Posted on: Friday, August 6, 2004
State reviews HMSA clauses
By Deborah Adamson
Advertiser Staff Writer
The state is looking into the legality of clauses in the Hawaii Medical Service Association's insurance contracts that shift certain liability to employers, give the insurer broad powers to define medical coverage and allow it to not renew policies for any reason.
After getting about six complaints, the state Insurance Division decided to review the clauses to see if they violate state statutes. If so, the insurance commissioner has the power to void them.
"I won't sign it," said Clifford Lee, owner of Hawaii Cash Register & Computer in Waipahu who crossed out termination clause of his contract and wrote "No!" and "Will not accept!" on the margins. "It looks like an innocent piece of paper but it's like saying, 'Look, give me a blank check, and someday I'll use it'."
The clauses aren't new and they're standard in every employer contract, said Cliff Cisco, spokesman for HMSA, the state's largest health insurer. "All these clauses have been in our contracts for a while and we see them as standard business practice," he said. "We rarely terminate an agreement with an employer. If it happens, it would be for non-payment of dues."
A "defend and indemnify" section of the contract could require employers to pay for legal and medical expenses if a worker appeals a denial of medical coverage — before the state's external review panel or a court — and the insurer loses.
The only exception would be if HMSA acted with willful misconduct and gross negligence, which are tough to prove and a high legal standard to meet, the state Insurance Division said.
"This is a real risk for small business. (HMSA has) the option to shift the liability," said Arleen Jouxson-Meyers, president of the Hawaii Coalition for Health, a patient advocacy group that has often sparred with HMSA.
Another clause causing concern is one that grants HMSA "full discretionary authority" to set the type and scope of medical coverage to be provided. Kaiser's contracts also have this stipulation.
Employers are concerned the clause was written too broadly, said Tom Pico, an attorney with the state Insurance Division. It gives insurers sweeping powers to determine eligibility for coverage, such as in experimental treatment.
Pico said the "defend and indemnify" clause may be standard for HMSA but it's not standard nationally. He contacted several out-of-state insurance commissioners, who have never seen this clause in health insurance contracts before.
As for the clause that gives the insurer broad powers to define medical coverage, known as the "full discretionary authority" clause, it's illegal in Maine and Minnesota, Pico said. The National Association of Insurance Commissioners also has taken a stance against it, he added.
Cisco at HMSA said the discretionary authority isn't broad since the state's Patients' Bill of Rights mandates a certain level of coverage. He said where HMSA would exercise such authority would be "in the fringes" — such as deciding whether to cover a treatment that could be experimental.
Kaiser Permanente spokeswoman Allison Russell said "full discretionary authority" gives the healthcare provider the right to determine products to be offered and who is eligible for coverage. She said the clause has never been used.
However, Pico said that when a patient appeals a denial of coverage before the state's external review panel, HMSA and Kaiser routinely invoke their "full discretionary authority" rights even in cases that don't involve experimental treatment.
As for HMSA's right to not to renew a contract for any reason, Pico said it goes against state labor requirements. At present, coverage can only be refused for non-payment of premiums.
"There does appear to be an inconsistency with Department of Labor regulations," Pico said.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
