STAND. COM. REP. NO.993

Honolulu, Hawaii

, 2001

RE: S.B. No. 940

H.D. 1

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Judiciary and Hawaiian Affairs, to which was referred S.B. No. 940 entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE UNFAIR PRACTICES,"

beg leave to report as follows:

The purpose of this bill is to more clearly set forth the rights and obligations of mutual benefit societies and health maintenance organizations with regard to the health coverage of individuals who may have a third-party claim for recovery of damages. Specifically, the measure provides that refusing to provide, or limiting health coverage to persons that may have third-party claims for damages, is an unfair insurance practice under article 13 of the Insurance Code.

Testimony in support of this bill was received from the Department of Commerce and Consumer Affairs, Consumer Lawyers of Hawaii, and a concerned individual. A private individual provided comments. Testimony in opposition was submitted by AT&T, the Hawaii Business Roundtable, AlohaCare, Kapiolani HealthHawaii, Straub Health Plan Services, Inc., Queen's Health Plans, Hawaii Medical Service Association, Outrigger Hotels & Resorts, the Ohana Hotel Group, and Hawaii Business Health Council.

This bill amends statutory provisions enacted in Act 29, Session Laws of Hawaii 2000, which intended to comprehensively govern health insurer rights and obligations with regard to covered individuals with third party claims. Your Committees note that the purpose of Act 29 was to protect consumers that have a potential third party claim from being refused coverage, or from having their coverage limited because of the potential claim. At the same time, the intent of Act 29 was to avoid windfall recoveries to the consumer by providing affected health insurers with reimbursement rights under section 663-10, Hawaii Revised Statutes (HRS).

Your Committees heard concerns that this bill would make it impossible for insurers to exercise their reimbursement rights through investigation of the claim and the filing of a timely notice of lien against the judgment. There were concerns that the bill removes any incentive plaintiffs and their attorneys would have to provide health insurers with timely and complete information about a third-party claim, and increases their ability to "double dip" into the insurance recovery pool.

Upon consideration, your Committees have amended this measure as suggested by the interested parties. The amendments made by your Committees:

(1) Provide that an individual with a third-party claim may be required to provide timely notice of the claim to a potential lienholder under section 663-10, HRS;

(2) Allow the parties to agree that reimbursement under section 663-10, HRS, is to be determined by binding arbitration by an arbitrator selected by agreement, or by the court where there is no agreement on the arbitrator;

(3) Require the court or arbitrator to provide sufficient time and opportunity for discovery or investigation by a lienholder or potential lienholder under section 663-10, HRS; and

(4) Provide that individuals who refuse to submit timely notice of a third-party claim, third-party recovery of damages, and related information to a lienholder or potential lienholder, has waived rights under sections 663-10 and 431:13-103(a)(10), HRS.

Your Committees have also made technical, nonsubstantive amendments to this bill, which include placing the substance of the parties' amendments in chapter 663, Tort Actions, rather than in article 13, the unfair insurance practices article of the Insurance Code.

Finally, to ensure further discussion of this measure, your Committees have changed its effective date to January 1, 2050.

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Judiciary and Hawaiian Affairs that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 940, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 940, H.D. 1, and be referred to the Committee on Finance.

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

____________________________

ERIC G. HAMAKAWA, Chair

____________________________

KENNETH T. HIRAKI, Chair