Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 665 entitled:

begs leave to report as follows:

The purpose of this measure is to preclude those employed by a health care insurer in Hawaii and those serving as consultants to health care insurers from serving on the Prepaid Health Care Advisory Council (Council).

This measure also requires the chairperson of the Council to be appointed by the Governor, pursuant to section 26-34, Hawaii Revised Statutes.

The Hawaii Medical Association submitted testimony in support of this measure. The Department of Labor and Industrial Relations (DLIR), which recommended amendments for clarification purposes, submitted testimony in support of the intent of this measure.

Your Committee finds that under existing law, the Director of DLIR is charged with the duty to determine whether a prepaid health care plan is qualified under Hawaii law to offer benefits under Chapter 393, Hawaii Revised Statutes, upon advice by the Council. Your Committee also finds that new health plans seeking entry into Hawaii, particularly employer-sponsored health plans, have encountered difficulty in obtaining approval from the Council. Therefore, the current process has fostered a lack of competition in the marketplace for prepaid health care plans, with a probable impact on health insurance rates.

Accordingly, your Committee believes that changes in the composition of the Council should be made in order to promote the effective administration of the Prepaid Health Care Act. However, your Committee has amended the measure as follows to further clarify those individuals who should be precluded from serving on the Council:

Additionally, your Committee finds that the measure as amended encompasses the exclusion of consultants of HMOs, mutual benefit societies issuing individual and group hospital or medical service plans, or any other health care organizations from participation on the Council, and, therefore, has foregone the specific inclusion of such language. Your Committee also determines that the amendments to the Prepaid Health Care Act that are proposed by this measure do not alter the substance of the Act and, therefore, are not precluded under the Employees Retirement Income Security Act, Title 29 United States Code Section 1144.

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 665, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 665, S.D. 1, and be placed on the calendar for Third Reading.