HMSA profit soars; Kaiser loss widens

Hawaii Medical Service Association’s profit soared to $56.8 million in the second quarter, while Kaiser Permanente’s losses rose to $40.5 million as the health insurers struggle to balance the pool of sick and healthy members.

Health insurance companies try to collect enough premiums to pay for the projected medical costs of their members, though one insurer may have more high-cost cases or higher utilization, substantially impacting their financial results.

Nonetheless, the significant difference in quarterly earnings is unusual.

“The disparity in financial results between HMSA and Kaiser is a reflection of the complexity and challenges in the health insurance marketplace,” said state Insurance Commissioner Gordon Ito, who regulates health plan rates. “The Division is reviewing the underlying reasons which caused the significant differences.”

HMSA said its profit — nine times more than the $6.3 million it earned a year ago — is due to lower health care costs, lower taxes due to a federal tax reform bill passed last year and fees it collected from its members to pay for the federal Affordable Care Act, which pushed Americans to purchase health insurance or pay tax penalties.

Kaiser attributed its substantial loss to higher hospital admissions, an increase in the use of high-cost drugs and higher-than-anticipated payments for outside medical services, and hospital care for its 253,084 members.

The financial results of the state’s largest health insurers has resulted in significant disparities in proposed rates.

After years of double-­digit premium increases, HMSA is seeking to boost rates for Obamacare plans by 2.7 percent in 2019, while Kaiser is proposing an average 28.6 percent rate hike.

The rates are still under review by the Insurance Division.

“The best way to keep health care affordable for everyone is to improve the health and well-being of our members and communities,” Michael Stollar, HMSA president and CEO, said in a news release.

HMSA, with a membership of 729,617, collected $894.3 million in premiums in the quarter, up from $854.8 million a year ago and paid $768.7 million in medical benefits, compared to $774.4 million. Administrative expenses rose to $80.1 million from $74.8 million. That resulted in a $45.5 million operating gain — up from $5.6 million, which was bolstered by investment gains of $5.8 million, up from $4.2 million in the year-earlier period.

HMSA’s reserve, set aside to protect members in the case of a public health emergency, rose to $509 million, or $698 per member, from $469.6 million, or $641 per member.

Kaiser collected $380.2 million in dues revenue, up from $365.7 million, but spent $422.2 million, compared with $379.1 million in the second quarter of 2017. That widened its operating losses to $42 million from $13.4 million. The health- maintenance organization — both a medical provider and insurer — earned $1.5 million from investments and other income, an increase from $1.4 million, bringing total losses to $40.5 million, up from a loss of $12 million.