Requires health insurers to provide employers with group health claims experience. Prohibits "broad discretionary authority" clauses in health insurance contracts. Lowers maximum reserves ceiling for managed care plan and prohibits rate increases for plans with excess reserves. (SD2)

A BILL FOR AN ACT

SECTION 1. The legislature finds that it is in the best interest of the entire community that individual privacy is both valued and protected. Because the majority of businesses in Hawaii are small businesses, certain safeguards need to be put in place to protect the sharing of highly confidential claims experience information from which employers might reasonably be able to infer which of their employees are using more benefits than others. It is the legislature's intent to ensure that this sensitive information is safeguarded and that individuals are not penalized for their respective health conditions.

The legislature further finds that certain health insurers in the State employ a variety of clauses in their health insurance contracts with employers that unfairly burden Hawaii employers with risks of liability. One such clause requires employers to pay for legal and medical expenses if a worker appeals a denial of medical coverage to the State's external review panel or a court and the insurer loses. Another clause provides insurers with broad discretionary authority to set the type and scope of medical coverage provided to Hawaii employers. According to the office of the insurance commissioner, such a discretionary authority clause gives insurers broad powers to define medical coverage and is illegal in Maine and Minnesota. This broad discretionary authority also gives the insurer the right to determine which products to offer to patients and who is eligible for coverage. Determining whether to cover a medical treatment that the insurer deems experimental is one example of the discretionary power to determine the scope of medical coverage for patients.

However, according to the office of the insurance commissioner, certain hospital and medical service associations and health maintenance organizations in Hawaii routinely invoke their "broad discretionary authority" rights even in cases that do not involve experimental treatment when patients appeal a denial of coverage before the State's external review panel.

Additionally, the legislature finds that while managed care plans need monetary reserves to cover unanticipated claims and unforeseen business fluctuations, the accrual of excessive amounts of reserves may indicate that the managed care plan is accumulating funds, rather than applying those funds to pay claims. As a result, plan subscribers may be paying a higher premium rate than is justified. The legislature concludes that reserves equivalent to thirty per cent of annual health care expenditures and operating costs are sufficient to insure a managed care plan against insolvency.

The purposes of this Act are to: (1) require a health insurer to provide group health claims experience information to employers who provide health insurance for their employees; (2) prohibit the use of "broad discretionary authority" clauses in health insurance contracts; (3) lower the current reserves ceiling for a managed care plan; and (4) prohibit a managed care plan from raising rates when its net worth exceeds the reserves ceiling.

PART I.

SECTION 2. Chapter 431, Hawaii Revised Statutes, is amended by adding a new section to article 10A to be appropriately designated and to read as follows:

"§431:10A-   Health claims experience request. (a) Except as provided in subsection (d), an insurer upon written request shall provide an employer that provides health care coverage to its employees, the employer’s aggregate group health claims experience for the current policy period.

SECTION 3. Chapter 432, Hawaii Revised Statutes, is amended by adding a new section to article 1 to be appropriately designated and to read as follows:

"§432:1-   Health claims experience request. (a) Except as provided in subsection (d), a mutual benefit society upon written request shall provide an employer that provides health care coverage to its employees, the employer’s aggregate group health claims experience for the current policy period.

SECTION 4. Chapter 432D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§432D-   Health claims experience request. (a) Except as provided in subsection (d), a health maintenance organization upon written request shall provide an employer that provides health care coverage to its employees, the employer’s aggregate group health claims experience for the current policy period.

PART II.

SECTION 5. Chapter 431, Hawaii Revised Statutes, is amended by adding a new section to article 10A to be appropriately designated and to read as follows:

"§431:10A-   Discretionary authority clauses; prohibited. No employer group health policy, contract, plan, or agreement issued or renewed in this State after December 31, 2005, by an insurer under this article, other than life insurance, annuities, disability income insurance, and long-term care insurance, shall contain any provision customarily known as "discretionary authority" that grants broad powers to the insurer to determine the type and scope of medical coverage to be provided in contracts with an insured, including the power to determine eligibility for coverage for experimental treatment."

SECTION 6. Chapter 432, Hawaii Revised Statutes, is amended by adding a new section to article 1 to be appropriately designated and to read as follows:

"§432:1-   Discretionary authority clauses; prohibited. No individual and group hospital or medical service plan, policy, contract, or agreement issued or renewed in this State after December 31, 2005, by a mutual benefit society under this chapter shall contain any provision customarily known as "discretionary authority" that grants broad powers to the mutual benefit society to determine the type and scope of medical coverage to be provided in contracts with a covered member, including the power to determine eligibility for coverage for experimental treatment."

SECTION 7. Chapter 432D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§432D-   Discretionary authority clauses; prohibited. No policy, contract, plan, or agreement issued or renewed in the State after December 31, 2005, by a health maintenance organization under this chapter shall contain any provision customarily known as "discretionary authority" that grants broad powers to the health maintenance organization to determine the type and scope of medical coverage to be provided in contracts with a covered subscriber, including the power to determine eligibility for coverage for experimental treatment."

PART III.

SECTION 8. Section 431:14F-103, Hawaii Revised Statutes, is amended to read as follows:

"[[]§431:14F-103[]] Making of rates. (a) Rates shall not be excessive, inadequate, or unfairly discriminatory and shall be reasonable in relation to benefits provided.

(b) Except to the extent necessary to meet the provisions of subsection (a), uniformity among managed care plans in any matters within the scope of this section shall be neither required nor prohibited.

(c) The commissioner shall not approve increases in rates filed under section 431:14F-105 if a managed care plan's net worth exceeds thirty per cent of its annual health care expenditures and operating expenses, as reported on the most recent financial statement filed with the commissioner, except as provided in section in 431:14F-108(a)."

SECTION 9. Section 431:14F-106, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) If a managed care plan's net worth exceeds [fifty] thirty per cent of its annual health care expenditures and operating expenses as reported on the most recent financial statement filed with the commissioner, the excess moneys shall [either:

(b) Excess moneys applied in accordance with subsection (a)[(2)] shall be reallocated among all lines of health insurance business sold by the managed care plan. Reallocation of moneys pursuant to this section may be delayed until the amount of moneys available to be reallocated exceeds $10,000,000. Nothing in this section shall prohibit a managed care plan from maintaining reserves above minimum requirements but below the maximum limit or from returning moneys to, or reducing moneys payable by, enrollees of the managed care plan prior to reaching the maximum limit."

SECTION 10. Section 431:14F-108, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) If within the waiting period or any extension of the waiting period as provided in section 431:14F-105, the commissioner finds that a filing does not meet the requirements of this article, the commissioner shall send to the managed care plan which made the filing, written notice of disapproval of the filing specifying in what respects the filing fails to meet the requirements of this article and stating that the filing shall not become effective. The commissioner shall not approve of a filing for a rate increase if a managed care plan's net worth exceeds thirty per cent of its annual health care expenditures and operating expenses, as reported on the most recent financial statement filed with the commissioner; provided that:

SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 12. This Act shall take effect upon its approval.