Rising medical costs continued to dog Kaiser Permanente Hawai'i and Hawai'i Medical Service Association as both healthcare plans reported third- quarter losses.

HMSA reported a third-quarter loss of $10.9 million, the fourth time over the past five quarters that HMSA finished a quarter in the red. The state's largest insurer reported a $7.2 million loss during the same period in 2006.

Both revenue and benefit expenses declined in large part because of a decision by the 112,000-member Hawai'i Employer-Union Health Benefits Trust Fund to shift to a self-funded arrangement with HMSA, said Steve Van Ribbink, HMSA executive vice president.

"HMSA will still process (EUTF's) members claims, but EUTF revenue and benefit expenses are no longer reflected in our books," Van Ribbink said.

He also blamed a drop in Quest membership from 706,582 at the end of the second quarter to 699,806 this year for the losses.

Dues revenue dropped significantly from $452.6 million in the third quarter of 2006 to $370.9 million this year. HMSA said 96 percent of dues revenue went to pay for benefit expenses in the third quarter, the same as a year earlier.

The health insurer did say that its investment income fared a little better in the third quarter than the same period in 2006. HMSA reported a net realized investment gain of $9.6 million this year, compared with $7.9 million last year.

For Kaiser, the $600,000 third- quarter loss wasn't as great as the $3.2 million net loss of the second quarter of this year. Kaiser reported net income of $3 million in the third quarter of last year.

"The general rate of medical inflation combined with an unexpected loss in membership contributed to our operating results," said Dave Delaney, Kaiser's regional chief financial officer.

In September, Kaiser announced that it would reduce its workforce by 90 positions, or 2 percent, as it attempted to streamline operations while increasing services, including expanded hours at certain clinics. The cuts were to take affect this month.

Delaney said these efforts "during challenging times in the health care industry have resulted in dramatic improvement over last quarter."

Kaiser also announced yesterday that it will be increasing the rate it charges commercial customers by an average 2 percent in 2008. Commercial customers include businesses and the state and federal governments, but does not include Medicare and QUEST. Kaiser is the state's largest health maintenance organization.

Reach Curtis Lum at culum@honoluluadvertiser.com.