My favorite example is Hawaii's biggest health insurer, the Hawaii Medical Service Association. Ninety-three percent of its premium dollars go to medical/hospital benefits. This consumer-controlled group also works to restrain excessive hospitalization and medical care.
Recently HMSA has moved more vigorously into promoting healthy lifestyles. But it won't refuse payments on your behalf if you induce your ill health by smoking, bad diet, lack of exercise or an accident that was your fault. Health care is no-fault.
Auto insurance is something else.
The state insurance commissioner, Wayne Metcalf, tells me he has no reliable figures on what percentage of our auto insurance dollars go to pay for actual losses. (He should.) But we both know it's nowhere near the 93 percent payout by HMSA. Closer to 60 percent, I'd guess.
High amounts are spent on litigation, based on the theory that someone is to blame for every auto accident, and that person (or his insurance company) ought to be made to pay.
The idea of leaving punishment to the police and the criminal justice system seems unthinkable to the auto insurance industry, even though it isn't to the health industry.
Hawaii has had a partial no-fault auto insurance law since about 1970. Unless medical expenses are over a certain threshold, suing for pain and suffering is not allowed.
The threshold is calculated to keep 90 percent of cases out of court. It soon will advance to $13,900 from a start around $1,500.
One reason for the advance is that sharpies contrive to be overtreated to push their expenses over the threshold. If they then sue and win their lawyers are apt to take one-third of the award.
There are legal expenses on the other side, too. These usually are paid by insurance companies out of our money pool.
Insurance companies need profits to stay in business, naturally, but we rely on competition and the eagle eye of the insurance commissioner to assure us they aren't excessive.
Nevertheless, auto insurance premiums have risen to levels that have our legislators voter-pressured to go into special session to finish a reform law they didn't finish in April. Given Governor Cayetano's opposition to eliminating the right to sue, some such right will have to be in a bill for him to sign it.
YET rate reductions of 20 to 35 percent are being sought. They will come, it appears, from reducing mandatory coverage levels for medical care, bodily injury liability and property damage; from removing the right-to-sue threshold but substituting a deductible on recoveries of at least $5,000, maybe more; and from a revision in the rules penalizing uninsured drivers.
We will be allowed to buy cheaper packages that will make optional any wage loss recovery or death benefits. A peer review process created a few years ago to control costs may be jettisoned because, like the right-to-sue threshold, it has become a legal playground.
Commissioner Metcalf thinks any bill will come closer to the goal of an HMSA-like high-payout-to-consumers plan, but no one may be able or willing to tell us exactly how close. An immense difference will remain, we can be sure.