Disappeared News

Thanks to fine investigative reporting by Pacific Business News' Kristen Consillio,a front-page article in Friday's PBN, Bill could dilute oversight on health insurance rates, reveals more about the troubled legislative process in Rep. Robert Herkes' office. It isn't pretty.

The article demonstrates that Herkes has turned the process of legislating health insurance regulation over to the industry that is being regulated. He has allowed the industry to write its own legislation and hasn't studied the law himself, despite all the testimony given to his committee by the Insurance Commissioner and the public.

Herkes' harboring of a corporate intern who is Executive Administrator of HMSA Foundation has been the focus of current attention. See Richard Borreca's column Lawmakers still struggle to get it right and this morning's editorial in the Star-Bulletin, Cleanse intern program of special interests.

But Consillio's article reveals that industry penetration into Rep. Herkes' office is more profound than just the donation of a senior executive to help him with his work--the same industry is literally writing legislation for him. She writes:

"Kaiser Permanente Hawaii lobbyist Chris Pablo acknowledged that he drafted the amendments to the bill and circulated them among other health plans, like the Hawaii Medical Service Association, to enlist their support."

The resulting amendment, which Rep. Herkes sprung on the committee for passage, was no longer a simple bill to cancel the sunset provision of the rate regulation law--all the new language was highly favorable to the health insurers. One section in particular practically assures that any attempt at rate regulation would be tied up in litigation virtually forever.

Effectively, all the testimony presented to the committee was wasted because the chair had already let the industry write an amendment to the bill on how to regulate itself.

The democratic process was bypassed--through its access to the committee chair, the health insurance industry is writing new law on how it should be regulated.

Rate regulation has saved Hawaii's premium payers millions, but Herkes is willing to let insurers undo the savings. The winners will be health insurers who already have a near-monopoly grip on the Hawaii market, and the losers will be small-business owners and individuals who would pay unlimited escalating premiums for health care coverage.

At the end of the article Herkes is quoted:

"The bottom line is they are regulated," Herkes said. "I think [insurers] made more money on the previous law, and took advantage of it frankly, because they treated the [rate] cap like a floor and would go right up to it."

Trouble is, the existing law isn't a "cap" like the gas cap law--the insurers propose a rate increase and submit supporting documentation. If the proposed increase is reasonable, it is approved. The actuarial process is long and full of numbers, but the insurers are supposed to do those calculations anyway. They have to do an honest job of it or their application would be turned down. The Insurance Commissioner has reported that occasionally errors are discovered and corrected.

So let's recap: Rep. Herkes has demonstrated that he doesn't understand the law itself--and he has turned the process of writing his legislation entirely over to the industry being regulated.

This is an outrage, and if not reversed, will be very costly to small business in particular. House leadership should back off on their resistance to reform and should undo the damage to this bill in particular.

The legislative process surrounding SB2917 has been frankly shameful. What started out as a short bill to remove the sunset clause in the rate regulation bill has been allowed, through access and influence, to turn into a blot on the reputation of the House itself.

What is the remedy? SB2917 is headed to conference. It should be restored to its original language. If it is allowed to stand as it is, it will demonstrate to the voters, as the insurance companies pick their pockets, that legislators are willing to let special interests run what should be our government.

Call, email or fax your legislators and ask them to restore the original language of SB2917.