STAND

STAND. COM. REP. NO. 618

Honolulu, Hawaii

, 2005

RE: S.B. No. 760

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Commerce, Consumer Protection, and Housing and Health, to which was referred S.B. No. 760 entitled:

"A BILL FOR AN ACT RELATING TO HEALTH INSURANCE,"

beg leave to report as follows:

The purpose of this measure is to lower the ceiling on the maximum amount of reserves that a managed care plan may hold and to require refunds of excess reserves to subscribers.

The Department of Commerce and Consumer Affairs and an individual testified in support of this measure. The Hawaii Medical Service Association (HMSA), HMSA Board of Directors, Mutual Benefit Association of Hawaii, Voluntary Employees' Benefit Association of Hawaii, Hawaii Association of Health Plans, HMAA, Kaiser Permanente, Hawaii Pacific Health, and three individuals opposed the measure.

This measure reduces the maximum amount of reserves a managed care plan may hold from fifty per cent to thirty per cent of annual expenses, and repeals the authority for a managed care plan to apply excess reserves to reduce future premium rates. The measure also requires a refund of excess reserves to subscribers, unless the managed care plan needs the reserves to meet anticipated increases in enrollment or for capital investments, or can show that the excess reserves are the result of temporary fluctuations in investments and will not persist.

Your Committees have amended this measure:

(1) By deleting language that requires a managed care plan to refund excess reserves, subject to certain exceptions;

(2) To prohibit the Insurance Commissioner (Commissioner) from approving a managed care plan's request for a rate increase if the plan's net worth exceeds thirty per cent of its annual health care expenditures and operating expenses, as reported on its most recently filed financial statement; and

(3) To allow the Commissioner to approve a rate increase notwithstanding excess reserves if there is evidence that the managed care plan may sustain a negative cash flow due to a high amount of reimbursements in the next reporting period, subject to the requirement of filing a report with the Governor and Legislature.

As affirmed by the records of votes of the members of your Committees on Commerce, Consumer Protection, and Housing and Health that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 760, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 760, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committees on Commerce, Consumer Protection, and Housing and Health,

____________________________ ROSALYN H. BAKER, Chair		____________________________ RON MENOR, Chair