Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 2618 entitled:

begs leave to report as follows:

The purpose of this bill is to enhance a patient's access to quality care by allowing patients the option of having their insurance reimbursement sent directly to a dentist of their choice, regardless of whether the dentist is a preferred provider.

Your Committee receive testimony in support of this measure from the Hawaii Dental Hygienists' Association, Hawaii Medical Association, and numerous dentists and consumers. The Chamber of Commerce of Hawaii and Hawaii Medical Service Association testified in opposition to this bill. Hawaii Dental Service commented on the measure.

Your Committee finds that an important function of health plans (plans) is their ability to manage costs. This occurs when providers that participate in a plan contractually agree to a negotiated rate and reimbursement. In exchange, the provider is acknowledged as a "participating" (par) provider, and the plan directly reimburses the par provider for services to plan members, usually at rates more favorable than for nonparticipating (nonpar) providers.

Nonpar providers may charge fees exceeding the plan's eligible charges and will still be reimbursed for services provided to members. However, nonpar providers are excluded from direct reimbursement. This means that patients may select a nonpar provider, but must pay for the cost of service "up front" and be reimbursed later by the plan.

Your Committee finds that withholding direct reimbursement from nonpar providers is a tool that encourages providers to participate in a plan and allows plans to negotiate lower fees with par providers. This benefits plan members, and in turn, the general public, since fees set by providers in a community must be competitive with par provider fees. By mandating direct reimbursement of nonpar providers, this bill would remove a substantial incentive for providers to participate in a plan, and would deny plans an important cost management tool. Your Committee is therefore concerned that this bill may have the effect of generally increasing the cost of dental care in Hawaii.

Your Committee further finds that in most cases, withholding direct reimbursement merely makes it more inconvenient for plan members to see a nonparticipating provider. Your Committee finds that this inconvenience is one reason that withholding direct reimbursement is an effective health plan cost management tool.

However, your Committee is concerned about the effect of withholding direct reimbursement on the group of persons with limited incomes, who live in communities with limited numbers of participating providers. These persons may need immediate dental care, but be unable to obtain an appointment with a par provider, and also unable to pay the "up front" cost of treatment by a nonpar provider. In these cases, necessary care may be denied or delayed because nonpars are excluded from direct reimbursement.

Your Committee thus finds that further discussion of the issues raised by this bill is merited. To facilitate discussion, your Committee has amended the bill's effective date to July 1, 2050. Your Committee has also made technical, nonsubstantive amendments for purposes of clarity, consistency, and 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 H.B. No. 2618, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2618, H.D. 1, and be referred to the Committee on Finance.