Posted on: Wednesday, March 16, 2005

Health insurer bill not 'final' yet

By Deborah Adamson
Advertiser Staff Writer

Hawai'i residents who want to challenge a health insurer's denial of coverage would have to take their case to an "independent review organization," under a bill making its way through the Legislature.

House Bill 395 would make the independent review organization's decision final so patients would not be able to appeal to the courts if they disagreed with the ruling.

An amended version of the bill has been approved in the House and has crossed over to the Senate.

Rep. Ken Hiraki, D-28th (Iwilei, Downtown, Makiki), whose Consumer Protection and Commerce Committee approved the bill, said he expects that the measure will be amended in the Senate.

"We wanted to move the bill forward for further discussion," said Hiraki, who introduced the bill. "The bill is not in its final form."

The impetus for the bill was a Hawai'i Supreme Court decision last November that invalidated the use of a state external review board by people enrolled in company-sponsored health insurance plans.

Previously, people who were denied coverage by their health plans and exhausted all internal appeals could take their case to the three-member panel run by the state Insurance Division.

But the high court ruled that the Insurance Division's panel was superceded by the federal Employee Retirement Income Security Act of 1974, known as ERISA.

As a result, people in ERISA plans now have to seek arbitration or file a lawsuit if they are turned down for coverage by their health plan. About 90 percent of Hawai'i's population are insured and most are covered by ERISA plans, according to the state Insurance Division.

Those in non-ERISA plans — a group of about 330,000 who pay for their own health insurance or are covered through the government — still can use the state external review process.

But the bill would require that all patients go through an independent review organization, which would be paid for by the state.

The bill also states that only cases involving medical necessity would be heard. The independent review organization would not consider disputes that involve interpretation of what procedures are allowed under an insurance contract. Under the state external review process, patients were allowed to challenge decisions regarding contract interpretation.

HMSA and Kaiser Permanente support the bill, saying it's better to streamline the appeals process into one system instead of having separate processes for ERISA and non-ERISA plan members.

"It would make better sense to have one process than two," said Chris Pablo, Kaiser's director of public, government and community affairs.

He also said the use of independent review organizations is "very common" in other states.

HMSA spokesman Cliff Cisco said the insurer, which helped craft the bill, has "always supported an external review" because "we think it's the right thing to do."

Richard Miller, a consumer advocate who is also a law professor emeritus at the William S. Richardson School of Law at the University of Hawai'ii Manoa, disagrees.

In a letter to legislators, Miller said the bill takes away "the only truly effective, fair, affordable and proven means" of contesting a health plan's denial of coverage for treatment and services.

The state panel also has overturned a "significant" number of decisions that denied coverage, even though the insurer's ruling was affirmed by an independent review organization, he said.

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