STAND. COM. REP. NO.1133

Honolulu, Hawaii

, 2001

RE: S.B. No. 1066

S.D. 1

H.D. 1

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 1066, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE,"

begs leave to report as follows:

The purpose of this bill is to reduce the probability of future health insurer insolvencies by increasing minimum net worth requirements applicable to mutual benefit societies and health maintenance organizations. The stricter standards under this bill require the maintenance of a minimum net worth equal to three times the average of monthly net claims incurred during the past calendar year, if the sum is greater than $1,500,000 or other sums based upon existing minimum net worth formulas.

The Insurance Division (Insurance Division) of the Department of Commerce and Consumer Affairs submitted testimony in support of bill. The University Health Alliance submitted testimony in support of the amendments proposed by the Insurance Division. Comments on the bill were submitted by Alohacare. Testimony in opposition to the bill was received from the Chamber of Commerce of Hawaii.

Your Committee finds that the recent seizures of several health insurers by the Insurance Division underscore the need for more stringent minimum net worth requirements for mutual benefit societies and health maintenance organizations. However, your Committee also understands that if net worth requirements are too stringent, they will adversely affect a health insurer's ability to operate its business, as well as the consumers that the insurer serves.

Your Committee has amended this bill that reflects a compromise between the Insurance Division and regulated industry by:

(1) Deleting the requirement that a mutual benefit society or health maintenance organization maintain a minimum net worth equal to three times the average of monthly net claims incurred during the past calendar year;

(2) Raising the minimum net worth requirement from the current $1,500,000 to $2,000,000, to be completely phased in by December 31, 2002;

(3) Mandating each mutual benefit society and health maintenance organization to prepare and make available quarterly net-worth reports for review by the Insurance Commissioner;

(4) Establishing a fine for failure to produce required quarterly net-worth reports; and

(5) Changing the effective date from July 1, 2050, to upon approval.

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. 1066, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1066, S.D. 1, H.D. 1, and be placed on the calendar for Third Reading.

 

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

____________________________

KENNETH T. HIRAKI, Chair