The Hawai‘i Medical Service Association (HMSA) announced today that it earned an operating gain in 2011 of $22.3 million, or 1.1 percent of the $2.1 billion in dues it collected last year. After adding investment and other income and deducting taxes, HMSA’s total gain for the year was $43.8 million, or 2.1 percent of dues collected.
“To put our total gain in perspective, $43.8 million covers about nine days of health care claims paid to doctors, hospitals, and health care professionals for our members,” said HMSA Executive Vice President and Chief Financial Officer Steve Van Ribbink.
HMSA spent $1.9 billion or 90.5 percent of dues on health care services for its members last year.
“As a nonprofit health plan, we are dedicated to helping improve the health and well-being of Hawaii’s communities,” he said. “By devoting the overwhelming majority of dues to paying for health care and keeping our administrative costs low, we are providing value to our members and their health.”
Administrative costs of $174.4 million represented 8.4 percent of dues revenue in 2011. Investment and other income totaled $21.7 million.
“We want to operate as close to breakeven as possible, which means that what we collect in member dues is just enough to cover health care costs and administrative expenses. In 2011, we came very close to breakeven with 90.5 percent of member dues spent on health care costs and 8.4 percent on administrative expenses,” said Van Ribbink.
The operating gain of 1.1 percent went into HMSA’s reserve, which is used to cover unexpected health care costs by members or occasional losses by HMSA. HMSA used its reserve often during the weak economy of recent years to subsidize health insurance rates. HMSA’s reserve had declined by 29 percent since 2007.
Van Ribbink noted that 2011 is the first year since 2005 that HMSA has had an operating gain. “From 2006 to 2010, HMSA sustained operating losses totaling $321.3 million, or 3.8 percent of member dues. It’s good to get back to breakeven operations,” he said.
Health care costs in 2011 increased by 15.1 percent over 2010. HMSA’s total payments to health care providers in 2010 were $1.62 billion. HMSA paid physicians, hospitals, pharmacies, and other health care providers an average of more than $156 million per month last year. This represents one of the highest per-month payment levels in the past four years.
Membership and the HMSA Reserve
At the end of 2011, HMSA had 692,011 members and maintained a health plan reserve of a little more than $406.2 million or $587 per member.
The HMSA reserve is used to protect members from financial losses and community health emergencies, such as a disease outbreak or natural disaster.
2011 President and CEO Compensation
Total annual compensation for HMSA’s President and Chief Executive Officer, Robert Hiam, was $1,236,941.
Executive compensation consists of a base salary and performance incentives set by the board of directors, including measures focusing on the delivery of high-quality health care, outstanding customer service, value to the community, and overall financial performance.
HMSA is a nonprofit, mutual benefit association founded in Hawaii in 1938. It is governed by a community board of directors that includes representatives from health care, business, labor, government, education, clergy, and the community. HMSA is an independent licensee of the Blue Cross and Blue Shield Association.