STAND. COM. REP. NO. 380

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1128
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 1128 entitled: 

     "A BILL FOR AN ACT RELATING TO INSURANCE,"

begs leave to report as follows:
     
     The purpose of this measure is to strengthen the enforcement
of the insurance laws, facilitate the ability of mutual benefit
society members and health maintenance organization (HMO)
enrollees to understand their health insurance policies and
contracts, and clarify the law applicable to the licensing of
fraternal benefit society agents.

     The Insurance Commissioner presented testimony in support of
this measure.  The Hawaii Medical Services Association presented
testimony in support of the measure and proposed an amendment to
its effective date.

     Your Committee finds that the current range of fines for
violations of the insurance laws are too low to be an effective
deterrent against unlicensed activity and other illegal acts.
Increasing the fines from a range of $10 to $1,000 per violation
to a range of $100 to $10,000 per violation will enable the
Insurance Division to impose a fine appropriate to the
seriousness of the violation that will hopefully deter against
future violations.

     Your Committee further finds that there is no justification
for holding mutual benefit societies and HMOs to standards

 
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                                   STAND. COM. REP. NO. 380
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different than those applicable to insurers under chapter 431,
Hawaii Revised Statutes (HRS), with respect to the readability of
insurance contracts.  For instance, section 431:10-105(a), HRS,
requires every insurer to utilize the Flesch reading ease test to
determine the readability of any contract.  Imposing this and
other contract readability requirements established under the
Insurance Code on mutual benefit societies and HMOs will assist
their members and enrollees in better understanding the extent
and specifics of their health insurance coverage and benefits.

     Your Committee also finds that fraternal benefit society
agents who are currently licensed as solicitors have been
confused as to whether the current insurance laws permit them to
obtain other types of insurance licenses.  Your Committee
believes that the recodification of Hawaii's insurance laws may
have contributed to the confusion and further believes that this
measure will clarify that fraternal benefit society agents
licensed as solicitors may obtain other types of insurance
licenses. 

     Your Committee is mindful that if the proposed amendments to
the health care coverage disclosure provisions are enacted,
mutual benefit societies and HMOs will require additional time to
come into compliance with the law.  Accordingly, your Committee
has amended this measure by changing the effective dates for
sections 2 and 4 to January 1, 2000.  Your Committee has also
made technical, nonsubstantive amendments to the measure.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 1128, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 1128, S.D. 1, and be referred to the Committee on Ways and
Means.


 
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                                   STAND. COM. REP. NO. 380
                                   Page 3


                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
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