State lawmakers are seeking more insight about a proposed partnership between two of Hawai‘i’s health care leaders.
Hawai‘i Medical Service Association, or HMSA, and Hawai‘i Pacific Health recently announced plans for a new partnership the leaders of these organizations say will improve access to care and address health care affordability in Hawai‘i.
As part of the partnership, HPH and HMSA would create a new nonprofit parent organization called One Health Hawai‘i “to align strategy, strengthen collaboration and improve coordination statewide across Hawai‘i’s health care system,” a recent announcement noted. Find more information here.
The state House Committee on Consumer Protection and Commerce and Senate Committee on Commerce and Consumer Protection on Tuesday held a joint informational briefing to discuss the matter. Government officials, regulatory agencies and health care industry leaders joined the briefing, which ran more than two hours.
“It is certainly of concern for this committee and the Senate committee as well, if I can speak for them, that this may have profound consequences on the health care landscape for Hawai‘i, especially given the prominence of HMSA and HPH in our medical community,” state Rep. Scot Matayoshi, chair of the House committee, said at the start of the briefing. “Whether those effects are good for the consumer or bad for the consumer are kind of yet to be seen. We are still waiting for more details to come out on the proposed partnership, and I think that will impact how the community and these committees view such a partnership.”
The full briefing can be found online here, but here are some highlights:
- HPH President and CEO Ray Vara says the organizations have not yet made any regulatory filings at the state or federal level, “and look forward to going through that process as appropriate.”
- Legally, Vara says, the proposal is not a merger. That echoes the messaging shared during last week when the proposed plan was described as a partnership.
Both Hawai‘i Pacific Health and HMSA would continue to operate independently under the newly formed parent company, One Health Hawai‘i, he explained. Each would have their own boards that would report to a newly formed parent board. Vara says HPH would continue to work with each payer in the community while HMSA would continue to work with all the respective providers in the community.
- In response to questions about data, Vara says firewalls will be created to protect data from “inappropriately flowing” between the two organizations. HPH would never see the reimbursement data from HMSA for other providers, and vice versa.
- “Every health care provider, every payer, they have their own care coordination system. This will align it into one,” Dr. Mark Mugiishi, CEO of HMSA, told lawmakers. “Where as a consumer, as a person, you’ll have one. That saves money on the administrative side and it’s a better experience for the patient, consumer, because they have one voice that they’re listening to.”
Other health care systems and insurers aren’t on board, though, and voiced concerns about the proposed partnership. The Queen’s Health Systems is among those opposed to the plan.
- "I think what you’re hearing from HMSA and HPH is just a small piece of the whole story,” President and CEO Jason Chang told lawmakers. “This is a huge topic and the monumental implications are very real. If the commercials sound too good to be true, I would urge you to believe that they are too good to be true.”
While there are some intended outcomes from the proposed partnership, Chang says there also are “some very real, dangerous, unintended consequences from such a major realignment of health care in Hawai‘i.” - Ed Chan, Hawai‘i market president of Kaiser Foundation Health Plan and Hospitals, told lawmakers that his organization also shares some of the concerns expressed by the broader health care community, but “we also want to recognize that innovative solutions and enhanced partnerships may be necessary for the sustainability of our health care ecosystem here in Hawai‘i as a whole.”
Noting comparisons made between the proposed HMSA and HPH partnership and Kaiser Permanente, Chan told the committee members that Kaiser Permanente’s integrated care and coverage model began more than 80 years ago and has been serving the Islands for more than 65 years.
“Our approach has always been aligned incentives across health insurance, hospital and clinic care, and the doctors and other providers caring for our members,” he explained. “This keeps the patient at the center while ensuring that health care remains accessible and affordable to all in the community.” - Chase Aalborg, president and CEO of Adventist Health Castle in Kailua, noted that for some independent providers, discussions surrounding the affiliation “makes it seem like we could be inconsequential in the decisions that are made, but that decision on how this moves forward is extremely consequential if it is not managed correctly. Independent providers could feel the heaviest of impacts. The ripple effect through the community could be incredibly painful. Adventist Health Castle is the largest private employer on Windward O‘ahu. Risk of decreased payments or driving profitable services to other facilities has an economic impact as well as a health care impact for our community.”
- Dr. Nadine Tenn Salle, president of Hawai‘i Medical Association, said the organization, which represents physicians across the state, wasn’t there to support or oppose the proposed affiliation between HPH and HMSA, but rather to articulate questions from Hawai‘i’s doctors.
“Physicians broadly agree that Hawai‘i’s health care system is under strain and that improvement is necessary,” she says. “What physicians are questioning is whether there’s sufficient transparency at this stage to responsibly evaluate the impact a vertically aligned insurance provider model will have. Across multiple physician forums, the message has been consistent and clear that we have more questions than we have answers.”
Those questions include how decisions affecting access and site of care will be made, how physician input will be incorporated into governing, what safeguards are enforceable rather than aspirational, and what mechanisms exist if unintended consequences occur.
“From the physician’s perspective, policy or regulatory comfort should not come before clarity, particularly in a small and highly concentrated health care market like Hawai‘i.” - At the start of the briefing, Deputy Attorney General Rod Kimura discussed antitrust laws, which he says refers to “certain laws enacted to protect competition.”
“You might ask, why protect competition? Well, because competition lowers prices through price competition. It encourages innovation through product differentiation and improvements. It gives consumers more choices because we all have different tastes and preferences. And we also want to prevent concentrations of economic power that might harm the markets.”
Three of the often mentioned anti-trust laws are the Sherman Antitrust Act, enacted in 1890, the Clayton Antitrust Act and the Federal Trade Commission Act, both of which were enacted in 1914.
The Sherman Act, he explains, makes two things illegal: agreements that “unreasonably restrain trade and monopolization,” while the Clayton Antitrust Act aims to stop “anti-competitive behavior before it causes harm.”
Meanwhile, the Federal Trade Commission Act established the FTC but also intends to cover matters that may not fit neatly into the Sherman or Clayton acts. The state law counterparts in Hawai‘i “basically tracks the federal law,” Kimura says. - Kimura says there are two well-known types of mergers: horizontal and vertical mergers. A horizontal merger happens when two competing companies come together while vertical mergers happen when two companies “are in different stages of a supply chain and they form a new entity.”
“Now, there may be very valid reasons for doing [a vertical merger], such as they want to reduce their dependency on external suppliers or distributors. They want to enhance their operational efficiency. They want to improve product quality or delivery speed or they want to lower cost or economies of scale,” he explained. “And sometimes there may be reasons which can harm competition.” - Nadine Ando, director of the state Department of Commerce and Consumer Affairs, spoke of the department’s regulatory role and oversight.
“From a regulatory standpoint, partnerships between insurers and health care providers can take many forms,” she told lawmakers. “Some may offer opportunities for improved coordination of care or efficiencies in service delivery. Others may raise important questions about costs, competition, governance and long-term system impacts. Our role is not to presume outcomes, but to ensure that any insurer-related activity complies with Hawai‘i law and serves the public interest.”
Ando says that several core considerations guide DCCA’s Insurance Division when it reviews matters involving health insurers, such as the impact to consumers, and rates and costs.
“If a partnership affects insurer costs or network structures, those impacts may appear in future rate filings, all of which are subject to regulatory review to ensure that they are not excessive, inadequate or unfairly discriminatory,” Ando says.The division also looks at market considerations.
While anti-trust enforcement is the responsibility of other authorities, Ando says the Insurance Division “considers whether the insurer’s activities may affect competition or consumer choice within the insurance marketplace.”
The Insurance Division — led by Insurance Commissioner Scott Saiki, a former state representative who served as speaker of the House from 2017 to 2024 — also considers financial solvency and governance, evaluating whether insurer assets are being used appropriately, “whether financial commitments are prudent and whether governance structures remain aligned with HMSA’s obligations to its members,” Ando explains. “It is also important to note that oversight of a partnership such as this may involve multiple state and federal agencies depending on its structure. The department coordinates with other regulators as appropriate while respecting jurisdictional boundaries.”
Established by social workers in 1938, HMSA is the largest health insurer in the Islands. HPH is a not-for-profit health care system with four medical centers — Kapi‘olani Medical Center for Women & Children and Straub Benioff Medical Center in Honolulu, Pali Momi Medical Center in ‘Aiea and Wilcox Health in Līhu‘e — and other clinics around the state.
According to tax filings, HPH’s revenues for the year ending June 30, 2024, totaled about $247.34 million while expenses totaled $229.54 million.
HMSA had a membership of 760,000 as of Dec. 31, 2024. According to its 2024 financial report, HMSA’s member premiums totaled about $4.35 billion in 2024 while expenses totaled $4.47 billion, for a net operating loss of about $117.4 million.
For the latest news of Hawai‘i, sign up here for our free Daily Edition newsletter.
Stephanie Salmons can be reached at stephanie@alohastatedaily.com.
