Hawaii Medical Service Association’s investment gains more than doubled in the third quarter as net income for the state’s largest health insurer soared 26-fold from the year-earlier period.
The huge jump in profits to $10.4 million masked an operating loss of $8.5 million that was largely attributable to $6.3 million in fees and taxes related to the Affordable Care Act. Fees related to the ACA, also known as Obamacare, totaled $633,238 a year earlier, HMSA said, but have risen sharply in 2014 when major provisions of the law took effect.
HMSA reported $16.3 million in investment gains compared with $7.9 million in the third quarter of 2013. In that year-earlier quarter, HMSA had just $400,000 in net income and an operating loss of $12.2 million.
Administrative expenses in the third quarter fell 3.6 percent to $56.8 million from $58.9 million in the year-earlier period.
"Fortunately, we’ve had investment gains to help us make up for significant losses due to increasing drug costs associated with new specialty drugs," Steve Van Ribbink, HMSA chief financial officer and treasurer, said in a statement.
HMSA, which had 721,135 members at the end of the quarter, also incurred losses in its operations due to higher-than-expected medical claims and lower federal reimbursements for its Medicare Advantage plan, known as Akamai Advantage.
The company will discontinue its five Medicare Advantage plans for 46,000 seniors Dec. 31 after estimated losses of about $64.1 million last year. It will begin offering four new, higher-premium plans next year.
"Taking care of our Akamai Advantage members has become especially challenging," Van Ribbink said. "But despite the government cutbacks in Medicare payments, HMSA is committed to the seniors and disabled members that make up our Akamai Advantage family and we’ll continue to do what it takes to be here for them."
In addition, HMSA will raise rates an average 3.8 percent for 3,141 members Jan. 1 but is cutting premiums by an average 6.2 percent for 6,527 individuals, explaining that it expects "most of our ACA individual plan members to use fewer health services than last year, leading to a lower average rate."
The company also boosted rates for small-business groups by 8.8 percent July 1 for 110,000 consumers and 8,500 small businesses.
HMSA’s reserve at the end of the third quarter stood at $381.8 million, or $529 per member.
