Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 590 entitled:

begs leave to report as follows:

The purpose of this bill is to increase the financial stability of Hawaii's health maintenance organizations and mutual benefit societies. This measure amends the net worth requirements applicable to these entities, which must maintain a minimum net worth equal to the greater of either $1,500,000, or other net worth requirements listed in the statute which are based on the entity's premium revenues, health care expenditures, operating expenses, and other costs. The bill:

The Hawaii Medical Service Association testified in support of this measure. The Insurance Division of the Department of Commerce and Consumer Affairs commented.

Your Committee finds that in Hawaii, as well as across the country, health care costs have fluctuated wildly over the last few years. In order to survive these fluctuations a health plan must have adequate reserves. Those that do not become insolvent or leave the market. In these cases, the delivery of services under a consumer's health plan is, at best, disrupted. At worst, consumers are left with no coverage.

Your Committee finds that the new net worth requirement in this bill will increase the standard of financial responsibility that must be maintained by mutual benefit societies and health maintenance organizations, and will bolster the stability of Hawaii's health plans.

Your Committee has amended this bill by changing each year of the three-year phase-in period for the net worth requirement for mutual benefit societies and health maintenance organizations to 2020 to encourage further discussion of the phase-in schedule. Your Committee has further amended this bill by making technical, nonsubstantive amendments for purposes of style, clarity, and consistency.

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 H.B. No. 590, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 590, H.D. 1, and be placed on the calendar for Third Reading.