Tag Archives: HMSA

Majority of EUTF’s preferred provider plan participants opt to shift back to HMSA

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At last week’s meeting of the Hawaii Employer-Union Health Benefits Trust Fund, it was publicly announced that approximately 21,000 members submitted forms to move to the PPO health plan administered by HMSA instead of staying with the “default” HMA plan.

If that’s still true when all the smoke clears, it will mean HMSA held on to nearly 2/3 of its plan participants despite the EUTF decision that initially “defaulted” all HMSA members over to HMA.

It’s a better outcome for HMSA than the earlier shakeout at the Hawaii State Teachers Association, where at least 2/3 of teachers remained in a new HMA-administered plan.

But it’s an even bigger boost for HMA, which went from about 700 EUTF members to something around 12,000.

Both companies say they are looking forward to the competition.

When I was at the State Capitol yesterday to pick up paperwork to be filed in order to work as a session staffer during the upcoming session, the House Accounting Office was fielding questions about the EUTF health insurance plans. Turns out there is still a tremendous amount of confusion and anxiety about the EUTF offerings among the hundreds of people being hired to staff the 2010 legislative session.

Then there’s EUTF administrator Jim Williams, who is stepping down at the end of the year and moving to HSTA, where he has reportedly accepted a 3-month contract as executive director effective January 1, 2010, according to a Facebook post by Big Island teacher Paul Daugherty.

Daugherty also reports that HSTA interim executive director Dwight Takeno, who has also been serving as the teachers’ union chief negotiator, is leaving to take a human resources position at the University of Hawaii.

I met Takeno a decade ago when he was the young assistant to UPW state director Gary Rodrigues. This was during the period before Rodrigues was indicted and while the UPW and it’s parent union, AFSCME, were attempting to sidestep or dismiss allegations about misconduct by the union leader. I hope Takeno learned the right lessons from that experience.

Competitor says HMSA caused its own problems with bad strategic decisions, arrogance

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Harris NakamotoAn official of the small company that recently displaced HMSA as administrator of the “default” preferred provider health plan for state and county workers says HMSA’s corporate arrogance and a string of bad strategic decisions are responsible for the nonprofit insurer’s recent problems.

Harris Nakamoto, vice-president and general manager of HMA Inc., a health plan administrator, and Summerlin Life & Health Insurance Company, an affiliated insurer, said his company has benefited from HMSA’s mistakes, as well as a business plan emphasizing patience, strong performance, and a measure of good luck.

Earlier this year, HMSA was ousted from its position as primary insurer for Hawaii’s unionized public school teachers, losing more than two-thirds of the state’s 9,000 teachers to HMA.

The Hawaii State Teachers Association provides health coverage through the separate HSTA Voluntary Employees Beneficiary Association Trust under temporary legislative authority designed to test the VEBA approach. Health coverage for other public employee unions is combined through the Hawaii Employer-Union Health Benefits Trust Fund.

Nakamoto hopes the EUTF’s decision to make an HMA-administered plan its “default” as of February 1, 2010 could shift another 20,000 members to HMA out of the 33,000 currently in an HMSA-administered plan, with family members and dependents added on top of those member numbers. [Note: An earlier version of this entry reported the date of the new plans as January 1, a deadline which has been delayed for one month.]

The projected losses are a body blow to HMSA, long the state’s dominant health insurer.

Both HSTA and EUTF have shifted largely to self-funded insurance plans, attempting to save money by paying an administrative fee to a “third party administrator” like HMA and covering claims from their own trust funds, instead of paying insurance premiums to an insurer such as HMSA, which would then pay claims and keep any profits, but also absorb all the risks.

The move to self-funding has been criticized by some because it also shifts all risks to the trust funds, leaving them vulnerable to unexpected cost increases or higher numbers of doctor visits by members. EUTF has been struggling to stem a series of substantial monthly losses.

The move to self-funding by public employee health plans is likely to cost HMSA hundreds of millions in annual insurance revenues, Nakamoto estimated.

Nakamoto, who starred with the Iolani football team back in the 1970s, said he was contacted by HSTA officials in April and asked whether HMA could provide an alternative to a substantial increase in premiums being demanded in a “take it or leave it” offer from HMSA.

On May 30, the HSTA VEBA board of trustees voted to move all 9,000 teachers to a new self-funded 80-20 plan administered by HMA.

Nakamoto believes HMSA was surprised when the teachers union “called their bluff” and rejected the insurers ultimatum. Subsequently HMSA agreed to offer a fully-insured 90-10 plan promising more benefits at a higher price.

According to a September 22 letter from HSTA to the EUTF, only 2,850 members have chosen the higher-cost HMSA plan.

“Our competition means that HSTA is now in the drivers’ seat,” Nakamoto said. “They were able to call the shots, and teachers now have a choice.”

“HMSA took a double whammy” in the HSTA negotiations, Nakamoto said with a smile. “They lost membership, and they also took all the risk.”

He believes those seeking the higher coverage of the 90-10 plan are likely to be those with more medical needs, so that the deal moved a lot of bad risk to HMSA through “adverse selection”.

In the HSTA case, HMA’s 80-20 plan became the default because the HSTA VEBA initially cancelled the prior 90-10 HMSA plan. Even when they later approved a new HMSA plan, the HMA 80-20 plan remained the default.

Nakamoto believes HMSA officials wrongly thought a similar 80-20 plan would become the default and the dominant plan for the larger EUTF, and immediately jumped on it when offered a choice of plans to administer.

But EUTF eventually decided that its 90-10 plan, now to be administered only by HMA, should remain the default, threatening to leave HMSA’s offering as an also-ran.

Nakamoto estimates HMSA has spent at least $1 million in advertising attempting to counteract its own bad decisions and to encourage its members to stay in an HMSA-administered plan. It also faces potential penalties for violating EUTF rules requiring advance review and approval of advertising concerning open enrollment issues.

HMA, part of the Arizona-based IMX Companies, entered the Hawaii market in 2002 and quickly targeted major unions that hire outside administrators for health plans funded through union health and welfare trusts. Like EUTF, these trusts are governed by boards composed of union and employer representatives.

HMA now administers health plans for more than 125,000 union members and their families in Hawaii, including Unite HERE! Local 5, Hawaii Teamsters, Hawaii Electricians, ILWU Local 142, and the United Food and Commercial Workers Union.

The company collects an administrative fee paid “per employee, per month”.

“I believe we do a good job, and provide a solution to escalating health care costs,” Nakamoto said.

Nakamoto said his company knows what it’s like when your competitor is in the default position.

“We were just a small peanut for the past three years,” Nakamoto said, referring to HMA’s fewer than 1,000 EUTF members compared to more than 33,000 that signed up with HMSA.

But we were required to attend all the open enrollment sessions, the same as any vendor. We traveled to the neighbor islands, we spent all the necessary money to be at the dozens of sessions, just like a good soldier. We were just thankful to be able to participate. We have to be patient.

Nakamoto said that patience has now paid off, as the company hopes its position as the default plan will translate into 20,000 or more new EUTF members.

HMA didn’t think about the default designation or take any special actions to grab that position away from HMSA, Nakamoto said.

He described it as a surprise, “an acorn that dropped into our hands.”

Nakamoto also responded directly to critics who say his company has a reputation for paying less and paying late.

HMA, as a third party administrator, doesn’t decide when claims are paid, Nakamoto said. Each trust fund has its own payment schedule, with some paying weekly, some bi-weekly, and at different times of the month.

“We follow their direction,” Nakamoto said.

In addition, Nakamoto said HMA is stricter than HMSA in pursuing questions like “third party liability”, cases where another insurer might be responsible for covering part of the cost.

“Our clients do more due diligence, and we do more management of claims,” he said.

Nakamoto said each of the unions has its own performance measures that the company has to meet or exceed in order to retain its contracts.

EUTF to consider penalizing HMSA for “unauthorized and inaccurate information”

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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.

HMA/Summerlin to be EUTF “default” plan despite failure in two key mainland markets

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Nevadacare, a sister company of Summerlin Life & Health Insurance Co., the firm recently named to provide the “default” health plan to state-county workers in a controversial decision by the Hawaii Employer-Union Health Benefits Trust Fund, agreed late last year to stop doing business in Iowa based on allegations made by the Iowa Insurance Commissioner.

In an agreement dated October 30, 2008, Nevadacare agreed not to do business or solicit any business in Iowa for five years, and to voluntary give up its registration in that state. In addition, it agreed to reimburse the state for the costs incurred in its investigation of the company.

The company agreed to stop doing business in Iowa “without admitting to or denying the allegations”, according to the agreement.

Nevadacare, Summerlin, and HMA Inc., another partner company in Hawaii, are all part of the Arizona-based IMX Companies.

According to the Iowa Insurance Division web site, Nevadacare, an HMO that did business in Iowa as Iowa Health Solutions Inc., faced several allegations:

Failure or refusal to submit to a peer review; Failure to file or properly complete an application for renewal of certificate of authority; Failure to file or complete a premium tax return.

Less than two months later, the company announced plans to withdraw from offering commercial health insurance in Nevada, and said it would transition its clients to a regional Blue Cross-Blue Shield company.

Summerlin entered the Hawaii health insurance market in 2004 with a plan to target small businesses. J.D. Dyer, IMX chairman, predicted in a PBN interview the company would have 100,000 “fully insured members” in Hawaii within three years.

Despite being promoted by the Lingle administration as an example of its efforts to boost competition in the marketplace, Summerlin now has just 16,000 members in Hawaii, State Insurance Commission J.P. Schmidt told PBN in August, far short of its earlier goal.

During 2009, state and county employees could choose between several different health plans, including Kaiser, an HMSA HMO, and two so-called “90/10” preferred provider plans, one administered by the local nonprofit HMSA, and the second by the mainland for-profit, HMA/Summerlin.

Given the choice between two equal plans offered by different administrators, 33,000 EUTF members selected HMSA in 2009 and “less than 300” selected HMA/Summerlin, according to a November 23 letter from HMSA president Michael Gold. The vast majority selected the HMSA-administered plan even though it was slightly more expensive.

Despite this clear expression of member preferences, and the precedent of providing a choice between two equal plans offered by competing administrators, EUTF suddenly changed course this year and, at its August 26 meeting, approved HMA/Summerlin as the sole 90/10 plan for the coming year and designating HMSA to offer only a new “80/20” plan that would provide fewer benefits for a lower monthly premium.

HMSA says it simply responded to an EUTF request to develop a lower cost 80/20 plan, but had not been told that it would be limited to offering this new plan and there had been no discussion that its competitor’s 90/10 plan would be considered the “default” for the 33,000 EUTF members who had previously chosen HMSA.

In addition, HMSA says it was surprised to find it was blocked from continuing to offer its own competing 90/10 plan, as it had done previously.

EUTF minutes provide no indication that trustees were made aware of Summerlin’s problems in Iowa and Nevada before making their controversial decision to limit HMA and HMSA to a single plan each, rather than to continue offering competing plans.

The recommendation emerged suddenly from a series of confidential “dispute resolution” meetings by a subcommittee of the board, facilitated by a federal mediator. These meetings were not subject to the sunshine law and were not open to the public, so there is no record of the discussions leading up to its recommendation.

According to the minutes of the August 26 meeting, the discussion began as trustee John Radcliffe “stated for clarification that the Sub-Committee is recommending status quo and offering a second plan which is a voluntary plan which is a less good plan and is not a 90/10 plan but an 80/20 plan.”

Despite Radcliffe’s reference, the recommendation was anything but “status quo”. Further along in the discussion it was made clear that the status quo–competing 90/10 plans by HMA and HMSA–would not continue after all.

There is no indication in the minutes as to why this was not considered possible or desireable.

And the minutes do not indicate why Radcliffe, who was not on the 4-member mediation subcommittee, was the one to offer up this clarification.

In the same discussion, almost as an afterthought, EUTF administrator Jim Williams acknowledged that HMA would be made the “default” plan.

But despite many questions, the board had little choice but to approve the recommendation of the subcommittee. The board had been deadlocked since November 2008 on the shape of the new plans and rates to be offered, triggering the secret mediation process. Failure to accept the mediated deal would have continued the stalemate and potentially left public employees without any health coverage in 2010.

Despite the confusion and the warnings of more to come when members had to sort out their health plan choices, EUTF trustees had run out of time and now had little choice but to vote and move on.