Hawaii considers medical spending threshold for insurers

The chairs of the state House and Senate Health Committees have introduced bills in their respective chambers regulating the medical-loss ratio, the percentage of every premium that a company spends directly on members' care.

The proposed law would mandate an 80% medical-loss ratio for individual and small group products and an 85% ratio for large group policies. Health plans also would be required to report their spending to the state each year.

Hawaii Medical Assn. Executive Director April Donahue said the association drafted a proposed bill using a template from the American Medical Association and worked with lawmakers to make sure it would work under Hawaiian law. Then it found legislators willing to sponsor the measure.

Donahue said the association was in part following a national discussion of insurers' spending, which culminated with proposed federal minimum medical-loss ratios (varying by type of plan) included in the U.S. Senate's health care reform bill passed Dec. 24, 2009.

"This legislation encourages insurers to further minimize administrative expenses and streamline administrative processes, which we believe will eventually clear up time for physicians to spend on patient care instead of administrative tasks," she said.

Hawaii's BlueCross BlueShield-affiliated plan, Hawaii Medical Services Assn., is the state's largest insurer, with a market share greater than 50%.

HMSA Senior Vice President Fred Fortin said the company wants to expand the push for transparency of health care costs "beyond the 7% that goes into administration" to include scrutiny of what doctors and hospitals charge.

HMSA's medical-loss ratio varies by line of business, but is usually more than 90%, Fortin said: "I don't think we have a problem with reasonable loss ratios."

At least 15 other states have mandated minimum medical-loss ratio levels, but some are as low as 55% or 60%, and some apply only to individual or small group coverage.

Hawaii is joined by at least two other states looking at the issue in 2010. Lawmakers in Florida will consider whether to require Medicaid managed care organizations to report and reach a minimum medical spending ratio. Legislators in Indiana will consider a bill that would require insurers to report medical spending ratios to state regulators.