Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 153
                                        S.D. 1

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Labor and Environment, to which was
referred S.B. No. 153 entitled: 


begs leave to report as follows:

     The purpose of this measure is to change the medical fee
schedule for workers' compensation reimbursements to providers
from 110% of Medicare to the annually adjusted federal workers'
compensation medical fee schedule for use in Hawaii.

     Testimony in support of this measure was received from ILWU
Local 142, the Hawaii Federation of Physicians and Dentists, the
Hawaii Medical Association, the Hawaii Orthopaedic Association,
the Hawaii Society of Physical Medicine, the Hawaii State
Chiropractic Association, Castle Medical Center, Comprehensive
Health and Active Rehabilitation Training, HealthSouth
Rehabilitation Center of Hawaii, Kaiser Foundation Health Plan,
and forty-one individuals.  The Hawaii Nurses Association
testified in support of the measure with amendments.

     Testimony in opposition to this measure was received from
the Department of Labor and Industrial Relations, the Insurance
Commissioner, and GEICO Direct.

     Your Committee finds that changes made to the workers'
compensation medical fee schedule will affect both the workers'
compensation premium rates and the motor vehicle insurance rates.
Section 431:10C-308.5, Hawaii Revised Statutes, which delineates

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limitations on charges for motor vehicle insurance, prohibits
charges permissible in the motor vehicle insurance statutes from
exceeding the charges permissible under workers' compensation

     Since the enactment of Act 234, Session Laws of Hawaii 1995,
the Insurance Division of the Department of Commerce and Consumer
Affairs has approved an average reduction in workers'
compensation insurance premiums of 37.5%.  Similarly, motor
vehicle insurance premiums have decreased more than the minimum
20% as required by Act 251, Session Laws of Hawaii 1997.  These
savings can in part be attributed to the reimbursement schedule
based on 110% of Medicare.

     Your Committee also finds that physicians and other
healthcare providers are reluctant to treat workers' compensation
injuries because the reimbursement, in many cases, does not cover
the cost to treat the patient.  According to an analysis by the
National Council on Compensation Insurance, Inc., the estimated
impact on medical costs of raising the fee schedule to 120% of
Medicare is 8.39%.  This would result in an estimated impact on
overall costs of 2.06%.  

     The federal workers' compensation reimbursement schedule for
Hawaii is reported to be as high as 145% of Medicare.  According
to the NCCI analysis, an increase of reimbursement to 145% of
Medicare could impact medical costs by 28.3%.  This would result
in an estimated impact on overall costs of 6.95%.  Your Committee
feels that, without more concrete information regarding the
federal workers' compensation reimbursement schedule for Hawaii,
it is premature to make such a drastic change to current practice
regarding medical reimbursement.

     However, your Committee feels that medical service providers
may be justified in raising specified fees in the schedule for
workers' compensation and motor vehicle insurance.  Your
Committee has amended the measure to add a mechanism by which
medical service providers may request changes in specified fees
provided that evidence substantiating the need for the change in
fees is provided.

     As affirmed by the record of votes of the members of your
Committee on Labor and Environment that is attached to this
report, your Committee is in accord with the intent and purpose
of S.B. No. 153, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 153,
S.D. 1, and be referred to the Committee on Ways and Means.

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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Labor and

                                   BOB NAKATA, Chair

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