STAND. COM. REP. NO. 2258

Honolulu, Hawaii

RE:    S.B. No. 2271

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2010

State of Hawaii

Madam:

     Your Committee on Health, to which was referred S.B. No. 2271 entitled:

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

begs leave to report as follows:

     The purpose of this measure is to set a ceiling on the amount of insurance premiums applied toward administrative expenses and to require insurers to annually report how health care premiums are spent with an emphasis on administrative and medical expenses.

     Specifically, the measure requires that:

     (1)  Eighty percent of health insurance premiums collected from individual and small employer insureds; and

     (2)  Eighty-five percent of health insurance premiums collected from large employer insureds;

be expended on medical expenses.  If the insurer fails to meet these threshold percentage expenditures, the insurer is required to issue a dividend or credit to policyholders.

     Your Committee received testimony in support of this measure from the Hawaii Medical Association and the Arc of Kona.  Your Committee received testimony in opposition to this measure from the Hawaii Association of Health Plans.  Testimony in support of the intent of this measure with amendments was submitted by the Department of Commerce and Consumer Affairs, the Hawaii Medical Service Association, and the Healthcare Committee for Faith Action for Community Equity.  Written testimony presented to the Committee may be reviewed on the Legislature's website.

     Your Committee finds that having a clear understanding of how health care premiums are allocated by health insurance companies, especially in terms of administrative costs, helps consumers to make informed decisions when choosing insurance companies.  Your Committee further finds that the types and extent of information required by consumers and by the Insurance Division of the Department of Commerce and Consumer Protection is sufficiently different to warrant both an annual premium transparency report to the Insurance Commissioner and a Health Data Clearinghouse for public dissemination.

     Your Committee has amended this measure by:

     (1)  Making the percentage of premiums spent on administrative expenses consistent with similar restrictions currently enforced on mutual benefit societies by lowering them to sixty-five percent;

     (2)  Adding a new chapter in the Hawaii Revised Statutes establishing a medical data clearinghouse; and

     (3)  Inserting an effective date of July 1, 2050, to encourage further conversation on this measure.

     As affirmed by the record of votes of the members of your Committee on Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2271, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2271, S.D. 1, and be referred to the Committee on Commerce and Consumer Protection.

Respectfully submitted on behalf of the members of the Committee on Health,

____________________________

DAVID Y. IGE, Chair