The state House passed a bill Tuesday designed to keep the landmark Hawaii Prepaid Health Care Act intact in light of recent federal legislation.

But 14 House members — six Democrats and all eight Republicans — voted against House Bill 1134, in spite of their commitment to the 1974 act.

The disagreement over the bill centers in part on perceptions of political maneuvering. There is also concern that HB 1134 might actually end up hurting Hawaii’s health law, the first in the nation to set minimum standards of health-care benefits for workers.

But a key supporter of the bill defends the process the bill went through and says it is legally sound.

HB 1134 now heads to the desk of Gov. Neil Abercrombie for his consideration.

What HB 1134 Does

When the Hawaii act was enacted some 35 years ago, the Legislature anticipated that a similar health-care law might be enacted at the federal level. In that event, a termination clause was built into the Hawaii act.

In 1993, the Clinton administration pushed federal heath-care reform, ultimately unsuccessfully. But, hedging its bets, Hawaii’s Legislature enacted Act 99 in 1994, which repeals the Hawaii act’s termination clause upon the passage of a federal health-care law.

In 2010, President Obama signed into law the federal Patient Protection and Affordable Care Act. At the behest of Hawaii’s congressional delegation, the federal act carves out an exemption so that Hawaii’s act can continue.

But the federal legislation has never been popular, and Republicans have been talking about repealing or dramatically amending it ever since. Those efforts gained urgency with the fall of the U.S. House to the GOP, thanks in part to Tea Party voters.

In response, HB 1134, introduced by House Majority Leader Blake Oshiro, calls for eliminating both the original termination clause and the Act 99 termination clause.

HMSA’s Involvement

Prior to Tuesday’s floor vote, no Democrats had voted against the measure.

But, on Tuesday several argued in caucus prior to the vote and later on the House floor that they now had concerns about the bill that they wanted to work out in conference committee.

What upsets some House members who ultimately voted against HB 1134 is the role of the Hawaii Medical Service Association.

HMSA testified in support of the bill, as did the Department of Labor and Industrial Relations, the Hawaii Association of Health Plans, the American Cancer Society and AARP Hawaii.

In testimony dated March 22, Jennifer Diesman, HMSA’s vice president for government relations, wrote, “The provisions of HB 1134 HDl offer a simple, single step to maintain the premium health care that the majority of people in Hawaii already enjoy.”

Diesman argued the same point in two other pieces of written testimony.

The problem, say several lawmakers, is that HMSA sent an email to all House members on Monday — the day the House voted to defer voting on the measure for 24 hours — warning against amending HB 1134 to delay implementation of the bill until Dec. 31, 2013 — the day before the federal act must be fully implemented.

“From an operational perspective, it’s not possible to wait until 2013 for clarity on which direction the State will pursue — the federal (health-care act or ACA) or Hawaii’s own (health-care act, PHCA),” wrote Diesman. “There is a cloud of uncertainty for health plans and employers who purchase heath care coverage for their employees. … Having the sunset provision issue immediately addressed would reduce that uncertainty and make for a more successful implementation of the ACA, while ensuring the continued benefits of the PHCA.”

Democrat Rep. Della Au Bellati, who voted against HB 1134, told Civil Beat she doesn’t understand how HMSA — “the largest insurer in the state” — got wind that the bill might be amended.

“(Diesman) could not have had access to that information unless she was privy,” she said. “She was in effect lobbying us when this all should have been done internally.”

Democrat Rep. Mark Takai, who also voted against HB 1134, wrote Diesman back on Tuesday saying that he wanted to preserve the Hawaii act.

“My concern is that this bill may jeopardize Hawaii’s PHCA and our ERISA (Employee Retirement Income Security Act) exemption,” he wrote. “All I’m requesting is that we take this bill into conference and extend the effective date of the act to a later date, which will allow additional time to ensure that a bill like this will not eliminate PHCA upon the effective date of this act.”

Takai added, “Does HMSA actually need more than two years to plan? And is there anything wrong with an effective date of June 30, 2012 or December 31, 2012?”

(Takai’s email was cc’d to all House members as well as Democratic Sens. Josh Green, chairman of Senate Health, and Roz Baker, a committee member.)

Asked about her email and the possibility that the bill might have been amended, Diesman chose to reiterate HMSA’s support for the legislation.

“We think it is a good bill,” she said. “We think preserving the Prepaid Health Care Act is a good thing for the people of Hawaii, and until we know what happens with the federal law, we want to make sure we preserve what’s good with our system and ultimately take what’s good about the federal system and apply to it to Hawaii’s.”

Democrat Rep. Ryan Yamane, chairman of House Health, also said he was not surprised that HMSA responded quickly once the vote on HB 1134 was deferred Monday. That’s what lobbyists do, he said.

“They are in this building a lot — they have a lot of bills they are following, so for them to get involved, well — that’s for them to say,” he explained.

The AG’s Concerns

The Hawaii Chamber of Commerce, meanwhile, took no position in its testimony on HB 1134 but advised that HB 1134 would not have any legal effect “based on the narrow exception” that ERISA granted to Hawaii’s law.

ERISA supersedes state laws related to employee benefits.

“The Chamber believes the people of Hawaii need time to understand the benefits” of the federal health-care act “before determining which model will hold down costs,” the chamber said in its testimony.

But, the Attorney General’s Office on Feb. 23 submitted testimony in opposition to HB 1134 precisely because ERISA “likely” preempts it — in spite of the “narrow exemption” for Hawaii.

Louie and Deputy Attorney General Gary Ige wrote, “Any substantive amendment to the PHCA would go beyond the allowable exemption of amendments only for the “effective administration” of the PHCA and would, therefore, be subject to preemption.”

Rep. Belatti says House leadership informed members in the caucus before the floor vote that there was now a legal opinion in support of the bill having an effective date, and that the opinions were from the law firm of Alston Hunt Floyd and Ing.

“But that legal opinion was never part of of the official committee hearing testimony,” said Belatti.

One House Democrat who voted against HB 1134 said members were told that the attorney general later reversed his opinion on the bill.

But that second opinion was not among the bill’s written testimony as of Wednesday afternoon, a day after the floor vote.

A spokesman for the attorney general sent Civil Beat separate testimony from Deputy AG Ige.

The first, dated March 2, clarifies the AG’s position, stating that the office is “not opposed” to the intent of HB 1134 but that it “continues to have legal concerns” how a repeal of the Hawaii act could be preempted by ERISA. Ige also writes, “However, since there is no case on point, should the repeal be challenge on preemption grounds, the outcome cannot be predicted with certainty.”

The last paragraph of Ige’s testimony states that, even if a court rules that ERISA preempts HB 1134, “such a ruling would not affect the Hawaii Prepaid Health Care Act as it exists today…”

Testimony from Ige dated April 6 to state senators says much the same.

Rep. Yamane said he has no problem with the AG’s office at first opposing a bill and then later modifying its position.

“We were advised that this measure was good to go, that it was clean,” said Yamane. “It also passed 25-0 in the Senate and has gone through several committees in both chambers. For someone to suggest that the bill was somehow sprung on them, well, that surprises me.”

Congressional Involvement

Belatti also said House leadership informed members that Hawaii’s congressional delegation “was working on this, but it is unclear who in the delegation was pushing this — we have not had any communication in writing.”

But Yamane said that he understands that the delegation is involved with integrating the state and federal legislation, and that the point person for that is Rep. Oshiro.

Civil Beat left a message with the Oshiro’s office. Oshiro is an attorney with Alston Hunt, an influential local law firm whose clients include HMSA and other businesses in the health-care industry.

Late Wednesday the House Minority Caucus released a statement critical of the passage of HB 1134.

House Republican Leader Gene Ward said in the release, “This bill, passed by the House yesterday, will jeopardize the superior Hawaii healthcare by repealing a portion of the 1973 law, subjecting Hawaii’s program to a potential legal challenge.”

“The Attorney General also continues to have doubts about this bill,” Rep. Cynthia Thielen said in the statement.

Rep. Barbara Marumoto told Civil Beat that, while the Department of Labor and Industrial Relations supports the bill, it also said passage of HB 1134 could “trigger” ERISA.

“They said that, and the (Department of Commerce and Consumer Affairs) did not say diddly-poop — he just deferred to Department of Labor,” she said. “And the AG’s testimony the first time said the bill was dangerous. The next time they came in, (Democratic Rep.) Scott Saiki pointed out that their testimony was exactly the same but instead of saying the AG was opposed they just changed one word to say they are not opposed.”

Marumoto continued: “So, we are saying we don’t want to kill the bill, but that we should all just take a deep breath, assess the situation, talk to some legal beagles. Why take a chance with our Prepaid Health Care Law?”

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