The state’s two largest health insurers are blaming substantial losses in the first quarter on a combined $54.1 million in fees related to Obamacare.
The Hawaii Medical Service Association recorded $46.1 million in costs due to the Affordable Care Act, which contributed to a $30.1 million loss after investment gains from January to March.
Kaiser Permanente Hawaii said the federal law added approximately $8 million in first-quarter expenses, resulting in a $5.8 million loss.
The ACA fees pay for subsidies for low-income families and individuals to purchase insurance coverage on the Hawaii Health Connector, the online insurance marketplace, a cornerstone of President Barack Obama’s signature health care law.
"This helps achieve a major goal of the ACA: to increase access to health care," said Kaiser spokeswoman Laura Lott. "Many people buying insurance for the first time are lower-income families and individuals needing assistance to pay premium costs."
But the insurers say that will come at a price for members across the board when they factor ACA fees into premium rates. HMSA has said costs related to Obamacare are responsible for the bulk of a 12.8 percent proposed rate hike for most of the 77,000 small-business workers renewing health plans July 1. Kaiser said ACA fees account for approximately 2 percent to 3 percent of insurance premium costs.
"The reason why they have nonprofit status is to offset these things, but they want consumers to pay the price," said Angus McKelvey (D, Lahaina-Kaanapali-Honokohau), chairman of the House Consumer Protection and Commerce Committee. "I don’t think Hawaii’s families, small businesses and the economy can take any more of these endless rate increases. It’s going to be the straw that breaks the camel’s back. It gives people the hard choice of having to put food on the table, pay rent or have health insurance."
McKelvey added, "They obviously saw a value to enter the marketplace for subsidized families (on the Connector), so the fees should have been rolled into their financial plan."
HMSA collected $707.9 million in premiums for the quarter and paid $636.3 million to providers but incurred $108.2 million in administrative expenses, including ACA fees. That left an operating loss of $36.5 million offset by investment gains of nearly $6 million. Altogether that left HMSA $30.1 million in the red compared with a $3.6 million loss in the first quarter of 2013.
HMSA, with 732,526 members at the end of the quarter, maintained a reserve of $364.1 million, or $497 per member.
Meanwhile, Kaiser brought in $296.1 million in premium revenue and paid $302.8 million in benefit expenses, resulting in a $6.7 million operating loss. Investment gains of $900,000 reduced the loss to $5.8 million. Kaiser, the state’s biggest health maintenance organization with 229,690 members at the end of March, posted a loss of $600,000 in the year-earlier period.
The insurers’ losses might continue to grow as they incur additional ACA fees this year.
HMSA will have to pay $65.4 million in ACA fees this year, while the remaining Obamacare fees — about $19.3 million — will be expensed throughout the year, said Steve Van Ribbink, HMSA’s chief financial and services officer. Kaiser did not have an estimate of how much in ACA fees it would pay for the year.
"HMSA continues to collect only what’s necessary to keep our members in the best possible health," Van Ribbink said. "That’s one thing that stays constant despite all the changes during the past few years with health care reform, the state health care marketplace, and all the related rules, regulations and fees."
HMSA and Kaiser are the only two health insurers participating on the Connector, and pay a 2 percent fee on each health plan sold on the exchange. To date, the Connector said it has raised $40,350 in user fees.
Mike Gold, HMSA’s president and chief executive officer, riled lawmakers last week after publicly urging leaders to immediately dismantle the exchange, at least for small businesses.
As is, he said, the state is "setting up another level of process that has to happen that somebody is going to have to pay for going forward. That somebody is all of us. One way or the other, whether it’s fees or whether it’s taxes that come out of the general fund, you have to pay for something that’s not necessary."
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