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 S.B. No. 589, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this bill is to regulate dental insurers under the Insurance Code. This measure:

Testimony in support of this bill was received from the Insurance Division (Division) of the Department of Commerce and Consumer Affairs (DCCA). The Hawaii Medical Service Association testified in support of the intent of the bill. Testimony in opposition to the bill was received from Hawaii Dental Service.

Your Committee finds that dental service organizations, which provide contracts of indemnification for dental health treatment and act essentially as insurers, should be regulated in the same manner as other insurers.

Your Committee heard concerns that regulating dental service organizations as insurance carriers would eliminate their ability to tailor plans to fit the needs of employee and union groups, and would require them to issue a standard policy to each subscriber. This would impose unnecessary and costly administrative requirements on these organizations and also subject them to the state premium tax. All such costs would then be passed on to consumers.

Your Committee has thus amended this bill as suggested by the Insurance Commissioner, to:

1. Exempt dental health care insurance contracts from the premium tax; and
2. Clarify that persons providing or arranging for the delivery of dental services are included in the definition of "health maintenance organization" (HMO) in chapter 432D, the Health Maintenance Organization Act.

Your Committee understands that existing law, amended by this measure, allows dental service organizations to organize as mutual benefit societies under chapter 432, HMOs under chapter 432D, or as insurers subject to chapter 431. Dental insurers subject to chapter 431 will be exempt from the premium tax. Dental organizations organized as HMOs or mutual benefit societies will not be subject to the insurance premium tax and will also be exempt from insurance policy requirements.

Your Committee reconsidered decision-making on this bill to allow further discussion of the bill in Conference, by adding an amendment changing the effective date of the bill from upon its approval, to January 1, 2050.

Technical, nonsubstantive amendments have also been made to remove references to chapter 423, Hawaii Revised Statutes, and for style.

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. 589, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 589, S.D. 1, H.D. 1, and be placed on the calendar for Third Reading.