STAND. COM. REP. NO. 387-04

Honolulu, Hawaii

, 2004

RE: H.B. No. 2409

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Judiciary, to which was referred H.B. No. 2409 entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE,"

beg leave to report as follows:

The purpose of this bill is to combat the growing problem of insurance fraud in Hawaii by:

(1) Replacing the Insurance Fraud Investigations Unit (IFIU) of the Insurance Division of the Department of Commerce and Consumer Affairs (DCCA) with an Insurance Fraud Investigations Branch (IFIB);

(2) Providing IFIB with expanded jurisdiction to investigate and prosecute insurance fraud in all lines of insurance including workers' compensation insurance;

(3) Defining "insurance fraud" to include fraudulent policy applications, producer fraud, and fraudulent misrepresentation in insurance sales and settlements;

(4) Expanding penalties to include civil and administrative sanctions in lieu of or in addition to existing criminal penalties; and

(5) Authorizing fines and settlements to be deposited into the Compliance Resolution Fund to partially cover IFIB costs.

DCCA, the Department of Labor and Industrial Relations (DLIR), and the National Federation of Independent Business (NFIB) supported the bill. The Hawaii Insurers Council supported the intent of the bill. Testimony in opposition was provided by the Hawaii Medical Services Association and Hawaii Medical Association. State Farm Insurance Companies, Hawaii Association of Health Plans, and American Council of Life Insurance commented.

Your Committees find that insurance fraud in Hawaii's health insurance market, alone, is conservatively estimated to cost $60,000,000 annually. These costs are passed on to consumers. By expanding the existing authority of DCCA's Insurance Fraud Investigations Branch from fraudulent motor vehicle insurance claims, to fraud within all lines of insurance including workers' compensation, this bill allows DCCA to more effectively fight fraud and reduce its costs.

Your Committees note that DLIR supports this measure and acknowledges that it allows DCCA to assist the department, which does not have the staffing to initiate and conduct workers' compensation fraud investigations and aggressively pursue criminal prosecutions.

Your Committees also acknowledge the concerns of those who opposed the measure as drafted, while agreeing with its intent. These organizations shared concerns about the expansion of the definition of "fraud" to among other things, include insurers and insurer actions and omissions, and to remove the requirement of intent. These organizations recommended further discussion and collaboration before enactment.

To emphasize that the bill is not yet ready for enactment, while keeping the subject open for further discussion, your Committees have amended this bill by delaying the effective date until 2099. Technical, nonsubstantive amendments have also been made for clarity, consistency, and style.

 

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2409, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2409, H.D. 1, and be referred to the Committee on Labor and Public Employment.

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

 

____________________________

ERIC G. HAMAKAWA, Chair

____________________________

KENNETH T. HIRAKI, Chair