 2003 exceeded financial projections for the year.
It was due in large part to the stock market rebound in the fourth quarter that generated significant investment income from health plan reserves. Two one-time adjustments also added to its 2003 revenue picture
2003 Dues Revenue, Benefits and Expenses
HMSA reported total dues revenue of $1.46 billion for 2003, and it paid $1.33 billion to health care providers for services rendered to HMSA members. On average, HMSA incurred benefit expenses of nearly $111 million per month in 2003. Administrative expenses totaled $112.2 million for the year.
As a result, the health plan experienced a net underwriting gain of $19.15 million.
The 2003 net operating gain represents 1.24 percent of total dues revenue for the year.
Given the volatility of market forces, benefit utilization and medical inflation, this is a near-breakeven performance for HMSA in 2003. This operating gain follows a 2002 operating loss of $49.28 million.
Over the past six years, HMSA has incurred operating losses totaling $175 million, as summarized below.
2003 Investment Income and Net Gain
The net realized investment gain for 2003 was $35.62 million. Other income totaled $280,000. After investment income and taxes, the health plan experienced a net gain of $46.99 million.
“We’re very pleased with the performance of our investment portfolio in the fourth quarter of 2003,” said Steve Van Ribbink, chief financial Officer of HMSA. “It was great to see the U.S. economy coming back and consumer confidence growing stronger. As a result, we saw HMSA fourth quarter investment income nearly double over the previous quarter. As you can imagine, this greatly improved our operating results for the year.”
2003 Health Plan Reserves
At the end of 2003, HMSA had a total of 677,140 members, and it maintained $488.6 million in health plan reserves.
This equals about $721.65 per member. Considering the high cost of medical care today, this “is a very small amount.” For example, in addition to other benefit expenses in 2003, if every HMSA member had undergone an MR1 brain scan, the entire amount of reserves would have been wiped out.
“HMSA investment income is derived from health plan reserves, and reserves are maintained to protect health plan members, employers and providers from losses and unexpected emergencies,” said Van Ribbink. He noted that investment income subsidized losses totaling $175 million over the past six years.
