Trustees of the Hawaii Employer-Union Health Benefits Trust Fund are expected to vote today in a closed executive session on whether to penalized the state’s largest health insurer for what EUTF has called “unauthorized and inaccurate information” distributed in advertisements and mailings during November’s “open enrollment” period.

The action stems from a widely circulated email and Hawaii Medical Service Association ads warning its 33,000 EUTF members that they will be automatically transferred to a plan administered by HMA Inc., an affiliate of Summerlin Life & Health Insurance Company, unless they apply for a new lower cost plan administered by HMSA.

The EUTF contract requires prior approval of any communications sent directly by health insurers and plan administrators regarding the open enrollment choices and procedures, which HMSA did not request or receive.

It is the latest round in a lingering controversy over EUTF’s decision to discontinue the existing side-by-side HMA and HMSA-administered plans, and to designate the HMA-administered plan as the “default” for all public employees, rather than a new plan administered by the larger and far better known HMSA.

Currently, both HMSA and HMA administer PPO 90-10 health plans, in which employees pay 10% of most costs while the insurance plan covers 90%. Fewer than 1,000 employees are in the existing HMA-administered plan, while more than 33,000 are in the HMSA plan.

But as of February 1, 2010, employees in the PPO plan who did not apply for a new HMSA 80-20 plan will be assigned to the 90-10 HMA-administered plan. [Note: A previous version of this post incorrectly reported the start date of the new plans as January 1, a deadline which has been delayed a month.]

HMSA officials have said that they did not expect HMA to be designated as the default at the time they chose to administer the 80-20 plan. A request by HMSA to administer both their existing 90-10 plan and their new 80-20 plan was rejected by EUTF trustees in September.

EUTF has demanded that HMSA stop references to an “HMSA plan” because the plan is self-funded by EUTF and is not an HMSA insurance plan. Instead, both HMSA and HMA are hired only as third-party administrators of the plan defined and self-insured by EUTF.

HMSA’s competition has increased the pressure on EUTF by calling for strong action.

In a November 30 letter to EUTF chairman George Kahoohanohano, HMA General Manager Harris Nakamoto called on the trustees to “take serious action” in response to HMSA and impose penalties that will “send a message” to all vendors.

HMA requests that the Board of Trustees take serious action on MHSA’s attitude, conduct and disregard of the established rules during this open enrollment period. They did not follow the necessary approval processes communicated to all EUTF vendors in some of their emails, ads and external communications. Jim Williams’ demand letter to HMSA on November 4, 2009 was a strong message. However, we have yet to receive corrective actions to be taken by HMSA. We believe no vendor has any right or privilege to be above the established rules and regulations set forth by the EUTF and its Board of Trustees. What penalties will be EUTF Board serve HMSA during the next board meeting? This will set the tone for all vendors, and send a strong message in the next open enrollment sessions.