The standard techniques for marketing health plans include media advertisements, targeted mailings with follow up to employers, and personal presentations (either solicited by a potential client or initiated by the provider) by the providers' marketing or sales staff. Most plan providers also use independent health underwriting agents who develop accounts and are compensated by the provider on commission basis (usually three to seven percent per year of gross premiums30 ). While the State regulates minimum benefits for most employer-sponsored health plans, competition is possible in the areas of costs, coverage, and service delivery.
Businesses consider health plan premiums as one of the most important elements in their selection of health plans. Similarly, steep increases in premium costs are cited as a major reason for changing health plan providers (see Chapter 5). Health plan providers consider their actuarial procedures and data to be proprietary information. Neither premium amounts nor the methodology used to calculate them are regulated by the State. Federally qualified health maintenance organizations (HMOs) must use one of the community rating methodologies set forth in the federal statutes.31 Kaiser Permanente and HMSA's HMOs are federally qualified. Thus, outside the federal restrictions, rate setting in Hawaii is at the discretion of each plan provider so long as the revenues generated are sufficient to cover benefits and maintain the financial reserves and resources required by the state Insurance Code.
Those interviewed for this study described certain rate setting practices that they viewed as unfair. However, specific situations were not identified. Independent verification would require an extensive analysis of the financial records of plan providers that is beyond the scope of this study. Further, as is noted in the following descriptions, the imputed motive rather than the act alone, appears to be the element that brings some of the practices into question.
Hawaii's Prepaid Health Care Act32 (PHCA) establishes the basic coverage for employer-sponsored health plans and provides for the Prepaid Health Care Advisory Council to advise the Director of the Department of Labor and Industrial Relations with regard to the comparability of new plans relative to the mandated coverage. In effect, "comparability" refers to Hawaii Medical Service Association (HMSA) Plan 4 and Kaiser Permanente Plan B. Applications for approval of new plans are submitted the to Department of Labor and Industrial Relations, reviewed by departmental staff, and submitted to the Council for its consideration and recommendation for approval or denial. The Director has, in most cases, accepted the Council's recommendation. The Council's seven members are appointed by the Director and represent a cross-section of the interests impacted by PHCA, with strong representation by the plan provider sector. At this writing the members are:
The Council is generally considered to have substantial influence regarding plan approvals. Issues of competition and possible unfair advantage arise when:
In order to compete successfully in the health plan market place, providers must be able to deliver appropriate services to the ultimate users and pay the care providers for their services. The comparative simplicity of the capitated payment system of the HMO when contrasted with the individual billings and payments required under an indemnity plan probably give the former a competitive edge in terms of lower administrative costs. However, user preference for the wider selection of care providers available under indemnity plans counters the administrative convenience of HMOs. Among indemnity plans, those that provide direct payment to participating care providers have a distinct advantage over those requiring the user to file a claim for reimbursement. This may, in part, account for the fact that commercial health insurers are not major players in Hawaii.
Service delivery does not appear to be a significant competitive factor in today's marketplace. However, should there be a move toward exclusive contacts between plan providers and health care professionals and facilities, this could change dramatically. Exclusive contacts with a single-plan provider could eventually result in a vertically integrated monopoly.
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