Hawaii Medical Service Association’s profit shrank in the third quarter after opening its first retail centers and absorbing fees related to the new Affordable Care Act.
The state’s largest health insurer reported Monday earnings of $400,000, compared with $8.4 million in the year-earlier quarter.
Factored into the quarterly earnings were fees related to the federal law, which also is contributing to higher premiums next year. HMSA expects to file a rate hike this week that will include an increase of 4.1 percentage points related to ACA fees and taxes.
"We knew that our expenses would be higher this quarter due to health care reform, the new HMSA centers, and all the training needed to make sure our employees are well prepared to help consumers," Steve Van Ribbink, HMSA’s chief financial and services officer, said in a statement. "We believe that the money we spent is already paying off for the community. Our HMSA centers have been extremely busy because people have questions and they’re looking for credible answers from people they can trust."
HMSA collected $677.4 million in premiums, up from $621.38 million, and paid $630 million in medical benefits, compared with $568.60 million, for its more than 722,000 members.
It also spent $59.5 million on administrative expenses, significantly more than the $50.1 million in last year’s third quarter. HMSA’s operating loss of $12.2 million reversed a quarterly gain of $2.7 million in the same period a year ago.
However, investment income of $7.9 million and a $4.7 million tax benefit turned the loss into a profit of $400,000 after taxes.
Under major provisions of the health reform law that take effect next year, consumers and small businesses are able to buy medical insurance directly through insurers or via an online marketplace, where they can apply for tax credits to lower the cost of coverage.
As Hawaii’s medical insurers scramble to hold onto their market share, part of HMSA’s expenses included a $3.5 million investment in retail storefronts recently opened in Pearl City and Honolulu where consumers can shop for health plans, get screenings and learn about health care reform. It will open a third center in Hilo on Hawaii island next month.
HMSA said Friday it will extend current health plans for another year for roughly 12,400 individual plan members and 8,000 small businesses in response to a policy reversal announced last week by President Barack Obama that allows insurers to keep individuals in their existing health plans for another year. The plans were originally slated to be canceled at year’s end because they did not meet minimum benefit requirements under the law.
"Consumers have more choices than ever now, especially because they now have the option of keeping their current health plan," Van Ribbink said. "We want to help them understand these choices so they can make the best decision for their financial and health care needs. We’ve had more customers than expected in the HMSA centers and our new website is helping consumers get the information they need about health care reform, health plan options and prices."
HMSA’s reserve stood at $444.5 million, or $616 per member, in the quarter ending Sept. 30. The surplus is down from $457.88 million in the third quarter of 2012.
