STAND. COM. REP. NO. 440________

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 1065
                                     H.D. 1

Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Consumer Protection and Commerce, to which
was referred H.B. No. 1065 entitled: 


begs leave to report as follows:

     The purpose of this bill is to create a Health Insurance
Revolving Fund, funded by a yearly assessment not to exceed
$500,000, calculated on a pro rata basis, and paid by entities
offering or providing health benefits or services regulated by
the Insurance Commissioner (Commissioner), with moneys from the
fund to be used for the regulation of health insurance.

     The Department of Commerce and Consumer Affairs (DCCA),
American Association of Retired Persons, and Kaiser Permanente
testified in support of this measure.  State Farm and the Hawaii
Medical Services Association (HMSA), also supported this bill,
suggesting amendments.

     DCCA testified that through legislation in Act 387, Session
Laws of Hawaii (SLH) 1997, Act 179, SLH 1995, and Act 178, SLH
1998, the Legislature gave the Commissioner the authority to
examine the financial affairs of mutual benefit societies, to
regulate all health maintenance organizations (HMOs), and to
regulate all entities offering or providing health benefits or
services under Article 2 and 13 of the Insurance Code.
Throughout this time the Insurance Division was never, however,
provided with the staffing and resources needed to accomplish
these legislative mandates.  DCCA testified that its one
full-time person assigned to health care regulation is paid from

                                 STAND. COM. REP. NO. 440________
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the Motor Vehicle Insurance Revolving Fund (MVIRF), and that its
Financial Surveillance and Examination Branch, responsible for
examination and financial surveillance of all mutual benefit
societies and HMOs, is approximately 75 percent funded by all
insurers with the exception of health insurers.  DCCA stated that
not only were additional personnel needed to regulate health
insurers as mandated, but that it was unfair to other insurers to
continue to give health insurers a "free ride."

     HMSA recognized that the staff of the Insurance Division
(Division) was currently overburdened and that with the possible
passage of multiple federal regulations looming in the future,
the Division might need additional staffing support.  HMSA did
not object to providing its fair share toward the Division's
needs, but requested an amendment to the terms of the assessment
to clarify "pro rata" and to make clear that federal and state
programs are excluded from the calculation of the aggregate
annual assessment.  HMSA also recommended that the Commissioner
be required to provide a justification for increases in
assessments so that this information could be passed on by HMSA,
to employers and individual rate payers.

     After full and free discussion of this bill, your Committee
has incorporated the amendments suggested by HMSA.

     As affirmed by the record of votes of the members of your
Committee on Consumer Protection and Commerce that is attached to
this report, your Committee is in accord with the intent and
purpose of H.B. No. 1065, as amended herein, and recommends that
it be referred to the Committee on Finance in the form attached
hereto as H.B. No. 1065, H.D. 1.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Consumer
                                   Protection and Commerce,

                                   RON MENOR, Chair