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The Honolulu Advertiser
Posted on: Saturday, January 24, 2004

Measure to clarify insurer rules

 •  State to rule on HMSA plan

By Deborah Adamson
Advertiser Staff Writer

A bill that will make it tougher for health insurers to refuse coverage to associations will likely be introduced as part of the governor's package of proposals to the Legislature.

State Insurance Commissioner J.P. Schmidt said the measure will make it clear that it's legal in Hawai'i to offer insurance to associations.

In the past, insurers have said they weren't sure it was legal for them to provide coverage to groups, he said. One reason is that other states have restricted association coverage because some small businesses have banded together for the sole purpose of negotiating lower rates as a group.

"The primary purpose of this bill is to clarify the law and to provide better access to healthcare," Schmidt said.

If the measure is approved, a health insurer could not deny coverage to an association based on the claim that the law lacked clarity.

That was one of the reasons cited when both HMSA and Kaiser Permanente pulled insurance coverage from the Maui Chamber of Commerce some years ago, Schmidt said.

But had the measure been approved earlier, it wouldn't necessarily have helped the Hawai'i Barber and Barber Stylists Association.

HMSA sent letters to the group of 1,000 members informing them that their coverage would end in December.

The insurer cited the barbers' lack of worker compensation coverage although most of the members are sole proprietors and have no employees. HMSA later reversed its decision.

A major reason why insurers don't want to write new insurance for associations is the view that they pose unacceptable levels of risk.

HMSA spokesman Cliff Cisco said groups, unlike employers, are more loose-knit and "have no control over people coming in and out of the plan."

Over time, those that remain in association plans tend to be those who use more services, he said. Businesses with better risk profiles or that become larger tend to leave and get their own policies.

Chris Pablo, Kaiser spokesman, added that "employers in the plan who are a better risk can get insurance on their own. Those who can't stay."

Schmidt said insurers may cite other reasons when denying or pulling coverage from associations — and it would still be legal. Such reasons include the following: The insurer no longer plans to target these types of clients or that these groups pose risks too high to accept.

But he hopes that once the health insurance market becomes more competitive, HMSA and Kaiser will think twice about not offering coverage to these groups.

"That's one of the reasons why competition is important," Schmidt said.

Reach Deborah Adamson at 525-8088 or at dadamson@honoluluadvertiser.com.