STAND. COM. REP. NO. 1400

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 528
                                     S.D. 2
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Consumer Protection and Commerce, to which
was referred S.B. No. 528, S.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO HEALTH INSURANCE,"

begs leave to report as follows:

     The purpose of this bill is to avoid conflicts between state
and federal laws relating to health insurance and clarify
jurisdiction over health insurance programs, by exempting health
insurance programs offered by mutual benefit societies, health
maintenance organizations, and managed care plans under programs
funded by the federal Social Security Act, from State mandated
health benefits requirements as well as those under the Patients'
Bill of Rights and Responsibilities Act, chapter 432E, Hawaii
Revised Statutes (chapter 432E).

     The Department of Human Services (DHS) testified in support
of this bill.  Your Committee received comments on the bill from
the Insurance Commissioner of the Department of Commerce and
Consumer Affairs (DCCA).  The Hawaii Medical Association (HMA)
testified in strong opposition to the bill, and the Hawaii
Coalition For Health (HCFH), in strong opposition to the
provisions of the bill that would exempt the poor who are the
recipients of federal Med-QUEST (QUEST) medical services, from
chapter 432E.

     DHS stated that under QUEST, patients are provided with a
federally defined grievance process and may eventually appeal to

 
 
                                 STAND. COM. REP. NO. 1400
                                 Page 2

 
the DHS.  DHS expressed concern that if exemptions from State
mandated health benefits and requirements are not provided, the
State may be required to cover the entire cost of these benefits
and requirements.

     DCCA commented that the purpose of the bill was to clarify
jurisdiction over health insurers, stating that the Insurance
Division and the Med-QUEST Division have been unable to determine
whether state mandated health benefits must be offered to QUEST
recipients.  DCCA also noted that it is not sufficiently clear
where federal and state jurisdiction over the QUEST grievance
process begins and ends, but that DCCA would be amenable to
adjudicating grievances for all under chapter 432E.

     The HCFH testified that the 1998 Patient Rights and
Responsibilities Act was fought for by consumer groups such as
the HCFH with the QUEST population partly in mind.  HCFH
testified that chapter 432E was needed because DHS has failed to
supervise the conduct of health plans providing QUEST medical
services, remedy the substantial deficiencies in participating
provider networks, correct long delays in getting newborns and
other new patients on board for receipt of services and
medications, and correct long delays in the processing of claims
for payment.  The individual testifying for HCFH stated that the
DHS' grievance procedure is little known and unpublicized, and
has, in her many years of service to QUEST patients, been of no
avail to the testifier or her patients.  HCFH also stated that
Chapter 432E is necessary because it provides some supervision
over the DHS' health plans, including protections such as the
requirement that health plans have adequate numbers and types of
participating providers, and the requirement that there be timely
claims payments.

     The HMA testified that they had grave concerns about this
bill, that would deny the poor the ability under chapter 432E to
appeal an adverse decision of a managed care health plan to an
external review panel appointed by the insurance commissioner.
HMA also stated that excluding QUEST patients from chapter 432E
would deny protections such as enrollee participation in
treatment decisions, and the right to be provided specific
information about an enrollee's health plan.

     Your Committee is concerned that exempting QUEST patients
from chapter 432E would leave the most vulnerable members of our
society with little protection or recourse in situations where
they encounter problems obtaining essential health services.
Your Committee also believes that the issue of whether state-
mandated benefits and requirements that overlap with or otherwise
affect federal requirements would result in the loss of federal

 
                                 STAND. COM. REP. NO. 1400
                                 Page 3

 
funding, merits additional examination and requires resolution.
Accordingly, your Committee has amended this bill to address your
Committee's concerns and initiate further discussion by:

     (1)  Deleting the provision that exempts health insurance
          offered under a program funded by the Social Security
          Act from the Patients' Bill of Rights and
          Responsibilities Act under chapter 432E, Hawaii Revised
          Statutes;

     (2)  Including an unspecified effective date; and

     (3)  Making technical, nonsubstantive amendments for style
          and clarity.

     As affirmed by the record of votes of the members of your
Committee on Consumer Protection and Commerce that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 528, S.D. 2, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as S.B. No. 528, S.D. 2, H.D. 1, and be referred to the
Committee on Finance.

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



                                   ______________________________
                                   RON MENOR, Chair