Hawaii health plans tops in U.S. for managing medical-service dollars

Despite seemingly negative news reporting to the contrary, health plans in Hawaii have proven to be the best in the nation at managing premium dollars by spending more on medical services and less on administrative expenses. This distinction is demonstrated by the fact that Hawaii is the only state in the nation where health plans do not owe consumers refunds as part of the federal Affordable Care Act.

Until recently, medical loss ratio (MLR) was an obscure term found in the act. It describes the percentage of premium dollars spent by health insurers on health care for their members, from visits to a doctor’s office to hospital services to prescription drugs. The MLR states that insurers must spent at least 80 percent to 85 percent of dues money on health care. Insurers that fail to hit that mark annually must provide refunds to individuals and businesses.

MLR is obscure no more. It has been propelled into the national spotlight with media coverage of a report that estimated that every state in the nation would receive MLR refunds, except Hawaii.

This is actually good news for Hawaii residents. While the allure of rebates is tempting, by not having to provide them, Hawaii’s health plans have demonstrated they are responsible stewards of member dollars.

Generally speaking, Hawaii’s residents are already getting good value from their premiums. Why is Hawaii different than the mainland in this regard? One of the reasons may be that the majority of health plans are locally based and operating as nonprofit entities.

In addition, member organizations of the Hawaii Association of Health Plans (HAHP) have been striving to reform the health care delivery system through investment in technology, improving quality and leading in innovation.

Many insurers are trying to bend the health care cost curve with two strategies. First, they are emphasizing preventive care. Second, they are moving away from paying for the volume of health care services and instead rewarding doctors and hospitals for the quality of care and positive patient outcomes.

While the Affordable Care Act’s medical loss ratio requirement does not truly address the real drivers of increased health care costs, HAHP takes pride in knowing that our member plans stand out for their ability to provide real value to consumers. HAHP plans will continue working toward ensuring that ACA-required refunds will not become necessary in our state.