Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 2408, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this bill is to allow small businesses and sole proprietors to form groups to obtain greater bargaining leverage and lower insurance rates by:

Your Committee heard testimony in support of this bill from the Insurance Division of the Department of Commerce and Consumer Affairs, Department of Labor and Industrial Relations, Legislative Information Services of Hawaii, National Federation of Independent Business, Honolulu Master Barbers Association, Hawaii State Bar Association, Chamber of Commerce of Hawaii and Hawaii Transportation Association. Testimony in support of the intent of the bill and stating concerns was received from Kaiser Permanente. The Hawaii Medical Service Association expressed concerns.

Your Committee finds that those testifying in favor of this bill highlighted the bill's potential for reducing the rates paid by small businesses as a result of the trade association having a stronger negotiating position and lower administrative costs.

The concerns expressed centered on the provisions of the bill that would prohibit the health insurer from restricting the plans offered. These restrictions would possibly result in "cherry picking," in which the youngest and healthiest are segregated, leaving a remainder pool with "adverse" demographics and rapidly increasing costs.

While acknowledging the potential problem addressed in the HMSA and Kaiser Permanente testimonies, your Committee believes that it can be avoided by a trade association that is careful in the design and management of its group health insurance program.

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. 2408, H.D. 1, and recommends that it be referred to the Committee on Finance.