Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 844
                                     S.D. 2
                                     H.D. 2

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 S.B. No. 844, S.D. 2, H.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this bill is to mandate that the insurance
coverage for mental illness, alcohol, and drug dependence
services be no less extensive than the coverage for other medical
or surgical services.

     Testimony supporting this measure was submitted by the the
Department of Health (DOH), Mental Health Association in Hawai'i,
Hawaii Medical Association, Hawaii Psychiatric Medical
Association, United Self-Help, the Very Big Mental Health
Consumer Sandwich Group, Equal Insurance Coalition, National
Association of Social Workers, Hawaii State Alliance for the
Mentally Ill, and the Protection and Advocacy Agency of Hawaii,
and several concerned individuals.

     Hawaii Government Employees Association supported the intent
of the measure.  The Insurance Commissioner of the Department of
Commerce and Consumer Affairs provided comments.

     Testimony in opposition was received from Queen's Medical
Health Management (Queen's), Kaiser Permanente (Kaiser), Hawaii
Medical Service Association, Legislative Information Services of
Hawaii, the Chamber of Commerce of Hawaii, National Federation of

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                                 Page 2

Independent Business, Outrigger Enterprises, Inc., and Hawaiian
Electric Company.  The Hawaii Psychological Association opposed
portions of the bill that would create a costly additional layer
of mental health referrals, and strongly supported provisions
establishing a Hawaii Equal Insurance Task Force (Task Force).

     Your Committee heard testimony that parity of coverage for
mental health and substance abuse services was necessary to avoid
stigmatizing and treating unequally, an illness that can be
effectively treated, and may be as debilitating as any other
illness or injury.  There was testimony that nineteen other
states have enacted parity laws utilizing various approaches, and
that data is beginning to show that costs due to parity
requirements are less than original estimates.  In some cases,
premium costs had declined, and the provision of mental health
services had become more efficient and less costly.  Testifiers
pointed to the high price paid for ignoring mental illness and
related treatment needs, in the form of homelessness, increased
numbers of adults incarcerated in state and county jails, and the
need to treat secondary medical conditions resulting from
untreated mental illness and substance abuse problems.  DOH
stated that those individuals who would extensively utilize and
would need the coverage of mental health and substance abuse
services required by the measure, are those individuals who
probably suffer from severe disabilities, and who are a small
portion of the five percent of the population who utilize these

     Many of those opposed to the bill testified as to the
existing burden of Hawaii's unique mandated employee health care
coverage, citing potential premium increases of 10 to 12 percent
this year that, because of Hawaii's laws, must be borne almost
entirely by the employer.

     HMSA noted that the necessary cost/benefit analysis of this
legislation had been requested in H.C.R. No. 223 in 1998, but had
not been provided by the Auditor.  Kaiser stated that the
legislature had, in Act 78, Session Laws of Hawaii 1998, doubled
the number of mental health visits required by law, and that
there was insufficient data regarding the impact of this
legislation and the need for additional coverage.  Kaiser also
suggested that the term "parity" be more clearly defined so that
a meaningful cost/benefit analysis could be performed, and to
allow comparison of Hawaii's parity legislation with that of
other states.  Queen's testified that by placing medical
necessity decisions in the hands of the patient's health care
provider, this bill would have the effect of superceding
provisions of section 334B, Hawaii Revised Statutes that
establish standards for utilization review of health care

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                                 Page 3

services, thereby allowing unfettered use of mental health and
drug abuse services without any utilization management.

     Your Committee recognizes the strongly felt concerns of
proponents of this measure, as well as the issues raised by those
in opposition regarding the unclear cost of the measure as well
as its potential to override utilization management controls.  

     Your Committee has accordingly amended this bill to:

     1)   Remove parity provisions;

     2)   Provide for the immediate formation of the Task Force;
     3)   Add new members to the Task Force, including
          representatives of the Hawaii Psychological
          Association, Hawaii Nurses Association, and the Chamber
          of Commerce of Hawaii, as well as the Insurance
          Commissioner and a representative of the State Public
          Employees Health Fund; and

     4)   Require that the Task Force report to the Legislature
          twenty days before the start of the 2000 regular

     Your Committee intends that the Task Force consider and
attempt to resolve the issues raised before your Committee,
including but not limited to:

     1)   A consideration and definition of the term "parity;"

     2)   An analysis of the potential impact of proposed parity
          legislation on existing mental health and substance
          abuse services costs, including an examination of
          inpatient versus outpatient costs and benefits; and

     3)   An examination of ways in which utilization review and
          other cost and quality control mechanisms may be

     To encourage further discussion of this measure, your
Committee has left its effective date blank.

     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 S.B. No. 844, S.D. 2, H.D. 1, as amended herein, and
recommends that it be referred to the Committee on Finance, in
the form attached hereto as S.B. No. 844, S.D. 2, H.D. 2.

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                                 Page 4

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

                                   RON MENOR, Chair