The Senate Consumer Protection and Information Technology committee yesterday approved the measure which would sharply reduce the number of lawsuits in the no-fault auto insurance system.

The proposal also makes the state's prepaid health plan the basis for medical benefits in auto accidents.

The co-chairs of the Senate Consumer Protection committee, Sen. David Ige and Sen. Rosalyn Baker, said the bill will lower insurance rates without taking away benefits from consumers or shifting significant costs to employers.

"Every consumer would see a reduction in their premiums because we have addressed the cost drivers," said Ige (D, Waimalu).

The Senate bill eliminates the current $13,900 medical-bill threshold that accident victims have to reach before suing. That threshold would be replaced by what's known as a "verbal threshold" which allows accident victims to sue for pain and suffering only in cases of serious or permanent injuries. A verbal threshold, which is in place in Michigan, aims to lower litigation costs, which is a key cost driver in Hawaii's no-fault system.

The bill also aims to control costs in auto accident cases through better management of medical care for accident victims. It would implement managed care procedures used by the state's prepaid health care system for treatment of auto injuries.

Currently, administrative costs for treating accident injuries is about 30 percent. By contrast, costs for managed care are about 7 percent. Both Baker (D, West Maui) and Ige have stressed that their bill doesn't shift medical costs to employers, who pay for most of the costs of the prepaid health care system.

Ige and Baker said they plan to consider the House's auto insurance measure next week. That bill aims to cut premiums 25 percent to 35 percent by repealing the state's 24-year-old no-fault law and replacing it with a tort-based system that allows accident victims to sue at-fault drivers for damages.

The House bill, which is backed by the Cayetano administration, also shifts medical costs in auto accidents to the prepaid health care system. Business leaders have said that shift places another burden on employers.