Report Title:

Medicaid; Procurement; Health and Human Services



Requires the department of human services to award medicaid contracts to nonprofit and for-profit entities which comply with specified reporting requirements.  Effective 1/1/2016.  (SD2)



H.B. NO.



H.D. 1


S.D. 2













     SECTION 1.  Recently, the state department of human services contracted for the administration of a new managed care program, QUEST Expanded Access, for the aged, blind, and disabled population.  Of the awarded contracts, only two went to for-profit insurance companies to provide medicaid coverage for Hawaii's 37,000 aged, blind, and disabled residents.  Several states have found a number of serious violations of law and instances of medicaid fraud in administering similar medicaid programs through for-profit insurance companies.  As a result, legislation has been proposed throughout the United States that permits only nonprofit and government-related entities to bid on medicaid contracts.

     The department of human services has determined that for-profit entities are allowable entities to contract medicaid health insurance plans under the QUEST Expanded Access program.  However, it is important to the taxpayers of the State of Hawaii that there are state laws and rules that give state agencies latitude to determine the reasonableness of administrative spending for for-profit health insurance plans.  It is also important to the taxpayers that for-profit corporations operating in the State of Hawaii and providing health insurance for Hawaii’s medicaid clients understand Hawaii's cultural history of caring for those that are less fortunate.

     For-profit entities that are willing to do business in the State of Hawaii with the cultural understanding and compassion that Hawaii as the "Health State" has fostered, should be willing to disclose all financial activities of its Hawaii subsidiaries and its national corporate entities as a gesture of good faith and local corporate integrity.

     The purpose of this Act is to require all future medicaid health insurance procurement contracts to be awarded only to qualified nonprofit and for-profit entities with reporting requirements to the administrative agencies.

     SECTION 2.  Chapter 103F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§103F-    Procurement of medicaid contracts; nonprofits and for-profits; reporting requirements.  (a)  The department of human services shall solicit proposals for the procurement of all medicaid health care insurance contracts in the State solely from nonprofit or for-profit entities that comply with the following annual reporting requirements:

     (1)  All nonprofit or for-profit entities shall submit a certified audit report for the contracted services provided to the State within one hundred and eighty days following the close of each fiscal year to the department of human services, the insurance division of the department of commerce and consumer affairs, and the legislature; provided that the report shall be accessible to the public;

     (2)  The audit report shall be based on contracts administered in the State and shall include the expenditure of revenue and the:

         (A)  Percentage of revenue for medical services;

         (B)  Percentage of revenue for administrative costs;

         (C)  Percentage of revenue held in reserves;

          (D)  Percentage of revenue paid to shareholders;

         (E)  Total number of full time employees hired for contracted services;

         (F)  Total number of employees located in the State and the category of work performed;

         (G)  Description of any on-going state or federal sanction proceedings, on-going civil or criminal investigations, and past sanctions or resolved civil or criminal cases, to the extent allowed by law;

         (H)  Total compensation provided for the five highest paid Hawaii employees and five highest paid employees nationwide; and

         (I)  List of any management and administrative service contracts made outside of the State.

     (b)  Within ninety days of receipt of the reports submitted pursuant to subsection (a), the department of human services shall provide a written analysis and comparative report to the legislature.  The legislature may conduct hearings, review the reports, and conduct analyses during the following legislative session, as deemed necessary."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on January 1, 2016.