State legislators continue to question HPH-HMSA deal

State lawmakers still had many questions Wednesday over the proposed partnership between Hawaii’s largest health insurer and one of its largest health care systems.

They also had many lingering concerns over the impacts of Hawaii Medical Service Association with Hawaii Pacific Health, which they expressed during a briefing that stretched over two hours at the state Capitol.

Most revolved around the potentially unfair advantage that would result from the HMSA-HPH deal, a vertical integration under a new entity, One Health Hawaii, and whether it would leave others with the burden of caring for high-cost patients and, ultimately, higher costs for everyone.

State Rep. Scot Matayoshi, chair of the House Committee on Consumer Protection and Commerce, questioned how the competing interests of an

insurance company and a medical provider would exist in the same entity.

“I think we’re all concerned that on the commercial side there are going to be incentives to essentially be cherry-picking, to siphon off healthy patients — intentionally or not — to the One Health system and then hurt the Hawaii health care system as a whole,” said Matayoshi (D, Kaneohe-Maunawili) at the briefing’s conclusion.

HMSA insures more than 750,000 people statewide, while HPH operates major hospitals including Kapi‘olani Medical Center for Women &Children, Pali Momi Medical Center and Straub Benioff Medical Center on Oahu and Wilcox Medical Center on Kauai.

Wednesday’s briefing followed an in January shortly after the partnership was first announced. Since then, HMSA and HPH have filed documents with the U.S. Department of Justice, which

are under review. Other

regulatory approvals are underway by the state insurance commissioner, the state Department of the Attorney General and State Health Planning and Development Agency.

HMSA and HPH have pulled out all the stops to win public support for its partnership under One Health Hawaii. In addition to television commercials, the two nonprofits have launched a , spoken to community groups and held a virtual town hall, all touting One Health Hawaii as a path toward a more coordinated and sustainable health system.

Dr. Mark Mugiishi, CEO of HMSA, said it would improve accessibility and coordination of care, plus align incentives.

Ray Vara, CEO of HPH, said the current health care system is not sustainable, with double-digit increases in health insurance costs. The move will reduce administrative burdens, whether it be dual case

management or prior

authorizations, he said, and “bend the cost curve” of rising insurance costs.

The partnership is projected to save more than

$2 billion over 10 years, he said, which could be reinvested into the community.

At the same time, it would be an open network, allowing HMSA members to continue choosing their own doctors at any hospital, and giving HPH patients the option of keeping their insurance plans.

Other health providers would be able to join as long as they agree to the network’s “value-based” model of care, which ties provider payments to patient health outcomes.

Rather than a fee-­for-service model, the

value-based plan is a per-­member-­per-month, fixed amount for a set time.

HPH in 2022 adopted the value-based model and successfully lowered the rate of premium increases, according to Vara. Value-based plans, however, have not been popular with Hawaii’s primary care providers or private practice physicians.

Jason Chang, president and CEO of The Queen’s Health Systems, another major player in Hawaii’s health care landscape, continued to speak out against the move. Chang on Wednesday said the aspirational goals of the deal sound great but “the issue is that we don’t need a merger to do those things.”

“This is not just vertical integration or a partnership,” he said. “This is a merger. So you think about the executive making decisions, you know, having one legal counsel or one CEO at the top making decisions for the two prospective organizations. To me, it’s a conflict of interest.”

Structurally, he said, it would be a monopoly that would give two organizations with a tremendous amount of power an advantage over competitors.

By taking lower-cost, lower-utilization patients, One Health Hawaii could keep its inflation rates low, he said, leaving other providers to care for higher-cost trauma, behavioral health and vulnerable patients.

Queen’s launched its ownagainst the move, warning that it could deepen already unacceptable gaps in care in Hawaii. Experience from other states, Queen’s said, shows that “costs rise, access narrows, and the community ultimately loses” when insurers and care providers merge.

HPH and HMSA insist this will not be the case, as other hospitals and insurance payers are invited to be part of their network.

Regulatory rules are in place to ensure fairness in the market, they said, and that is why the deal is currently undergoing review. Vara said officials from the DOJ were in Honolulu last week asking questions, and could request a secondary review.

“The reality of it is, if this doesn’t happen, we’re essentially committing to the relative status quo,” Vara said, “and that means sustained access issues, sustained unsustainable rates of increase for the cost of health insurance.”

Legislators have introduced bills, including , in response to the proposed HMSA-HPH partnership.

SB 3175 would have established state oversight of health care mergers, acquisitions and other consolidations. It would require such deals to undergo public interest review by the State Health Planning and Development Agency, along with legislative approval of “certain vertically integrated health care transactions.”

The bill, introduced by state Sen. Angus McKelvey (D, West Maui-Maalaea-South Maui), did not advance beyond its first reading.

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