EDITORIAL: More scrutiny for HMSA-HPH health care tie-up

Is it a good idea for Hawaii's largest health insurer, the Hawaii Medical Service Association (HMSA), to partner up in business with one of Hawaii's larger health care systems, Hawai'i Pacific Health (HPH)? State senators and representatives had plenty of questions and concerns to express at a Tuesday briefing on the issue — and Hawaii residents who depend on private insurance should, too.

State Rep. Scot Matayoshi, chair of the House Committee on Consumer Protection and Commerce, proclaimed that the health care pair-up will have "drastic ramifications" on Hawaii's health care landscape — but also noted that exactly what those will be isn't yet well understood. More analysis is warranted before firm pro- or anti-partnership positions are taken — but at this point, the uncertainty alone is reason to take pause before condoning or approving of these two powerful operations joining forces.

HMSA and HPH propose that they join forces under a new umbrella entity, One Health Hawaii — and argue that over time, this will improve health care for the benefit of consumers. But Hawaii's other insurance and health care operations, including The Queen's Health Systems and Adventist Health Castle, are expressing an equal, perhaps even higher, level of certainty that the change would be bad. The big fear is unfair competition.

A combined company would give the two partners in One Health Hawaii a cost advantage by shrinking the number of middlemen, giving HMSA an incentive to steer customers toward its "partner" and earn more per patient dollar. It could also potentially incentivize the partners to "cherry-pick" healthier patients with more money and ability to pay premiums, while leaving other hospitals responsible for the high-cost care sicker patients require. Queen's reps expressed particular concerns about this — and it would know, as Queen's takes the lion's share of uninsured emergency care patients in its emergency rooms on Honolulu.

Ray Vara, HPH president and CEO, and HMSA CEO Mark Mugiishi both assured legislators that separate operational pathways would be maintained, with HPH and HMSA as separate, independent operations. And the reps say no layoffs are planned (as of now), as the partnership would remain an open system. HMSA says members will still choose whichever doctor they prefer, and coverage and options will remain the same, but with "better coordination."

It's a slippery concept. How does "better coordination" save money if processes remain the same? Apparently it's because over time, employees and administrative functions will become redundant. However, the workforce will shrink not with layoffs, but as employees retire or leave of their own volition. The tighter, more productive company would thrive, in this theoretical scene.

Partnership advocates have wasted no time in reaching out to the public: A series of TV commercials have been launched, emphasizing the high cost of health care and intimating that this partnership will do something about that.

A decidedly contrarian view was raised at the hearing by a representative for Hawaii insurer HMAA, who said history and the workings of the U.S. economy show that there's "a substantial and foreseeable risk of increased health care costs, with the clearest, direct financial beneficiaries being senior executors and government insiders — not patients or purchasers of health care."

The amount of money to be saved (or diverted) with "shared administrative costs" and "the elimination of duplication" is eye-popping: more than $2 billion over 10 years, according to HPH's Vara. That's a lot of potential overlap in staffing, paperwork and capabilities, between just these two companies — and from consumers' vantage point, it raises questions over the possibility of industrywide streamlining that could reduce costs without creating a more consolidated and competition-insulated organization.

Vara told legislators that the current system is "unsustainable" — with every health system and the state's two major insurance companies losing money in 2025, at the same time that insured households experienced "double-digit-plus" increases health care costs. Many would agree. The outsized expense of the U.S. health care system is an era-defining challenge for this nation — with U.S. care costing more, but less effective than in many other nations.

The cost and barriers to health care for Americans propelled the Affordable Care Act to passage; however, "Obamacare" left the complex network of insurers, administrators, regulators and service providers in place — with each taking a "taste" and contributing to overall costs. With a nudge from the Trump administration's removal of penalties for those who don't buy insurance, costs have continued to rise.

The health care-financial services complex is ripe for a shakeup — some of the "disruption" and elimination of waste sought by the feds this year.

Whether the HMSA-HPH partnership is Hawaii's best option needs to be skeptically vetted — and the end goal must be an evolved structure prioritizing affordability, competition, innovation and quality of care.