Requires mutual benefit societies to pay for a reasonable portion of the reasonable charge of nonparticipating providers under its health insurance coverage plans.

A BILL FOR AN ACT

SECTION 1. The legislature finds that mutual benefit societies hold a unique position in the State's economy and business community. Mutual benefit societies are organized and carried on for the primary benefit of their members and their beneficiaries and not for profit. As a result, mutual benefit societies are exempted from many laws that apply to insurance companies. In addition to that exemption mutual benefit societies are tax-exempt or receive preferential tax treatment. However, because of limited application of the insurance code, the insurance commissioner has correspondingly limited supervisory authority over these entities.

The legislature further finds that payments to providers who are not participating providers can be so low in relation to what would be considered a reasonable charge for services as to provide illusory protection to the insured plan member who is responsible for the difference between the amount paid by the plan and the provider's fee. The plan's "eligible charge" for services rendered by nonparticipating providers are not disclosed to members and, therefore, a member has no way of knowing before obtaining services how much of the nonparticipating provider's fee will be covered by insurance. The legislature also finds that this situation is unfair to the plan member and that simply requiring the health plan to make this information available would not sufficiently protect the plan members from the illusory nature of the provided insurance. The legislature further finds that, although a fee limited by the medicare fee schedule is low in relation to the real value of the services, it is at least within the range of reasonableness so that a plan member's reasonable expectations as to the coverage being purchased is not totally disabused.

The purpose of this Act is to ensure that health insurance coverage provided by a mutual benefit society provides for a reasonable portion of the reasonable charge of nonparticipating providers.

SECTION 2. 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- Eligible charges for nonparticipating providers. All individual and group hospital and medical service corporation contracts shall provide coverage for health care services rendered to members by nonparticipating providers. The compensation to be paid to nonparticipating providers for health care services shall not be less than the fees prescribed in the Medicare Resource Based Relative Value Scale system applicable to Hawaii as prepared by the United States Department of Health and Human Services."

SECTION 3. Section 432:1-104, Hawaii Revised Statutes, is amended to read as follows:

"§432:1-104 Definitions. For the purposes of this article:

[(1) Commissioner] "Commissioner" means the insurance commissioner of the State of Hawaii.

[(2) Mutual benefit society is] "Mutual benefit society" is any corporation, unincorporated association, society, or entity:

Participating in a prepaid legal service plan subject to chapter 488 shall not in itself make a corporation, unincorporated association, society, or entity a mutual benefit society and subject to this article.

"Nonparticipating provider" means a licensed or certified health care provider who has not entered into an agreement with a mutual benefit society or a managed care plan to provide services, benefits, or supplies to plan members."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.