Hawaii Health Care-Chapter 5


Chapter 5


Opinions about competition in the health plan marketplace reflect the observer's position in the industry. Regulators' concerns center on the ability to enforce existing law and whether the laws adequately protect the public interest. Employers look for value for their premium dollar, an affordable product, and a marketplace that is responsive to their needs. Health plan providers want a "level playing field", the flexibility to design and deliver a product that is responsive to market demands, and a minimum of government regulation.

The characteristics of the marketplace itself also influence these views. As discussed in Part I of this study,34 they include:

The Regulators' Perspective

Insurance Commissioner35

The Insurance Commissioner is charged with licensing and monitoring the financial practices of commercial insurers, nonprofit mutual benefit societies and, as of January 1, 1996, HMOs. Issues raised in interviews with the Commissioner and key staff include:

Department of Labor and Industrial Relations (DLIR)36

The federal Employees Retirement Income Security Act of 1974 (ERISA) had the effect of freezing Hawaii's Prepaid Health Care Act in its original form except as to nonsubstantive administrative amendments. This has prevented the State from statutorily updating its provisions. Thus, the Department is limited in its ability to respond to changing conditions. However, DLIR's Prepaid Health Care Advisory Council has supported and the Director has authorized a variety of plans which they have determined are comparable to the coverage set forth in PHCA.

The Health Plan Providers' Perspective

The perspectives of plan providers, including independent agents, reflect a highly competitive environment that, at the same time, involves affiliations and alliances among competing entities. The following issues were raised by the health plan providers who agreed to be interviewed for this study. Due to the sensitive nature of some of the issues raised, the comments have been consolidated and specific sources are not identified. However, a draft of this material was circulated for comment to all who participated in the study, and this section reflects their comments.

The Employers' Perspective

Small Businesses

In a survey conducted for this study, small businesses were asked about their views regarding state regulation of health plan providers. The number of responses was disappointingly small. Of approximately sixty surveys distributed, only twelve responded (see Appendix B). The respondents were, with one exception, located on Oahu. Most had fewer than ten employees. However, four had more than ten. Three reported having an employee assigned full-time to human resource/personnel management tasks. The type of business of the respondents was quite diverse including manufacturing, retailing, construction, and professional service. None were unionized. The health plan providers serving the respondents were (in alphabetical order) HMAA, HMSA, Kaiser Permanente, PGMA, and Washington National Ins., and two reported that their plans were provided through a parent organization or business affiliation.

Generally, those who responded were satisfied with the level and impact of competition in the health plan marketplace, and they did not support state regulation of the industry. It is impossible to say whether the lack of response by the majority of those surveyed indicates a similar level of satisfaction. It is noteworthy, however, that given an opportunity to express their satisfaction or lack thereof with the health plan marketplace, few felt moved to complain. Specifically, the twelve responses received reflect the following positions.


State Regulation

Past Experience

  • One-half of those responding had changed plan providers because of unacceptable rate increases and the provider's refusal to negotiate critical issues.
  • Four indicated a change influenced by the availability of a competitive package offered by another provider.
  • One had had a plan canceled and two changed providers because of poor plan administration.

    Plan Selection Factors

    Large Businesses 37

    Many of Hawaii's large employers have operated in the State for several decades and have long standing relationships with established health plan providers. They find that health plan providers are generally willing to negotiate on key issues. The larger enterprises are more likely to offer a variety of plans administered by different providers as well as a choice of plans from an individual provider. They are more likely to have a unionized labor force and include health benefits among collectively bargained items, and have full-time professional staff to develop and administer their employee benefits programs.

    Dramatically rising health plan premiums in the late 1980s and early 1990s prompted formation of the Hawaii Business Health Council to examine the causes and possible solutions to the problem. Most of the State's large employers are represented on the Council. It provides a forum for its members to identify areas of common interest with regard to employee health issues, and to explore innovative options with health plan providers.

    The HMSA HealthLink plan was developed in cooperation with the Council. It has also been active in discussions with HMSA and a number of health care providers relating to the possibility of forming Integrated Delivery Networks (see chapter 3). In these activities it functions as a purchasing alliance or cooperative.

    The large employers share with their smaller colleagues the positions that:

    They are concerned that:

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