News Release
March 5, 2008
HMSA shortfall in 2007 delivers great value to members
Laura Lott
(808) 952-7566
laura_lott@hmsa.com
The Hawaii Medical Service Association (HMSA) today announced its 2007 operating
results, which included a shortfall after taxes of $22.59 million. This was due
in large part to ongoing increases in hospital and physician reimbursements. In
2007, HMSA’s total payments to health care providers exceeded $1.55 billion.
With costs on the rise, HMSA experienced a shortfall in each quarter of the year.
“Provider reimbursements in 2007 represented 94.4 percent of total revenue,”
said Steve Van Ribbink, HMSA executive vice president and chief financial officer.
“This is more than the plan’s historical average of 93 percent. It means
our members received a great value in 2007 because a higher percentage of their
dues went to providing care.”
“Provider payments of more than $1.55 billion also means HMSA paid physicians,
hospitals, pharmacies, and other health care providers nearly $130 million per month,”
said Van Ribbink.
HMSA Operating Expenses
HMSA held the line on operating expenses last year. Health plan expenses were $158.47
million in 2007, compared to $158.52 million the year before.
Last year, HMSA continued working on its multiyear project to replace the plan’s
core IT system. Although these expenses are part of the plan’s annual operating
expenses, none of the cost comes from member dues. Instead, the project is funded
by the HMSA reserve.
Health Plan Membership and Reserve
At the end of 2007, HMSA had 701,078 members and maintained a health plan reserve
of $569 million. On average, the HMSA reserve equals $812 per member.
“Protecting our members from financial losses, community health emergencies
(like a disease outbreak or natural disaster), and funding important health initiatives
are among the primary reasons why HMSA has a reserve that is properly invested and
managed,” said Van Ribbink. “In 2007, for example, the HMSA reserve
helped offset a large underwriting loss by generating $39.4 million in investment
income.”
2007 Executive Compensation
HMSA also released information about executive compensation. The Compensation and
Human Resources committee of the board of directors is responsible for determining
executive compensation. The committee uses the services of Towers Perrin, a national
human resources consulting firm, to help establish appropriate levels of compensation.
The committee looks at other local and national companies similar to HMSA in size,
complexity, and scope of responsibility.
The compensation program is designed to be fair, encourage retention of officers
for long-term value to the organization, and effective in linking compensation to
performance. Executive compensation consists of a base salary and an annual at-risk
performance incentive. The at-risk portion is based on measures of HMSA’s
overall financial performance, health care quality, customer service, and value
to the community.
Despite experiencing an operating shortfall in 2007, HMSA was able to achieve its
major financial performance goal of returning more than 93 percent of members’
dues dollars in health care benefits. This benefit-to-revenue ratio remains one
of the highest in the nation. The health plan also held the line last year on operating
expenses and performed well in other areas.
Total compensation for HMSA’s president and chief executive officer was $1,156,256
in 2007. The executive vice president and chief operating officer earned $851,005,
and the executive vice president and chief financial officer earned $558,778 in
2007.
More About HMSA
HMSA is a nonprofit, mutual benefit association founded in Hawaii in 1938. It is
governed by a community board of directors and includes representatives from health
care, business, labor, government, education, clergy, and the community at large.
HMSA is a member of the Blue Cross and Blue Shield Association, an association of
independent Blue Cross and Blue Shield plans. Nationally, HMSA and 38 other Blue
Cross and Blue Shield plans provide worldwide coverage to nearly 100 million members.
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