Bill targets health insurance rates

A year after it expired, House lawmakers are poised to pass a bill bringing back state regulation of health insurance rates.

Senate Bill 12, House Draft 2, would prohibit health insurance rates that are excessive, inadequate or unfairly discriminatory, with the state insurance commissioner having final approval power. The proposal is similar to legislation that was in place for three years before expiring at the end of last session. Insurers also would be required to refund excess premiums if cash reserves were more than half of annual operating expenses.

Rep. Josh Green, House Health chairman and a harsh critic of the state's largest insurer, Hawaii Medical Service Association, says rate regulation is needed to foster competition in Hawaii's market and keep rates affordable.

"That's a big start, because then the insurance commissioner can encourage compe- tition," said Green (D, Keauhou-Honokohau).

Insurance companies say regulation is unnecessary because the market determines the rate.

Jennifer Diesman, director of government operations for HMSA, called the proposal "misdirected."

"When the law was in effect, it didn't have the ultimate impact of reducing health care costs," she said. "Rate regulation does nothing to actually lower the costs of health care."

Diesman noted that HMSA, which covers about 700,000 subscribers, has some of the lowest operating costs of any insurer and that 93 cents of every dollar in revenue goes toward health care services.

Green, an emergency room physician on the Big Island, remained critical of HMSA, noting that the company had generated $13.5 billion in revenue since 1997, while its charitable arm had distributed $9.3 million in health care grants.

HMSA's net income during that time period was $207 million, according to figures from the state Insurance Division.

However, Diesman noted HMSA experienced net operating losses of about $176 million since 1997, with income generated mostly by interest on the insurer's cash reserves, estimated at about $568 million last month.

Last year, HMSA's net income declined 30.1 percent, to $17.8 million from $25.5 million.

Diesman said Green was comparing "apples to oranges," noting that the HMSA Foundation was set up as a separate entity. The foundation distributes about $1 million a year in health care grants, with all money coming from interest generated by an initial endowment of about $20 million.

No money from member premiums are used by the foundation, she said.

"They're not the same," Diesman said. "The foundation was set up with a mission to help improve the health care system in the state."

Green acknowledged that the foundation has a separate mission, but added, "It's all money."

"They're being creeps when they say that," he added, "because it's not apples to oranges, it's health care for the people of Hawaii."