Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Consumer Protection & Commerce, to which was referred S.B. No. 131, S.D. 2, entitled:

begs leave to report as follows:

The purpose of this bill is to provide a solution to the high cost and unavailability of medical malpractice and hospital professional and general liability coverage for the Hawaii Health Systems Corporation (HHSC), by authorizing a five-year pilot program under which funds are appropriated to allow HHSC to establish a captive insurance company that will provide this coverage to HHSC and its physicians.

HHSC and the Healthcare Association of Hawaii testified in support of this bill. The Department of Health and Department of Commerce and Consumer Affairs submitted testimony in support of the intent of this measure.

Your Committee finds that the cost of HHSC's insurance escalated from $1,400,000 to $4,290,000 between policy years 2003-2004, and 2004-2005, with less coverage. The anticipated benefits of a captive insurance program would include stability and predictability in risk financing, and cost savings that would begin in the second and third years of the pilot program.

Your Committee further finds that there are approximately 18 Hawaii-based captive insurance companies that insure the risks of owners and affiliates who have hospitals, medical schools, physicians, and other healthcare facilities around the country. The Insurance Commissioner (Commissioner) testified that the majority of these companies were licensed since the late 1990s, and that these companies have worked very well in providing coverage and control of their owners' insurance and risk management needs.

Your Committee has amended this bill, as recommended by the Commissioner, by deleting the unnecessary "carve out" from the captive insurance law for the pilot program, because the existing law provides sufficient authority for the Commissioner to license the pilot program for HHSC.

As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 131, S.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 131, S.D. 2, H.D. 1, and be referred to the Committee on Finance.