Report Title:

Healthcare; Universal

 

Description:

Forms a captive insurance company to provide medical malpractice insurance to medical doctors employed by the Hawaii Health Systems Corporation.  (HB1598 HD2)

 


HOUSE OF REPRESENTATIVES

H.B. NO.

1598

TWENTY-FOURTH LEGISLATURE, 2007

H.D. 2

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO HEALTHCARE.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  Chapter 323F, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

Part  .  MEDICAL MALPRACTICE CAPTIVE INSURANCE COMPANY

     §323F-A  Purpose.  The medical malpractice captive insurance company is established to provide medical malpractice insurance coverage to medical doctors employed by the Hawaii health systems corporation at the highest level of service with the lowest possible cost, consistent with reasonable and applicable actuarial standards and the sound financial integrity of the company.

     §323F-B  Definitions.  As used in this part:

     "Administrator" means the president and chief executive officer of the medical malpractice captive insurance company.

     "Board" means the board of directors of the medical malpractice captive insurance company.

     "Company" means the medical malpractice captive insurance company established by this part.

     "Council" means the medical malpractice captive insurance company oversight council.

     "Investment manager" means any fiduciary that has been designated by the board to manage, acquire, or dispose of the company's assets, a bank as defined by law, or an insurance company qualified to perform services under the laws of more than one state.

     "Medical doctor" means a physician licensed under chapter 453 or 460 and employed by the Hawaii health systems corporation.

     "Qualified actuary" means a member of the American Academy of Actuaries who is either a fellow of the Casualty Actuarial Society or an Associate of the Casualty Actuarial Society who has five or more years of experience.

     §323F-C  Medical malpractice captive insurance company, established.  (a)  The medical malpractice captive insurance company is established as an independent corporation to provide medical malpractice insurance and related services to medical doctors of the Hawaii health systems corporation.  The company may be reorganized as a nonprofit corporation under chapter 414D.

     (b)  The company shall be organized and operated as a domestic mutual insurance company.  The company shall comply with, unless specifically excluded, all requirements of the insurance code regarding a domestic mutual insurance company.  The company shall not be an agency of the State.  The company or its liabilities shall not be deemed to constitute debts or liabilities of the State or pledges of the full faith and credit of the State.  The company shall write medical malpractice insurance policies covering medical doctors to the same extent as any other private insurer.  The company shall not write other lines of insurance, reinsurance, or excess insurance.

     (c)  The company shall also be designated and licensed as a class 4 company under article 19 of chapter 431.  The company shall comply with, unless specifically excluded, all requirements of the insurance code regarding a class 4 company.  No person shall be allowed to become a participant of the class 4 company unless the person is a medical doctor licensed and practicing medicine in this state.  The company may insure the risks of its participants through participant contracts that segregate each participant's or related participants' liabilities through one or more protected cells pursuant to section 431:19-106.3.

     (d)  The company's assets shall consist of real and personal property and shall include all premiums and other moneys paid to the company, all property, and other income acquired, earned, or otherwise gained by the use of premiums and other moneys paid to the company by deposits, investments, exchanges, and other transactions.  The company's assets shall be the sole property of the company and shall be used exclusively by the company for the operation and obligations of the company.

     (e)  Notwithstanding any other law to the contrary, the company shall be excluded from the surplus requirements of domestic mutual insurers from January 1, 2009, through December 31, 2019.

     (f)  The company is exempt from participation, and shall not join, contribute financially to, or be entitled to the protection of, any plan, association, guaranty, insolvency fund, or education and training fund authorized or required by chapter 431.  Notwithstanding the foregoing exemptions, beginning January 1, 2009, the company shall participate in the property and liability insurance guaranty association, pursuant to sections 431:16-101 to 431:16-117; provided that the company shall meet the surplus requirements applicable to all other domestic insurers under chapter 431 effective January 1, 2009.

     (g)  On or after January 1, 2009, the company shall provide medical malpractice insurance coverage to medical doctors of the Hawaii health systems corporation.

     §323F-D  Board of directors, established.  (a)  The board of directors of the company shall be responsible for the organization, management, policies, and activities of the company.  The board shall consist of nine voting members and one nonvoting member.  The voting members shall consist of the following:

     (1)  Eight directors who shall be medical doctors licensed and practicing in the state; and

     (2)  One director who shall be a public, at-large member elected by the board.

The administrator shall be the nonvoting member of the board.

     (b)  The initial eight directors shall be appointed by the governor within sixty days of July 1, 2008, and shall serve for terms of one year each.

     The public, at-large member initially elected by the board shall serve for a term of one year.

     The initial board of directors shall determine the staggering and length of future directors' terms; provided that no term shall exceed three years.  Upon the expiration of the terms of the initial directors, the company's policyholders shall elect the directors.  Each director shall serve for terms as specified by the board unless sooner removed for cause pursuant to rules adopted by the board.  Each director shall hold office until a successor is elected as provided in this section.  No person shall serve more than two full terms as director.  Any other law to the contrary notwithstanding, the election and composition of the board of directors as provided in this section shall be deemed adequate to qualify the company as a mutual insurer under chapter 431.

     (c)  A vacancy on the board shall be filled by appointment of the governor or insurance commissioner in the case of appointed directors, or by election by the company policyholders or the board in the case of positions formerly occupied by a director elected by the company policyholders or by the board, respectively.  The person appointed to fill a vacancy shall serve for the remainder of the term of the person's predecessor.

     (d)  Each director shall receive necessary traveling and board expenses incurred in the performance of duty as director and a fee commensurate with the duties expected of actual attendance at board meetings.

     (e)  No person shall be a director who has a direct and substantial interest in a competing insurer as a stockholder (excluding the holding of less than one per cent of the outstanding shares in a publicly traded insurer).

     §323F-E  Powers; generally.  Except as otherwise limited by chapter 431, the company may:

     (1)  Sue, be sued, complain, and defend, in its corporate name;

     (2)  Have a corporate seal, which may be altered at pleasure, and use the seal by causing it, or a facsimile thereof, to be impressed, affixed, or in any other manner reproduced;

     (3)  Purchase, take, receive, lease, take by gift, devise, or bequest, or otherwise acquire, own, hold, improve, use, and otherwise deal in and with real or personal property, or any interest therein, wherever situated;

     (4)  Sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise dispose of all and any part of its property and assets;

     (5)  Make contracts and incur liabilities, borrow money at rates of interest as the board may determine, issue guaranty capital shares and surplus notes, require capital contributions, issue its notes, debenture bonds, and other obligations, secure any of its obligations by mortgage or pledge of all or any portion of its property or income, and secure financing by any board-approved mechanism;

     (6)  Allocate fiduciary responsibilities among the directors and designate other persons to carry out fiduciary responsibilities;

     (7)  Collect, receive, hold, and disburse all money payable to or by the company;

     (8)  Deposit the company's money in banks or depositories selected by the board and withdraw the company's money  from those banks or depositories; provided that the withdrawal shall be made or authorized only upon the signatures of at least two persons approved by the board;

     (9)  Pay money from the company to effectuate the company's purpose and administration, including amounts for costs incurred to establish the company; and

    (10)  Exercise all powers necessary or convenient to effect the purposes of the company.

     §323F-F  Duties and responsibilities.  (a)  All corporate powers shall be exercised by or under the authority of the board, unless otherwise provided in this part or in the articles of incorporation.

     (b)  The board shall discharge its duties:

     (1)  In accordance with the company's purpose;

     (2)  With the care, skill, prudence, and diligence under the circumstances that a prudent director, acting in a like capacity and familiar with those matters would use in conducting a similar enterprise and purpose;

     (3)  By diversifying the company's investments to minimize the risk of losses, unless it is prudent not to do so;

     (4)  In accordance with governing legal documents;

     (5)  By having an annual audit of the company by an independent certified public accountant;

     (6)  By securing a fidelity bond for the administrator and in its discretion for other agents dealing with the company's assets at the company's expense;

     (7)  By purchasing liability insurance for errors and omissions for the board, each director, and any other fiduciary employed or contracted by the company to cover liability or losses caused by the act or omission of a fiduciary;

     (8)  By maintaining proper books of accounts and records of the company's administration;

     (9)  By carrying out the reporting and disclosure requirements required by law;

    (10)  By appointing a qualified actuary to develop and recommend a responsible schedule of premium rates with consideration of the company's investment income or refunds, or both, and to provide actuarial certification of the company's loss reserves; and

    (11)  By cooperating with and assisting the council in its duties and responsibilities.

     (c)  Except as otherwise provided by law, the board may:

     (1)  Transact workers' compensation insurance policies required or authorized by state law to the same extent as any other insurer;

     (2)  Provide the terms and conditions of an insurance policy;

     (3)  Provide that any written instrument be executed for the company by the administrator or the administrator's agent;

     (4)  Enter into agreements to reinsure all or part of the company's exposure to loss and to limit the risk to the company; and

     (5)  Employ persons to administer the company, including legal counsel, accountants, insurance consultants, administrators, qualified actuaries, investment managers, adjustors, other experts, and clerical employees, and pay compensation and expenses in connection therewith.

     §323F-G  Administrator; appointment; duties.  (a)  The board shall hire an administrator, who shall serve at the pleasure of the board.  The administrator shall be the president of the company and the chief executive officer, who shall be responsible for the day-to-day operations and management of the company.

     (b)  The administrator shall have proven, successful experience as an executive at the general management level in the insurance business.  The administrator shall manage and conduct the business of the company according to the board's direction and policies.  The administrator shall receive compensation authorized by the board.

     (c)  Before entering the duties of office, the administrator shall give a fidelity bond in an amount and with sureties approved by the board.  The premium for the bond shall be paid by the company.

     (d)  The administrator shall be an ex officio, nonvoting member of the board.

     §323F-H  Financial management.  (a)  The board shall select a custodial trustee to collect, receive, hold, or disburse moneys payable to or by the company.

     (b)  The board shall invest the company's principal and income without distinction between principal and income and keep the company's assets invested in real or personal property or other securities.  The board may retain cash temporarily awaiting investment or to meet contemplated payments without liability for interest thereon.

     (c)  The board shall manage the company's assets, except to the extent that the authority to manage the company's assets is delegated to other qualified investment managers.  The board may appoint investment managers to manage, acquire, or dispose of any of the company's assets.  An investment manager may be designated as an "investment agent."  The investment manager shall acknowledge in writing that the investment manager is a fiduciary under the company.

     (d)  The board may:

     (1)  Sell the company's securities.  No purchaser of the company's securities is bound to see to the application of the purchase money or inquire as to the validity of such sale;

     (2)  Vote on behalf of any stocks, bonds, or securities of any corporation or issuer held in the company or request any action to such corporation or issuer.  The board may give general or special proxies or powers of attorney with or without powers of substitution;

     (3)  Participate in reorganizations, recapitalization, consolidations, mergers, and similar transactions for stocks, bonds, or other securities of any corporation that are held by the company, and accept and retain any property received thereunder for the company;

     (4)  Exercise any subscription rights and conversion privileges for the company's stocks or securities;

     (5)  Compromise, compound, and settle any debt or obligation due to or from the company; reduce the amount of principal and interest, damages, and costs of collection in settling such debts;

     (6)  Cause securities held by it to be registered in its own name or in the name of a nominee without indicating that the securities are held in a fiduciary capacity and to hold any securities in bearer form.  The company's records, however, shall show that such investments are part of the company;

     (7)  Delegate its investment powers to investment managers of the company to expedite the purchase and sale of securities.  The purchase or sale of securities by these managers shall be in the name selected by the board.  The authority of these managers to purchase or sell securities for the company shall be evidenced by written authority executed by the administrator.  The board shall require these managers to keep it currently informed as to the nature and amount of the investments made for the company by them.  The board may enter into appropriate agreements with these managers setting forth their investment powers and limitations.  The board may terminate the services of these managers.  These managers shall be subject to the board's instructions;

     (8)  Pay taxes or assessments that are assessed against the company;

     (9)  Require any applicant or policyholder to furnish the board with information necessary for the company's administration; and

    (10)  Delegate its authority to the administrator or any authorized representative to maintain any legal proceedings necessary to protect the company or the directors or to secure payment due to the company.  In connection with this delegation, the board or the administrator or their representative may compromise, settle, or release claims on behalf of or against the company or the board.

     §323F-I  Oversight council.  (a)  There is established the medical malpractice captive insurance company oversight council which shall meet at least once annually.  For administrative purposes only, the council shall be assigned to the department of commerce and consumer affairs.  The council shall oversee the activities of the company to ensure that the company fulfills its purpose as set forth in this part.

     (b)  The council shall consist of five members who shall include:

     (1)  A member of the senate appointed by the president of the senate;

     (2)  A member of the house of representatives appointed by the speaker of the house of representatives;

     (3)  The director of health;

     (4)  The director of commerce and consumer affairs; and

     (5)  An at-large member who is an owner, officer, or employee of the company policyholder appointed by the governor;

provided that if any designee under paragraphs (1) to (4) does not meet the test in subsection (c), the president of the senate, speaker of the house of representatives, or governor, as applicable, shall designate an appropriate representative.  Section 26-34 shall not apply to appointments under this section.

     (c)  No person shall serve on the council, who within the second degree of consanguinity or affinity, has a direct and substantial interest in an insurer that competes with the company, including but not limited to:

     (1)  A stockholder of a competing company (excluding a holder of less than one per cent of the outstanding shares in a publicly traded company);

     (2)  An employee of a competing company;

     (3)  An attorney who represents a competing company; or

     (4)  A party who contracts with a competing company (excluding an independent contractor or business owner who does less than twenty-five per cent of its total annual volume of business per year with competing insurers).

     (d)  Members of the council shall serve without compensation, but shall be reimbursed for reasonable expenses necessary for the performance of their duties.

     (e)  The administrator shall serve as liaison officer to the council.  Not later than sixty days after July 20, 2010, and every June 15 thereafter, the board shall provide to the council any and all data and information the council may require, including but not limited to:

     (1)  The company's statutorily-required annual financial statement;

     (2)  Copies of any reports issued by the insurance division in connection with the triennial examination of the company; and

     (3)  Actuarial certification of loss reserves.

     (f)  After receipt of the data and information required pursuant to subsection (e), the council shall review the activities of the company and determine whether the company is fulfilling its purpose as set forth in this part.  The council shall promptly, but in no event later than October 15, 2010, and every October 15 thereafter, submit a report to the governor with a copy to the board of directors, stating whether the company is fulfilling its purpose as set forth in this part.  If the council determines that there are any deficiencies in the company's fulfillment of its purposes as set forth in this part, it shall include in its report a detailed description of any deficiencies.  Within a period established by the council, but in no event later than six months after delivery of the council's report in accordance with this section, the company shall respond in writing to any deficiencies identified in the council's report.  The medical malpractice captive insurance company shall provide staff support to the council.

     (g)  If the governor determines that corrective action is appropriate after reviewing the council's report and the company's response, the governor shall inform the legislature, and the legislature shall consider what action is needed.

     §323F-J  Premium rates, determination.  (a)  The board shall establish the premium rates to be charged for insurance sold by the company.  The company shall comply with the requirements set forth in articles 14 and 19 of chapter 431.  Premium rates shall be set at levels sufficient, when invested, to carry all claims to maturity, to meet the reasonable expenses for administering the company, and to maintain a reasonable surplus.

     (b)  The board shall hire a qualified actuary to assist with the development of sound premium rates.

     §323F-K  Reserves, investment.  The board may invest or reinvest any surplus or reserves within the limitations established for insurance companies under chapter 431.

     §323F-L  Financial statements and other reports.  (a)  The company shall submit to the commissioner an annual statement of financial condition audited by an independent certified accountant.  The audit report shall contain an actuarial opinion prepared by a qualified actuary on the company's claims reserves and expenses.  The financial statement shall be on a form prescribed by the commissioner and shall include actuarially appropriate reserves for:

     (1)  Known claims and associated expenses;

     (2)  Claims incurred but not reported and associated expenses;

     (3)  Unearned premiums; and

     (4)  Bad debts, reserves for which shall be shown as liabilities.

     (b)  The company shall compile and maintain statistical and actuarial data relating to the determination of premium rate levels, the incidence of medical malpractice claims, the cost of medical malpractice claims, and other data relating to medical malpractice.  The compiled information shall be submitted annually to the commissioner.

     §323F-M  Audits.  The administrator, or designated representative, shall have reasonable access to any policyholder's payroll and employment records during regular working hours to carry out audits of payroll reported, the number of employees on the payroll, and other information necessary for the administration of this part.

     §323F-N  Wilful misrepresentation and fraud.  (a)  Any person who wilfully makes a false statement or representation for the purpose of directly obtaining any compensation or payment or for the purpose of avoiding any compensation or payment under this part shall be subject to the penalties in article 13 of chapter 431.

     (b)  The company shall develop and implement a program to identify and investigate fraudulent insurance acts."

     SECTION 2.  Section 323F-3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The corporation shall be governed by a fifteen-member board of directors that shall carry out the duties and responsibilities of the corporation [other than those duties and responsibilities relating to the establishment of any captive insurance company pursuant to section [323F-7(c)(20)] and the operation thereof]."

     SECTION 3.  Section 323F-7, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  Notwithstanding any other law to the contrary, the corporation and any of the regional system boards shall exercise the following duties and powers:

     (1)  Developing corporation-wide policies, procedures, and rules necessary or appropriate to plan, operate, manage, and control the system of public health facilities and services without regard to chapter 91; provided that each regional system board shall be responsible for its own policies, procedures, and rules necessary or appropriate to plan, operate, manage, and control the public health facilities within its own regional system consistent with corporate policies;

     (2)  Evaluating the need for additional health facilities and services; provided that each regional system board shall be responsible for the evaluation within its own regional system;

     (3)  Entering into and performing any contracts, leases, cooperative agreements, partnerships, or other transactions whatsoever that may be necessary or appropriate in the performance of its purposes and responsibilities, and on terms the corporation, or regional system boards, may deem appropriate, with either:

         (A)  Any agency or instrumentality of the United States, or with any state, territory, or possession, or with any subdivision thereof; or

         (B)  Any person, firm, association, partnership, or corporation, whether operated on a for-profit or not-for-profit basis;

          provided that the transaction furthers the public interest; and provided further that if any dispute arises between any contract, lease, cooperative agreement, partnership, or other transaction entered into by the corporation and a regional system board with regard to matters solely within that regional system, after July 1, 2007, the contract, lease, cooperative agreement, partnership, or other transaction entered into by the regional system board shall prevail; and provided further that such agreements are consistent with corporation policies;

     (4)  Conducting activities and entering into business relationships as the corporation board, or any regional system board, deems necessary or appropriate, including but not limited to:

         (A)  Creating nonprofit corporations, including but not limited to charitable fund-raising foundations, to be controlled wholly by the corporation, any regional system board, or jointly with others;

         (B)  Establishing, subscribing to, and owning stock in business corporations individually or jointly with others; and

         (C)  Entering into partnerships and other joint venture arrangements, or participating in alliances, purchasing consortia, health insurance pools, or other cooperative arrangements, with any public or private entity; provided that any corporation, venture, or relationship entered into under this section furthers the public interest; provided further that this paragraph shall not be construed to authorize the corporation or a regional system board to abrogate any responsibility or obligation under paragraph (15);

          provided that each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system consistent with policies established by the corporation board;

     (5)  Participating in and developing prepaid health care service and insurance programs and other alternative health care delivery programs, including programs involving the acceptance of capitated payments or premiums that include the assumption of financial and actuarial risk; provided that each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system consistent with policies established by the corporation board;

     (6)  Executing, in accordance with all applicable bylaws, rules, and laws, all instruments necessary or appropriate in the exercise of any powers of the corporation or regional system boards;

     (7)  Preparing and executing all corporation-wide budgets, policies, and procedures or any regional system budgets, policies, and procedures; provided that the regional system boards shall submit their regional and facility budgets to the corporation to be consolidated into a corporation-wide budget for purposes of corporation-wide planning and appropriation requests.  Regional system and facility budgets shall be received by the corporation and shall be included in the corporation-wide budget upon submittal to the corporation;

     (8)  Setting rates and charges for all services provided by the corporation without regard to chapter 91; provided that the duty and power of the corporation board shall be limited to approving the rates and charges developed by the regional system boards for the regional system's facilities and services.  Rates and charges may vary among regional systems and facilities and may be consolidated with the rates of other regional systems into one charge master.  Third-party payer contracts may be negotiated at the corporation-wide level with input from the regional systems, taking into consideration the rates set by the regional system boards.  For purposes of securing revenue bonds, the corporation or regional system board may covenant to set, and if necessary increase, rates and charges as needed to pay debt service and related obligations plus a coverage factor;

     (9)  Developing a corporation-wide hospital system that is subject to chapters 76 and 89; provided that employment of regional system and facility personnel shall be the responsibility of the regional system boards pursuant to corporation-wide policies and procedures, applicable laws, rules, regulations, and collective bargaining agreements;

    (10)  Developing the corporation's corporation-wide capital and strategic plans or any regional system board's capital and strategic plans; provided that each regional system board shall be responsible for development of capital and strategic plans in its own regional system that shall be consistent with, and incorporated into, the overall corporation-wide plans; and provided further that the corporation and each regional system board shall be entitled to undertake the acquisition, construction, and improvement of property, facilities, and equipment to carry out these capital and strategic plans;

    (11)  Suing and being sued; provided that only the corporation may sue or be sued; and provided further that the corporation and regional system boards shall enjoy the same sovereign immunity available to the State;

    (12)  Making and altering corporation board and regional system board bylaws for its organization and management without regard to chapter 91 and consistent with this chapter; provided that each regional system board shall be responsible for the final approval of its regional system board bylaws;

    (13)  Adopting rules without regard to chapter 91 governing the exercise of the corporation's or regional system boards' powers and the fulfillment of its purpose under this chapter;

    (14)  Entering into any contract or agreement whatsoever, not inconsistent with this chapter or the laws of this State, and authorizing the corporation, regional system boards, and chief executive officers to enter into all contracts, execute all instruments, and do all things necessary or appropriate in the exercise of the powers granted in this chapter, including securing the payment of bonds; provided that the corporation board shall delegate to a regional system board its authority to enter into and execute contracts or agreements relating to matters exclusively affecting that regional system; provided further that a regional system board shall exercise this power consistent with corporation-wide policies; and provided further that contracts or agreements executed by a regional system board shall encumber only the regional subaccounts of that regional system board;

    (15)  Issuing revenue bonds up to $100,000,000 subject to the approval of the governor or the director of finance; provided that:

         (A)  All revenue bonds shall be issued pursuant to part III, chapter 39;

         (B)  The corporation and any regional system board shall have the power to issue revenue bonds in any amount without regard to any limitation in chapter 39; and

         (C)  The corporation shall have the power to incur debt, including the issuance of revenue bonds in any amount, and the regional system boards shall have the power to issue revenue bonds in any amount upon approval by the corporation board;

    (16)  Reimbursing the state general fund for debt service on general obligation bonds or reimbursable general obligation bonds issued by the State for the purposes of the corporation or any regional system board;

    (17)  Pledging or assigning all or any part of the receipts, revenues, and other financial assets of the corporation or the regional system boards for purposes of meeting or securing bond or health systems liabilities; provided that each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system.  Any pledge or assignment by the corporation or any regional system board to secure revenue bonds or health system liabilities shall be valid and binding in accordance with its terms against the pledgor, creditors, and all others asserting rights thereto from the time the pledge or assignment is made, without the need of physical delivery, recordation, filing, or further act.  The corporation shall not take or omit to take any act that would interfere with, impair, or adversely affect any pledge of assignment by a regional system board pursuant to this chapter.  In connection with issuing revenue bonds or related obligations, consistent with corporation policies and procedures, any regional system board may make such other covenants, binding on the regional system board and the corporation, that the regional system board determines to be necessary or appropriate to establish and maintain security for the revenue bonds or related obligations;

    (18)  Owning, purchasing, leasing, exchanging, or otherwise acquiring property, whether real, personal or mixed, tangible or intangible, and of any interest therein, in the name of the corporation, which property is not owned or controlled by the State but is owned or controlled by the corporation; provided that:

          (A)  Regional system boards shall have custodial control over facilities and physical assets in their respective regional systems.  A regional system board may own, purchase, lease, exchange, or otherwise acquire property, whether real, personal or mix, tangible or intangible, and of any interest therein, other than property owned or controlled by the corporation, in the name of the regional system board; provided further that a regional system board shall be subject to section 323F-3.5; and

          (B)  Each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system;

    (19)  Maintaining, improving, pledging, mortgaging, selling, or otherwise holding or disposing of property, whether real, personal or mixed, tangible or intangible, and of any interest therein, at any time and manner, in furtherance of the purposes and mission of the corporation or any regional system board; provided that the corporation or any regional system board legally holds or controls the property in its own name; provided further that other than to secure revenue bonds and related obligations and agents, the corporation or any regional system board shall not sell, assign, lease, hypothecate, mortgage, pledge, give, or dispose of all or substantially all of its property; and provided further that each regional system board shall be responsible for conducting the activities under this paragraph in its own regional system, and control over such property shall be delegated to each regional system board;

    (20)  [Purchasing] Except for the formation of a captive insurer to provide medical malpractice insurance to medical doctors employed by the corporation pursuant to part    of this chapter, purchasing insurance and creating captive insurers in any arrangement deemed in the best interest of the corporation, including but not limited to funding and payment of deductibles and purchase of reinsurance; provided that only the corporation shall have the power to create captive insurers to benefit public health facilities and operations in all regional systems; and provided further that a regional system board may purchase insurance for its regional system in collaboration with the other regional systems and the corporation until captive coverage is provided by the corporation;

    (21)  Acquiring by condemnation, pursuant to chapter 101, any real property required by the corporation to carry out the powers granted by this chapter;

    (22)  Depositing any moneys of the corporation or any regional system board in any banking institution within or without the State, and appointing, for the purpose of making deposits, one or more persons to act as custodians of the moneys of the corporation; or any regional system board; provided that regional system boards may deposit moneys in banking institutions pursuant to corporation-wide guidelines established by the corporation board;

    (23)  Contracting for and accepting any gifts, grants, and loans of funds, property, or any other aid in any form from the federal government, the State, any state agency, or any other source, or any combination thereof, and complying, subject to this chapter, with the terms and conditions thereof; provided that the regional system boards shall be responsible for contracting for and accepting any gifts, grants, loans, property, or other aid if intended to benefit the public health facilities and operations exclusively in their respective regional systems; and provided further that all contracting for or acceptance of gifts, grants, loans, property, or other aid shall be consistent with corporation-wide policies established by the corporation board;

    (24)  Providing health and medical services for the public directly or by agreement or lease with any person, firm, or private or public corporation, partnership, or association through or in the health facilities of the corporation or regional system boards or otherwise; provided that the regional system boards shall be responsible for conducting the activities under this paragraph in their respective regional systems;

    (25)  Approving medical staff bylaws, rules, and medical staff appointments and reappointments for all public health facilities of the corporation or any regional system board, including but not limited to determining the conditions under which a health professional may be extended the privilege of practicing within a health facility, as determined by the respective regional system board and consistent with corporate-wide policies, and adopting and implementing reasonable rules, without regard to chapter 91, for the credentialing and peer review of all persons and health professionals within the facility; provided that regional system boards shall be the governing body responsible for all medical staff organization, peer review, and credentialing activities to the extent allowed by law;

     (26) (A)  Investing any funds not required for immediate disbursement in property or in securities that meet the standard for investments established in chapter 88 as provided by the corporation board or any regional system board; provided that proceeds of bonds and moneys pledged to secure bonds may be invested in obligations permitted by any document that authorizes the issuance or securing of bonds; and provided further that the investment assists the corporation or any regional system board in carrying out its public purposes; selling from time to time securities thus purchased and held, and depositing any securities in any bank or financial institution within or without the State.  Any funds deposited in a banking institution or in any depository authorized in this section shall be secured in a manner and subject to terms and conditions as the corporation board or a regional system board may determine, with or without payment of any interest on the deposit, including without limitation time deposits evidenced by certificates of deposit.  Any bank or financial institution incorporated under the laws of this State may act as depository of any funds of the corporation or a regional system board and may issue indemnity bonds or may pledge securities as may be required by the corporation or regional system board; provided that regional system boards may exercise the powers under this subsection with respect to financial assets of the regional system consistent with corporation-wide policies; and

         (B)  Notwithstanding subparagraph (A), contracting with the holders of any of its notes or bonds as to the custody, collection, securing, investment, and payment of any moneys of the corporation or regional system board and of any moneys held in trust or otherwise for the payment of notes or bonds and carrying out the contract.  Moneys held in trust or otherwise for the payment of notes or bonds or in any way to secure notes or bonds, and deposits of such moneys, may be secured in the same manner as moneys of the corporation or regional system board, and all banks and trust companies are authorized to give security for the deposits;

    (27)  Entering into any agreement with the State, including but not limited to contracts for the provision of goods, services, and facilities in support of the corporation's programs or the regional system boards' programs, and contracting for the provision of services to or on behalf of the State; provided that the regional system boards shall be responsible for entering into agreements to provide goods, services, and facilities in support of programs in their respective regional systems consistent with corporation-wide policies;

    (28)  Having a seal and altering the same at pleasure;

    (29)  Waiving, by means that the corporation or regional system board deems appropriate, the exemption from federal income taxation of interest on the corporation's or regional system boards' bonds, notes, or other obligations provided by the Internal Revenue Code of 1986, as amended, or any other federal statute providing a similar exemption;

    (30)  Developing internal policies and procedures for the procurement of goods and services, consistent with the goals of public accountability and public procurement practices, and subject to management and financial legislative audits; provided that the regional system boards shall be responsible for developing internal policies and procedures for each of their regional systems consistent with the corporation's policies and procedures; and further provided that:

         (A)  The regional system boards and the corporate board shall enjoy the exemption under section 103-53(e);

         (B)  The regional system boards shall enjoy the exemption under chapter 103D; and

         (C)  The corporation shall be subject to chapter 103D;

    (31)  Authorizing and establishing positions; provided that regional system boards shall be responsible for hiring and firing regional and facility personnel consistent with corporation policies, except a regional chief executive officer and regional chief financial officer shall only be hired or dismissed upon the approval of the regional system board and the corporation board as further set forth in section 323F-8.5;

    (32)  Having and exercising all rights and powers necessary or incidental to or implied from the specific powers granted in this chapter, which specific powers shall not be considered as a limitation upon any power necessary or appropriate to carry out the purposes and intent of this chapter; provided that the regional system boards shall be responsible for having and exercising all powers and rights with respect to matters in their regional systems consistent with the law; and

    (33)  Each regional system, through its regional system board, shall:

         (A)  Develop policies and procedures necessary or appropriate to plan, operate, manage, and control the day-to-day operations of facilities within the regional system that are consistent with corporation-wide policies;

         (B)  Exercise custodial control over and use of all assets of the corporation that are located in the regional system pursuant to this chapter; and

         (C)  Expend funds within its approved regional system budget and expend additional funds in excess of its approved regional system budget upon approval of the corporation board."

     SECTION 4.  Section 323F-4.5, Hawaii Revised Statutes, is repealed.

     ["[§323F-4.5]  Captive insurance board.  (a)  There is established a ten-member captive insurance board that shall carry out the corporation's duties and responsibilities relating to the establishment of any captive insurance company pursuant to section [323F-7(c)(20)] and the operation thereof.

     (b)  Eight members of the captive insurance board shall be appointed by the governor as follows:

     (1)  Three members from a list of five persons submitted by the president of the senate; provided that at least one of these members shall have experience in the insurance industry and financial matters;

     (2)  Three members from a list of five persons submitted by the speaker of the house of representatives; provided that at least one of these members shall have experience in the insurance industry and financial matters; and

     (3)  Two members, one of whom shall be the chief executive officer or chief financial officer of an insurer licensed to do business in the State and shall serve as a nonvoting member.

     The director of health or the director's designee and the insurance commissioner or the commissioner's designee shall serve as ex officio, nonvoting members.

     Any vacancy shall be filled in the same manner provided for the original appointments.  The captive insurance board shall elect its own chair from among its members.

     (c)  The selection, appointment, and confirmation of any appointed nominee shall be based on ensuring that captive insurance board members have diverse and beneficial perspectives and experiences and that they include, to the extent possible, representatives of the insurance and/or finance sectors.  Members of the captive insurance board shall serve without compensation but may be reimbursed for actual expenses, including travel expenses incurred in the performance of their duties.

     (d)  Any appointed member of the captive insurance board may be removed for cause by the governor or for cause by vote of a two-thirds majority of the captive insurance board members then in office.  For purposes of this section, cause shall include without limitation:

     (1)  Malfeasance in office;

     (2)  Failure to attend regularly called meetings;

     (3)  Sentencing for conviction of a felony, to the extent allowed by section 831-2; or

     (4)  Any other cause that may render a member incapable or unfit to discharge the duties required under this chapter.

Filing nomination papers for elective office, appointment to elective office, or conviction of a felony consistent with section 831-3.1, shall automatically and immediately disqualify a board member from office.

     (e)  No member of the captive insurance board shall be an employee or vendor of the corporation, or an immediate family member thereof.  For purposes of this subsection, "immediate family member" means a corporation board employee's or vendor's spouse, child, parent, grandparent, or any related individual who resides in the same household of the employee or vendor."]

     SECTION 5.  Act 278, Session Laws of Hawaii 2007, is amended as follows:

     1.  By amending section 1 to read:

     "SECTION 1.  The legislature finds that the cost of medical malpractice and hospital professional and general liability coverage continues to rise and that stability in risk financing is needed for the Hawaii health systems corporation and the physicians serving this entity.  The escalating costs of premiums, lack of insurers providing coverage in Hawaii, decreased limits of available coverage, and coverage restrictions, make it important to establish a captive insurance company to insure and control exposure to the liability risks of the corporation.

     [The purpose of this Act is to:

     (1)  Provide that if the Hawaii health systems corporation establishes a domestic captive insurance company to provide medical malpractice and hospital professional and general liability coverage for the corporation and its facilities and the physicians serving therein, it must submit a feasibility report to the legislature, a formalized financial plan to the director of finance for approval, and a business plan to the insurance commissioner; and

     (2)  Ensure that the composition of the captive insurance board includes members with the appropriate knowledge and experience to oversee the establishment and operation of a captive insurance company.]

     The purpose of this Act is to facilitate the establishment of a captive insurance company to provide medical malpractice insurance coverage for medical doctors of the Hawaii health systems corporation."

     2.  By repealing section 5:

     ["SECTION 5.  In organizing a captive insurance company pursuant to section 323F-7(a)(20), Hawaii Revised Statutes, to provide medical malpractice and hospital professional and general liability coverage for Hawaii health systems facilities and physicians, the Hawaii health systems corporation shall:

     (1)  Submit a formalized financial plan to the director of finance for review and approval; and

     (2)  Upon receiving the approval required by paragraph (1), in addition to the documents required to be submitted by article 19, chapter 431, Hawaii Revised Statutes, submit to the insurance commissioner a formalized business plan that includes the establishment of a captive insurer board of directors."]

     SECTION 6.  In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 2050.