THE SENATE                           S.R. NO.              82
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                    SENATE  RESOLUTION
  REQUESTING THE INSURANCE COMMISSIONER TO INVESTIGATE AND
    DETERMINE THE FAIRNESS OF THE ELIGIBLE CHARGE
    REIMBURSEMENT RATES OF HAWAII'S MUTUAL BENEFIT SOCIETIES
    AND HEALTH MAINTENANCE ORGANIZATIONS.


 1        WHEREAS, it has been claimed that the reimbursement
 2   practices of some of Hawaii's mutual benefit societies have
 3   caused many problems for Hawaii's hospitals; and
 4   
 5        WHEREAS, the low reimbursement rates have forced hospitals
 6   to institute cost-cutting measures that may not be in the best
 7   interest of consumers, including shortening hospital stays, to
 8   make up for lost income; and
 9   
10        WHEREAS, all hospitals in the State negotiate their own
11   contracts with mutual benefit societies; and
12   
13        WHEREAS, reportedly, some mutual benefit societies have
14   not been willing to increase their reimbursement rates to
15   hospitals in contract negotiations so that the hospitals
16   continue to face shortfalls in income even as they incur
17   expenditures for services rendered far in excess of the amounts
18   they are reimbursed by the mutual benefit societies; and
19   
20        WHEREAS, although preferred providers are party to an
21   agreement in which they agree to accept the mutual benefit
22   societies' low reimbursement "eligible charges," in fact,
23   preferred providers have little choice but to agree because of
24   the mutual benefit societies' unwillingness to increase
25   reimbursement rates and because the option of becoming a
26   non-preferred provider entails serious disadvantages; and
27   
28        WHEREAS, for example, under a preferred provider contract,
29   mutual benefit society reimbursement payments are sent directly
30   to preferred provider hospitals, thus saving the hospitals the
31   time and cost of collecting payments directly from each patient
32   treated, providing a quick turnaround and regularity and
33   predictability in payments, but if a hospital does not contract
34   with a mutual benefit society and is thus not a participating
35   preferred provider, such payments go directly to patients; and
36   

 
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 1        WHEREAS, if hospitals are not able to negotiate higher
 2   reimbursement rates from mutual benefit societies, their only
 3   alternative would be to not contract with mutual benefit
 4   societies and become non-participating providers; and
 5   
 6        WHEREAS, although non-participating providers may impose
 7   more realistic charges above some mutual benefit societies'
 8   reimbursement rates, the additional costs must be borne by
 9   consumers of health care -- an unfair burden when some mutual
10   benefit societies' reimbursement rates are clearly and
11   unrealistically low; and
12   
13        WHEREAS, not only mutual benefit societies, but also
14   health maintenance organizations make reimbursements to
15   hospitals; and 
16   
17        WHEREAS, it is in the public interest that all mutual
18   benefit societies' and health maintenance organizations'
19   reimbursement rates be examined to determine their fairness,
20   especially in light of the unwillingness of some mutual benefit
21   societies to negotiate more realistic rates; now, therefore,
22   
23        BE IT RESOLVED by the Senate of the Twentieth Legislature
24   of the State of Hawaii, Regular Session of 2000, that the
25   Insurance Commissioner is requested to investigate in
26   confidence and determine the fairness of the eligible charge
27   reimbursement rates of all mutual benefit societies and health
28   maintenance organizations; and
29   
30        BE IT FURTHER RESOLVED that the Insurance Commissioner is
31   requested to investigate the various profit and nonprofit
32   entities used by mutual benefit societies to determine the
33   impact this has on the profit margin and/or the increase in
34   premiums of mutual benefit societies, if any; and
35   
36        BE IT FURTHER RESOLVED that the study include a review of
37   the following:
38   
39        (1)  The reimbursement rates of mutual benefit societies
40             as compared to for-profit insurance companies;
41   
42        (2)  A comparison of coverages offered by mutual benefit

 
 
 
 
 
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                                  S.R. NO.              82
                                                        
                                                        

 
 1             societies to coverages offered by for-profit
 2             insurance companies;
 3   
 4        (3)  A comparison between administrative fees charged by
 5             mutual benefit societies and administrative fees and
 6             commissions assessed against policy costs by
 7             for-profit insurance companies;
 8   
 9        (4)  Whether the elimination of special participating
10             provider fee caps will increase the cost of premiums,
11             and if so, who will pay for the increase; and 
12   
13        (5)  Whether any mandate that increases costs will result
14             in an unfunded mandate against employers, and whether
15             this mandated change in coverage or payment schedules
16             would violate the provisions of the Employee
17             Retirement Income Security Act;
18   
19   and
20   
21        BE IT FURTHER RESOLVED that the Insurance Commissioner is
22   requested to report findings and recommendations in confidence,
23   including any necessary proposed implementing legislation, to
24   the Legislature no later than twenty days prior to the
25   convening of the Regular Session of 2001; and
26   
27        BE IT FURTHER RESOLVED that certified copies of this
28   Resolution be transmitted to the Insurance Commissioner, the
29   President of the Hawaii Medical Service Association, the Chief
30   Executive Officer of the Hawaii Health Systems Corporation, the
31   President of the Hawaii Management Alliance Association, the
32   President of the Mutual Benefit Association of Hawaii, the
33   President of Queen's Preferred Plan, the President of the
34   University of Hawaii Health Alliance, the President of the
35   Voluntary Employee Benefit Association of Hawaii, the Chief
36   Executive Officer of Kaiser Permanente, the Chief Executive
37   Officer of Kapiolani HealthHawaii, and the Chief Executive
38   Officer of Island Care.
39 
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42                         OFFERED BY:  ____________________________