The Hawaii Medical Service Association said Wednesday that premiums have not kept up with rising health care costs, leaving the state’s largest health insurer with a $3.6 million loss in the first quarter.

The loss reverses a year-earlier profit of $12.8 million and was the first down quarter for HMSA since the third quarter of 2010.

"Simply stated, the money we’re collecting from members and businesses for their premiums is not enough to keep pace with the rising cost of health care," Steve Van Ribbink, HMSA chief financial and services officer and treasurer, said in a news release. "Fortunately, carefully placed investments are helping to ease some of the burden."

HMSA collected 3.6 percent more in premium revenue in the first quarter, compared with the year-earlier quarter, for a total of $636.6 million. The insurer spent 5.9 percent more than a year ago, or $587.8 million, on benefit expenses. Administrative expenses grew 11.5 percent to $58.3 million. That resulted in a $9.5 million operating loss. Investment returns and other income totaling $5.9 million reduced the insurer’s net loss to $3.6 million.

With 721,676 members at the end of the quarter, HMSA reported a reserve of $459.3 million, or $636 per member. The reserve — designed to protect members in case of an emergency and to fund special initiatives — is up $37.1 million over the same period last year, primarily because of a membership increase of more than 20,000, the insurer said.

The company recently requested an 8.6 percent premium increase for 118,000 Hawaii consumers renewing health policies in July, but instead received approval for a 6.8 percent rate hike from the state Insurance Division, which regulates insurance rates. The division said the lowered rate will save small businesses about $10 million.

T&T Tinting Specialists Inc. chief executive Tommy Silva, who offers HMSA and Kaiser Permanente insurance to his 25 employees, said future rate hikes will force him to make cuts elsewhere and boost prices for consumers.

"We haven’t raised our prices in a long time, but that day is coming," he said. "With taxes, rent and medical increases and minimum wage going up, in order for us to pay our bills … we have to raise our prices. We don’t want to raise our prices because it’s going to make our product less desirable. But every corporation needs profit to survive."

Kaiser Permanente Hawaii reported a $600,000 loss in the first three months of the year, reversing a $1.8 million gain a year earlier.

The state’s largest health-maintenance organization, with more than 223,000 members, generated 1.5 percent more revenue, or $286.3 million, and spent $288.1 million on medical expenses, or 2.3 percent more than a year ago. It reported an operating loss of $1.8 million. Income from investments totaling $1.2 million reduced the HMO’s net loss to $600,000.

Kaiser said part of the costs were related to significant investments in technology and facilities to improve access for members. In addition, costs for covering members who use non-Kaiser providers were higher than expected, said Kaiser spokeswoman Laura Lott.

"When our members receive care outside the Kaiser Permanente system, we don’t control those expenses, which have historically been much higher than inflation," she said.