A new health insurer is poised to do business in Hawaii this year, boosting competition in the market dominated by Hawaii Medical Service Association and Kaiser Permanente Hawaii.

Family Health Hawaii, a nonprofit mutual benefit society, received approval last month from the state Insurance Division to begin selling plans as the fifth commercial health insurance carrier in Hawaii, along with HMSA, Kaiser, Hawaii Medical Assurance Association and UHA (University Health Alliance).

"The health insurance market needs more competition to provide a break for small businesses, and that’s the goal of Family Health Hawaii," said J.P. Schmidt, a former state insurance commissioner who is working as the company attorney for Family Health Hawaii. "They still have some regulatory things to get to before they can start actually offering policies. Hopefully around midyear, summertime, they’ll be able to hit the ground running."

The company was incorporated last year by local businessman Roger Godfrey, former executive of Foodland and Times supermarkets and past president and chairman of the Hawaii Food Industry Association. Godfrey didn’t return calls for comment.

Family Health still must file its rates with the Insurance Division for approval and meet the basic benefit requirements under Hawaii’s Prepaid Health Care Act before it can begin selling health plans. Insurance Commissioner Gordon Ito declined to comment on the new company.

A new health insurer is welcome news for businesses, though there is little hope of breaks from rising premiums.

"We’ve had over the years other alternative plans try to start up. They, of course, have a very uphill battle with the dominance of HMSA and existence of Kaiser," said Tim Lyons, executive director of the Hawaii Business League, which represents 900 small and midsize employers. "It’s just a hard road for any startup because they’ve really got to get the doctors to accept them, and that’s hard to do before your plan is out there. It’s very difficult to get your foot in the door. If they can come in at competitive rates, I’m finding less and less loyalty from the employer side to HMSA."

HMSA controlled 77 percent of the market and Kaiser 21 percent in 2010, according to the American Medical Association.

Having another health insurance company will not lower rates unless that company can get doctors to accept lower payments, said Gary Lee, a principal with Mercer, a New York human resource and benefit plan consultant.

"The only way it’s going to help competition is if the new health plan is able to lower the reimbursement to providers for the same services," Lee said. "I see little chance of success competing with the incumbent carriers, two of which (HMSA and Kaiser) control 90 percent of the bloody marketplace."

Family Health Hawaii’s entrance into the market comes as the state prepares to launch on Oct. 1 the first health insurance exchange, known as the Hawaii Health Connector, designed to provide individuals and small businesses access to more affordable health insurance policies as part of the federal Patient Protection and Affordable Care Act, also known as Obama­care.

Family Health might consider being part of the exchange, Schmidt said.

Summerlin Life and Health Insurance Co. was the last health insurer to try its hand at the competition, opening in Hawaii in 2004. However, it withdrew from the market in 2010, after selling its membership portfolio to competitor HMAA.

"There may well be some folks who worked with Summerlin who will be working with this company," Schmidt said. "The pool of talent of people who have the expertise and know the Hawaii market is not that big. They’ll want to make sure they have a team with good experts and good knowledge of the health insurance market in Hawaii."