Bill could dilute oversight on health insurance rates

By Kristen Consillio
Pacific Business News (Honolulu)
Updated: 8:00 p.m. ET April 16, 2006

Legislation backed by Hawaii's two largest health insurers and key legislators will weaken the state's power to regulate health-plan rates, the state insurance commissioner says.

The proposed amendments to the law make it harder for the state to deny insurers' rate proposals and would likely result in higher premiums for businesses, said state Insurance Commissioner J.P. Schmidt.


"The amendments make rate regulation ineffective -- it makes it harder to rein in excessive prices," he said. "And with no competitive market, health insurance premiums may continue to rise for businesses and individuals."

The law that took effect in January 2003 gave the commissioner broad power to deny proposed rate hikes that he considers either excessive, discriminatory or detrimental to businesses and consumers. Rates must be approved or denied within 90 days.

The amended bill is laden with complicated language, opening it to differing interpretations. It is now in the Senate, where lawmakers must decide whether to pass the amendments or do nothing with the bill. The law that gives the commissioner power to regulate health insurance rates expires June 30 and unless it is reauthorized, the state will no longer have the authority to review rates.

"The average person cannot understand what the legislation is doing," said Paul Tom, president of Benefit Plan Consultants, who opposes changes to the law. "It takes a technician to understand."

Kaiser Permanente Hawaii lobbyist Chris Pablo acknowledged that he drafted the amendments to the bill and circulated them among other health plans, like the Hawaii Medical Service Association, to enlist their support.

"My first priority is I would prefer if the whole rate-regulation process would end," Pablo said.

"But if the Legislature's intention is to continue rate regulation, then we cannot accept the process as it's written in the law now. We will continue to provide the depth of information that we do under the current law to enable the commissioner to do his job."

The amendments would make the following changes to the law, according to Schmidt:

Eliminate rate filings and supporting information from being open to the public.
Shorten the waiting period for rate approvals from 90 to 30 days, with an option to extend for another 30 days.
Require that the commissioner specify the actuarial, statutory and regulatory information that lead to a rate disapproval.
Require that the commissioner set an interim rate if a proposed rate is rejected.
Other changes exempt vision and dental rates from review and allow the commissioner to review only the method used to determine a rate and not the rate itself, Schmidt said.

"From my perspective I'm concerned about both ends of it -- on one side that rates aren't too high ... the other end that the big boys like HMSA and Kaiser not cut their rates too low to drive some of their competitors out of business," he said.

Rep. Robert Herkes, D-Puna-N. Kona, House Consumer Protection & Commerce Committee chairman, said the changes do not weaken the law.

Herkes said he worked out the bill's final draft with House Speaker Calvin Say and Rep. Dwight Takamine, D-S. Hilo-N. Kohala, chairman of the House Finance Committee.

Herkes said the amendments make the law more fair to both the insurers and the commissioner, who he said will still have the power to approve or deny rates.

"The bottom line is they are regulated," Herkes said. "I think [insurers] made more money on the previous law, and took advantage of it frankly, because they treated the [rate] cap like a floor and would go right up to it."