J.P. Schmidt to head Family Health Hawaii [The Honolulu Star-Advertiser]

March 30--Former state Insurance Commissioner J.P. Schmidt has taken the job of CEO of Family Health Hawaii, a startup health insurance company, and said he hopes to have as many as 50,000 members in five years.

Family Health Hawaii, which is preparing to enter the Hawaii market in the next few months, will be the state's fifth commercial health insurer, competing with Hawaii Medical Service Association, Kaiser, Hawaii Medical Assurance Association and UHA (University Health Alliance).

Family Health Hawaii received conditional approval to sell insurance from the state's Prepaid Health Care Advisory Council on Thursday, said Paul Tom, council chairman. The council reviews health insurance plans to ensure they meet the requirements of the 1974 Prepaid Health Care Act, the law mandating employer-sponsored health insurance for full-time workers.

The new health plan will offer lower premiums for small businesses and help drive down the rates of other insurers as well, Schmidt said.

Hawaii's health insurance market is dominated by HMSA and Kaiser, which controlled 77 percent and 21 percent of the market, respectively, in 2010, according to the American Medical Association.

"We believe that our premiums will be very competitive and, in many cases, lower than what the current health insurers provide," Schmidt said.

"That is what our aim is. Family Health Hawaii has been set up with a very efficient structure -- a structure that we believe will enable us to provide health insurance at a lower premium rate."

The insurance startup has obtained more than the required $2.3 million in statutory reserves primarily from local businessmen wanting more competition among local health plans, Schmidt said. He declined to name the company's investors.

Family Health Hawaii was incorporated last year by local businessman Roger Godfrey, former executive of Foodland and Times supermarkets and past president and chairman of the Hawaii Food Industry Association. Godfrey was named vice president. Another local businessman, John Fujieki, former president and CEO of Star Markets, is listed as a board member.

Schmidt, who most recently worked as an attorney with Bays Lung Rose & Holma, said he expects Family Health Hawaii to have 40,000 to 50,000 members in four to five years. He declined to say how many employees would be hired but said staffing will be based upon the company's growth. Kaiser, the No. 2 insurer in the state, has about 226,000 members. HMSA has more than 700,000.

A major reason the insurer will be able to offer lower-cost policies is that it has negotiated a favorable contract with one of the nation's largest provider networks, New York-based Multiplan Inc., which has contracts with more than 96 percent of local doctors and hospitals, Schmidt said.

"In addition to their Hawaii network, it has provider networks across the U.S., and that will make it much easier for Family Health Hawaii policyholders to find a doctor or hospital on the mainland," he said. "That's one of the difficulties for people in Hawaii today."

Another strategy is the insurer's medical management program, which includes preventive measures and helping policyholders identify serious medical problems in the early stages, Schmidt added.

The company's health plan rates must still be approved by the Insurance Division before it can open for business. State Insurance Commissioner Gordon Ito declined comment.

The company's entrance into the market comes as the state prepares to launch Oct. 1 a health insurance exchange, known as the Hawai'i Health Connector, designed to provide individuals and small businesses access to more affordable health insurance policies as part of the federal Patient Protection and Affordable Care Act, also known as Obamacare.

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