STAND. COM. REP. NO. 380-04

Honolulu, Hawaii

, 2004

RE: H.B. No. 2482

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 2482 entitled:

"A BILL FOR AN ACT RELATING TO HOSPITAL AND PROFESSIONAL LIABILITY RISK FINANCING,"

begs leave to report as follows:

The purpose of this bill is to enable the Hawaii Health Systems Corporation (HHSC) to establish a captive insurance company to meet its professional liability (medical malpractice) insurance needs and provide medical malpractice coverage to the Department of Health (DOH), the John A. Burns School of Medicine of the University of Hawaii (UH School of Medicine), and other state governmental or quasi-governmental entities.

Your Committee received testimony in support of this bill from DOH, HHSC, Maui Memorial Medical Center, and a concerned individual.

Your Committee finds that medical malpractice insurance coverage is essential to the operation of Hawaii’s 12 community hospitals. For the past 15 years this insurance was purchased from Farmers Insurance Group of Companies (Farmers). In late 2003, Farmers notified the State Insurance Commissioner and HHSC that it was withdrawing from the medical malpractice market. HHSC’s current policy with Farmers will not be renewed, when it expires on July 1, 2004.

Coupled with a very difficult medical malpractice insurance market, the sudden withdrawal of Farmers created a serious problem. It also created the opportunity, in fact the necessity, for HHSC to respond creatively to the challenge. This bill is that response.

Hawaii has a worldwide reputation as an excellent venue for creating and domiciling a captive insurance company. This bill utilizes Hawaii’s expertise to address the crisis in medical malpractice insurance for these governmental and quasi-governmental health agencies.

While a captive insurance company is in some respects a form of self-insurance, it has additional benefits. The principal additional benefit is its ability to access the reinsurance market in a cost effective manner. Insurance obtained by HHSC as contemplated by this bill, will allow HHSC to reduce the volatility of its loss experience and keep its costs below the cost of obtaining private insurance.

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. 2482 and recommends that it be referred to the Committee on Finance.

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

 

____________________________

KENNETH T. HIRAKI, Chair