Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred H.B. No. 2408, H.D. 2, entitled:

begs leave to report as follows:

The purpose of this measure is to require health insurers to provide health insurance to bona fide trade associations through association health plans (AHPs).

Testimony in support of this measure was received from the following: Department of Commerce and Consumer Affairs, The Chamber of Commerce of Hawaii, Hawaii Transportation Association, Hawaii State Bar Association, National Federation of Independent Business, Hawaii Association of Realtors, Legislative Information Services of Hawaii, Alakai Mechanical Corporation, Olsten Staffing Services Corporation, H20 Transportation, Honolulu Master Barber Association, Hawaii Financial Store, Inc., Hawaii Cinema Production, PKF Hawaii, Retail Merchants of Hawaii, Hawaii Automobile Dealers Association, and three individuals. The Hawaii Medical Service Association and Kaiser Permanente expressed concerns about the measure.

Your Committee finds that trade association members, who are not otherwise insured for health care benefits, must secure their own insurance, and that such insurance can be costly for sole proprietors or small businesses with recent histories of medical claims. Under this measure, small businesses would be able to band together through trade or professional associations to purchase affordable health insurance as a group through an AHP. An AHP would better enable members to negotiate favorable benefits and rates.

Your Committee further finds, however, that since this measure does not require full participation by an association's members, there are concerns that an association could "cherry pick" the healthiest, lowest risk members to participate in the AHP, thereby shifting higher risk members to, and raising the costs for, other health plans.

Accordingly, your Committee has amended this measure:

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2408, H.D. 2, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 2408, H.D. 2, S.D. 1.