RESOLUTION

WHEREAS, it has been claimed that the reimbursement practices of some of Hawaii's mutual benefit societies have caused many problems for Hawaii's hospitals; and

WHEREAS, the low reimbursement rates have forced hospitals to institute cost-cutting measures, including shortening hospital stays, to make up for lost income that may not be in the best interest of consumers; and

WHEREAS, all hospitals in the State negotiate their own contracts with mutual benefit societies; and

WHEREAS, reportedly, some mutual benefit societies have not been willing to increase their reimbursement rates to hospitals in contract negotiations so that the hospitals continue to face shortfalls in income even as they incur expenditures for services rendered far in excess of the amounts they are reimbursed by the mutual benefit societies; and

WHEREAS, although preferred providers are party to an agreement in which they agree to accept the mutual benefit societies' low reimbursement "eligible charges", in fact, preferred providers have little choice but to agree because of the mutual benefit societies' unwillingness to increase reimbursement rates and because the option of becoming a nonpreferred provider entails serious disadvantages; and

WHEREAS, for example, under a preferred provider contract, mutual benefit society reimbursement payments are sent directly to preferred provider hospitals, thus saving the hospitals the time and cost of collecting payments directly from each patient

treated, providing a quick turnaround and regularity and predictability in payments, whereas if a hospital does not contract with a mutual benefit society and is thus not a participating preferred provider, such payments go directly to patients; and

WHEREAS, if hospitals are not able to negotiate higher reimbursement rates from mutual benefit societies, their only alternative would be to not contract with mutual benefit societies and become nonparticipating providers; and

WHEREAS, although nonparticipating providers may impose more realistic charges above some mutual benefit societies' reimbursement rates, the additional costs must be borne by consumers of health care -- an unfair burden when some mutual benefit societies' reimbursement rates are clearly and unrealistically low; and

WHEREAS, not only mutual benefit societies, but also health maintenance organizations make reimbursements to hospitals; and

WHEREAS, it is in the public interest that all mutual benefit societies' and health maintenance organizations' reimbursement rates be examined to determine their fairness, especially in light of the unwillingness of some mutual benefit societies to negotiate more realistic rates; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-Second Legislature of the State of Hawaii, Regular Session of 2003, the House of Representatives concurring, that the Insurance Commissioner is requested to investigate in confidence and determine the fairness of the eligible charge reimbursement rates of all mutual benefit societies and health maintenance organizations; and

BE IT FURTHER RESOLVED that the Insurance Commissioner is requested to investigate the various profit and nonprofit entities used by mutual benefit societies to determine the impact this has on the profit margin or the increase in premiums of mutual benefit societies, if any; and

BE IT FURTHER RESOLVED that the Commissioner is requested to include in the study a review of the following:

and

BE IT FURTHER RESOLVED that the Insurance Commissioner is requested to report findings and recommendations in confidence, including any necessary proposed implementing legislation, to the Legislature twenty days prior to the convening of the Regular Session of 2004; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Insurance Commissioner, the President of the Hawaii Medical Service Association, the Chief Executive Officer of the Hawaii Health Systems Corporation, the President of the Hawaii Management Alliance Association, the President of the Mutual Benefit Association of Hawaii, the President of Queen's Preferred Plan,

the President of the University of Hawaii Health Alliance, the President of the Voluntary Employee Benefit Association of Hawaii, the Chief Executive Officer of Kaiser Permanente, the Chief Executive Officer of Kapiolani Health Hawaii, and the Chief Executive Officer of Island Care.

Report Title:

Insurers