AlohaCare, a health maintenance organization (HMO), sought to bid for a Quest Expanded Access (QExA) contract to provide healthcare services under Hawaii's Medicaid program but was unsuccessful, as the contracts were awarded to United HealthCare Insurance Company (Evercare) and WellCare Health Insurance of Arizona, Inc. (Ohana). AlohaCare petitioned the Insurance Commissioner, claiming that the awarded entities were not properly licensed to perform the required activities under the QExA contracts and that an HMO license was necessary. The Insurance Commissioner ruled that an HMO license was not required, as the services could be provided by other insurers.
AlohaCare appealed this decision to the circuit court, arguing that it undermined the Health Maintenance Organization Act, but the circuit court upheld the Commissioner's ruling. On further appeal, the Supreme Court of Hawaii determined that AlohaCare had standing to appeal and affirmed that both accident and health insurers and HMOs could provide the required care model for the QExA contracts, clarifying that this did not nullify the Health Maintenance Organization Act. The court's ruling affirmed the circuit court's judgment favoring the respondents, including the Insurance Commissioner and the Department of Human Services.
The background includes that the Department of Human Services had issued a Request for Proposals in October 2007 for qualified health plans to provide managed care services for eligible aged, blind, or disabled individuals in the Medicaid program, with payments based on capitated rates.
The RFP outlines 'managed care' as a comprehensive healthcare delivery model integrating clinical and administrative services to ensure timely, cost-effective access to primary care and necessary services. It specifies that 'QExA is a managed care program' requiring all acute, pharmacy, and long-term care services to be provided within this system. Licensure requirements state that the health plan must be licensed in Hawaii, not necessarily as a federally qualified HMO, but must comply with Section 1903(m) of the Social Security Act and relevant state requirements. The RFP defines 'Health Maintenance Organization (HMO)' in relation to 'Managed Care Organization,' indicating eligibility for a comprehensive risk contract under federal regulations and adherence to accessibility and solvency standards.
The term 'Participating' is defined for both healthcare providers and facilities contracted with the health plan to deliver covered services. A successful bidder must develop a provider network sufficient to ensure access to medically necessary services, with specific minimum network sizes for primary care physicians, specialists, and hospitals required on each island. If services are unavailable within the network or on the member's island, the health plan must arrange out-of-network services or transport the member to another island.
AlohaCare is confirmed to be licensed as an HMO under HRS chapter 432D, while United and Ohana are licensed as accident and health insurers under HRS chapter 431:10A but not as HMOs. Prior to submitting their application, United sought clarification on whether their license would allow them to offer the required closed panel managed care product. The Insurance Division's Health Branch Administrator indicated that HRS 431:10A-205(b) prohibits United from offering such a model. United subsequently sought further clarification in response.
On November 13, 2007, the Insurance Division revised its interpretation of HRS 431:10A-205(b), concluding that the statute does not prohibit offering a closed panel HMO product for Medicaid-Quest under an accident and health license. Subsequently, on November 16, 2007, the Insurance Division informed United that this interpretation was based on their documentation and purely informational. On April 24, 2008, the Health Branch Administrator provided a similar opinion to Ohana. On February 1, 2008, the Department of Human Services (DHS) awarded QExA contracts to United and Ohana, notifying AlohaCare that it was not selected and returning its unopened proposal due to failure to meet technical requirements. The contracts were executed on February 4, 2008.
On October 28, 2008, AlohaCare filed a Petition for Hearing and Declaratory Relief with the Insurance Commissioner, asserting its status as an 'interested party' and seeking a determination that Ohana lacked proper licensing under the HMO Act for the QExA contract. AlohaCare argued that the QExA contract work fell exclusively under Hawaii’s HMO statute, necessitating an HMO license. On December 8, 2008, DHS, later joined by United and Ohana, filed an Amended Motion to Dismiss, contending that the contracts were not insurance-related and thus outside the Insurance Commissioner's authority. The Commissioner denied this motion. United opposed AlohaCare's Petition by asserting that federal law does not mandate HMO licensing for Medicaid managed care organizations, while Ohana argued it was allowed to operate under its accident and health insurance license without needing an HMO license. They also claimed the Commissioner lacked jurisdiction over the QExA contract. A hearing on the Petition was conducted on March 18, 2009, with a Recommended Decision issued by the hearings officer on April 27, 2009.
On June 2, 2009, the Insurance Commissioner issued a Decision based on the hearings officer’s Recommended Decision, which included Findings of Fact (FOFs) regarding the QExA contracts and the RFP process. Key Conclusions of Law (COLs) established that: 1. The Petitioner qualifies as an 'interested party' with standing for declaratory relief under HAR 16-201-48 and is an 'aggrieved person' as defined by HAR 16-201-2, due to potential adverse impacts from the Commissioner’s licensing decisions affecting competition for the QExA contract. 2. Under HAR 16-201-50(1), petitions for declaratory relief are denied if they fall outside the authority's jurisdiction or are based on speculative facts; however, this Petition involves issues within the Commissioner’s jurisdiction regarding the Hawaii Insurance Code. 3. The QExA contracts with DHS and the entities [Ohana] and [United] are not classified as insurance contracts under HRS 431:1-201(a), placing their validity outside the Commissioner’s purview, except for the claim regarding the entities' licensing status. 4. Speculative allegations regarding potential CMS actions do not warrant relief, as per HAR 16-201-50(1)(D). 5. The matter to be resolved is whether a license under the HMO Act (HRS Chapter 432D) is necessary for the QExA contract, with the implication that if such a license is required, [United] and [Ohana] lack the proper licensing. 6. The case involves interpretation of several statutes, including HRS 431:1-201, 431:1-205, and HRS Chapters 432D, 432E, and 431:10A, which fall under the Commissioner’s jurisdiction. 7. Insurance is defined as a contract for indemnification against specified contingencies. [Ohana] and [United] are licensed to provide accident and health insurance under HRS Chapter 431:10A, but not under Chapter 432D. 8. The QExA plan is also governed by federal Medicaid laws, which allow MCOs to be federally qualified HMOs or state-certified risk-bearing entities. 9. Hawaii law does not necessitate that the QExA plan must be executed by an HMO, indicating flexibility in service provision under the program.
HRS 432E-1 defines a "managed care plan" as any plan, regardless of its format, that provides financing or delivery of health care services to enrollees through arrangements with selected providers and financial incentives for using participating providers. However, employee benefit plans are excluded from this definition if they are preempted by federal law. HRS 432D-1 defines a "health maintenance organization" (HMO) as an entity that provides or arranges basic health care services to enrollees on a prepaid basis, excluding certain enrollee responsibilities. HRS 432D-2(a) mandates that a certificate of authority is required to establish or operate an HMO in Hawaii, though "operating" lacks a specific definition in the statute.
The term "operate a health maintenance organization" is interpreted to mean engaging exclusively in activities authorized for HMOs. Risk-bearing entities licensed under other statutes, even if engaging in similar activities, do not qualify as operating an HMO under HRS 432D-2(a). The definition of a "managed care plan" includes both HMOs and other licensed risk-bearing entities, indicating substantial overlap in their powers, with the notable distinction that only HMOs can directly provide care to members through owned facilities and employed providers. Other licensed entities cannot mandate the use of specific providers or facilities.
HRS Chapter 393 reinforces that a defining characteristic of an HMO is its capacity to furnish direct care to members, distinguishing it from plans that merely reimburse health care costs. The predominant model of this type in Hawaii is the HMO offered by Kaiser Foundation Health Plan, Inc. For AlohaCare to succeed in a legal claim, the law would need to define an HMO as requiring a closed provider panel, which it does not.
Statutory interpretation rules indicate that a risk-bearing entity licensed under statutes other than HRS Chapter 432D is not implicitly restricted by HRS 432D-2(a) as long as its activities are authorized by its licensing statute. The QExA program, if designed solely for HMOs, would limit enrollees to services provided directly by those HMOs. Both United and Ohana are licensed as risk-bearing entities under HRS Chapter 431:10A, with no legal prohibition preventing them from offering the required closed panel product for the QExA RFP. HRS 431:10A-205(b) allows insurers to pay for services to hospitals or providers without mandating that care be received from specific entities, thus prohibiting restrictions that confine insureds to particular providers. Insurers can offer a closed panel or limited physician group model as long as there is a choice of providers and hospitals available to members. Legislative history shows no intention to prevent closed panel products like those required by QExA, especially given that the relevant statutory language has remained unchanged since 1955, predating modern managed care models. The statute was designed to differentiate between accident and sickness policy standards and those of Workers' Compensation Laws, preventing insurers from dictating care from a single provider. Therefore, the QExA RFP’s provision for capitated rates does not necessitate that health plans be licensed as HMOs in Hawaii.
Petitioner bore both the burden of proof and persuasion but did not succeed in substantiating its claims. The findings concluded that an HMO license is not required for United and Ohana to offer the QExA plan. Consequently, the Insurance Commissioner issued several orders: 1) DHS's Amended Motion to Dismiss was denied, affirming the Commissioner’s jurisdiction; 2) an HMO license is not necessary for offering the QExA managed care plan, which can be provided by any risk-bearing entity licensed in Hawaii; and 3) the petition lacked legal or factual grounds for relief, leading to a denial of all requested relief.
On July 2, 2009, AlohaCare appealed the Insurance Commissioner’s Decision to the circuit court, claiming it was adversely affected and thus an 'aggrieved person' under HAR 16-201-2. AlohaCare contended that the HMO Act mandates an HMO license for conducting 'HMO activities.' United countered that AlohaCare's interpretation nullified part of the definition of 'managed care plan' from the Patients’ Bill of Rights Act. The Insurance Commissioner argued that AlohaCare did not qualify as 'aggrieved' under HRS 91-14(a) and lacked standing, as its interest in competitive advantage was not a legally protected interest.
DHS subsequently filed a motion to dismiss, claiming AlohaCare lacked standing under HRS 91-14 because it was not an 'aggrieved person' and that HRS chapter 432D did not provide a private right of action for AlohaCare. In response, AlohaCare maintained its status as an aggrieved person. During a hearing on September 16, 2009, AlohaCare clarified that its appeal was under HRS 91-14, while United argued that AlohaCare only needed to demonstrate interest in the declaratory relief proceeding, not aggrievement, to participate. The distinction between 'interested party' and 'aggrieved party' was emphasized as a critical factor for the appeal's standing.
Only those individuals who are aggrieved, rather than merely interested, are permitted to access the courts for appeals regarding declaratory relief petitions. United and the Department of Human Services (DHS) concurred that under HRS § 91-8, only aggrieved persons can appeal to the circuit court, not just any interested party. AlohaCare contended that it was aggrieved due to actual or threatened injury resulting from the Insurance Commissioner's decision, which affected its business operations and imposed additional burdens compared to competitors. AlohaCare acknowledged that while the Insurance Commissioner’s ruling could not invalidate contracts held by United and Ohana, it could indirectly impact AlohaCare’s future operations by influencing licensing requirements crucial for contract eligibility.
The circuit court indicated it would have jurisdiction if AlohaCare could demonstrate it was an aggrieved party under HRS § 91-14. On September 29, 2009, the court expressed its intent to deny AlohaCare’s motion but later affirmed the Insurance Commissioner’s decision on December 23, 2009, citing deference to the Commissioner's interpretation of relevant statutes. The court’s affirmation order and judgment were filed on December 28, 2009. Subsequently, AlohaCare filed a timely Notice of Appeal to the Intermediate Court of Appeals (ICA) on January 5, 2010, and the appeal was fully briefed.
AlohaCare's appeal, accepted on October 12, 2010, argues that the HMO Act mandates that any entity categorized as an HMO must obtain a certificate of authority from the Insurance Commissioner before engaging in activities covered by the Act. AlohaCare asserts that the legislature intended for the Act to regulate activities previously unregulated by the State's insurance laws and claims that a letter from the Insurance Division contradicts this understanding. AlohaCare further criticizes the Insurance Commissioner's Decision for drawing inconsistent conclusions, particularly regarding the licensing status of Ohana and United under their QExA contracts, which it argues were performed without proper licensing authority. Additionally, AlohaCare contends that the Decision misapplies statutory construction principles when considering the relationship between HRS chapters 431:10A and 432D, arguing that the HMO Act's language is clear and should guide interpretation, asserting that the Act encompasses all related subjects, including requirements for indemnity insurance licensees.
In contrast, United contends that both it and Ohana are correctly licensed to operate under the QExA program. United makes three points: first, that the QExA program mandates a managed care program that is not defined as an HMO activity; second, that AlohaCare's interpretation would incorrectly require all employer-mandated health coverage to be provided by licensed HMOs; and third, that AlohaCare’s view would nullify HRS chapter 432E, while the Commissioner’s interpretation reconciles both statutes. United also supports the Commissioner’s Decision, asserting it adheres to established statutory construction rules and that the HMO Act's language is not unambiguous.
United argues against the utility of dictionary definitions for terms in HRS chapter 432D, asserting that the primary issue is whether HRS chapters 432D, 432E, and 431:10A can be construed to provide reasonable meaning while avoiding implied amendment or repeal. Additionally, United claims that the Insurance Commissioner’s Decision deserves deference.
The Insurance Commissioner presents five key arguments in response. First, it contends that the court lacks jurisdiction to hear the appeal since AlohaCare is not a "person aggrieved" under HRS 91-14(a). Second, the Commissioner asserts that AlohaCare has not demonstrated any prejudice to its substantial rights, making reversal under HRS 91-14(g) unwarranted. The Commissioner notes that AlohaCare's interests were not involved in the declaratory relief proceedings, as the Decision permitted third parties (Ohana and United) to provide specified services.
Third, the Commissioner claims it was within its discretion to deny the Petition based on speculative and hypothetical facts, as established by COL 5. Fourth, the Commissioner points out that AlohaCare did not challenge the Findings of Fact (FOFs) and Conclusions of Law (COLs) supporting the Decision, which contradicts HRAP 28(b)(4)(C). Finally, the Commissioner maintains that its interpretation and application of the statutes should be granted deference.
DHS, in its response, primarily argues that AlohaCare lacks standing to appeal, reiterating that it is not an "aggrieved person."
The document outlines specific procedural requirements for raising alleged errors in a legal context, including the necessary details regarding the location of the alleged error in the record and how it was brought to the attention of the court or agency. It emphasizes that if the point pertains to a finding or conclusion, it must include a quotation or reference to those findings. The Department of Human Services (DHS) contends that AlohaCare lacks standing to litigate the matter, arguing that HRS chapter 432D does not create a private right of action for AlohaCare, which is not a party or beneficiary of the QExA contract. DHS further claims that AlohaCare waived its argument concerning the licensing of competitors by failing to raise it in an earlier protest. Additionally, DHS asserts that the Insurance Commissioner improperly conducted a hearing on AlohaCare’s petition, suggesting that AlohaCare's arguments lack specificity and merit. AlohaCare counters these claims in its reply, asserting its standing and jurisdiction based on being aggrieved under HRS 91-14(a).
The court recognizes that rulings on declaratory actions are treated like other agency orders, making them appealable under HRS 91-14. AlohaCare claims it has the right to appeal the circuit court's decision as an aggrieved party, supported by HRS 91-8 and 91-14.
Regarding standing, the circuit court's jurisdiction over the plaintiffs' complaint is a question of law subject to de novo review. A plaintiff lacking standing cannot invoke the court's jurisdiction, and this issue is likewise reviewed de novo on appeal.
AlohaCare contends that the HMO Act exclusively regulates entities authorized to operate as licensed HMOs.
On secondary judicial review of an administrative decision, appellate courts apply the same review standards as the circuit court. HRS 91-14(g) outlines that the court may affirm, remand, or reverse an agency's decision if substantial rights are affected by legal violations, excess jurisdiction, unlawful procedures, or errors of law, among other criteria. Findings of fact are reviewed under a "clearly erroneous" standard, while legal conclusions are reviewed de novo. For mixed questions of fact and law, courts defer to agency expertise, provided the agency's decision aligns with legislative intent. Questions of statutory interpretation are also reviewed de novo.
AlohaCare has standing to appeal the Insurance Commissioner's Decision, as it qualifies as a "person aggrieved" under HRS § 91-8, which permits any interested person to petition for a declaratory order regarding statutory provisions or agency rules. The court confirms that both accident and health insurers and HMOs can offer a closed panel or limited physician group model of care per QExA contracts, without nullifying the HMO Act. Although there is a disagreement about the deference owed to the Insurance Commissioner’s interpretation, the court finds the Commissioner’s analysis correct and does not need to determine the issue of deference further. Additionally, while HRS § 91-14 outlines the appeal procedures for final decisions in contested cases, the court acknowledges that judicial review is also applicable to orders from declaratory rulings under HRS § 91-8, even if they do not stem from contested cases. The court disagrees with dissenting opinions claiming AlohaCare's appeal rests solely on HRS § 91-8, affirming that its appeal was properly made under HRS § 91-14. It is noted that the Insurance Commissioner's Decision did not arise from a contested case as defined by HRS § 91-1(5).
The Insurance Commissioner's Decision is appealable under HRS § 91-14 as it resolves a petition under HRS § 91-8. AlohaCare qualifies as a “person aggrieved,” facing increased competition from potentially improperly licensed competitors in the QExA contract process, as the Decision affirmed their proper licensing. AlohaCare has standing to appeal based on its “injury-in-fact,” which aligns with the definition provided in E. J. Lounge Operating Co. v. Liquor Comm’n of the City and Cnty. of Honolulu. The determination of “injury in fact” follows a three-part test assessing whether the injury arises from the agency’s decision, can be traced to it, and if relief is possible from a favorable ruling. AlohaCare claims two grounds for its injury: the Commissioner’s finding that its competitors are licensed to compete for QExA contracts, and the assertion that its HMO license has been significantly diminished. However, AlohaCare's broader claims regarding the effects of the Decision on its other activities lack supporting evidence in the record, thus failing to establish sufficient grounds as a “person aggrieved.”
AlohaCare was negatively impacted by a decision regarding licensing requirements to offer the QExA plan, as it concluded that its competitors, United and Ohana, were properly licensed to provide necessary services under the QExA contracts. The decision did not revoke or limit AlohaCare's HMO license, allowing it to continue operating and providing health care services. However, AlohaCare experienced increased competition from these competitors, which it argues is due to the decision's determination of their licensing validity. The Insurance Commissioner noted that evaluating the validity of the QExA contracts fell outside their jurisdiction and thus denied AlohaCare's claims related to the contracts' legitimacy. The core issue for jurisdiction was whether an HMO license is required for QExA contracts, referencing various statutory provisions. AlohaCare maintains that its injury from competition is traceable to the decision and that a favorable ruling could alleviate this injury by potentially deeming an HMO license necessary for United and Ohana to compete for QExA contracts. Consequently, AlohaCare is recognized as a "person aggrieved," granting it standing to appeal under HRS 91-14(a).
AlohaCare's bid for a QExA contract was rejected due to non-compliance with the technical requirements of the RFP, regardless of the Decision's outcome for United and Ohana. AlohaCare's injury stems from increased competition from allegedly improperly licensed competitors, which is linked to the Decision. Although the Insurance Commissioner could not void the contracts, a future action by DHS could potentially lead to their voiding. DHS's claim that AlohaCare would not bid on future RFPs lacks support in the record. Furthermore, DHS's assertion that HRS chapter 432D does not allow for a private cause of action is deemed incorrect; AlohaCare has the right to seek declaratory relief under HRS 91-8 and HAR 16-201-50 as an aggrieved party, allowing for an appeal of the Decision under HRS 91-14(a). The discussion regarding whether an “interested person” can appeal an order from a petition under HRS 91-8 remains unresolved, but AlohaCare is recognized as a "person aggrieved." The dissent's cited cases do not clarify this issue, as they address different jurisdictional concerns that do not impact AlohaCare’s standing, which is based on its claim of being aggrieved by the Decision.
The phrase “other agency orders” is interpreted to allow for the review of petitions for declaratory relief. Legislative history indicates that the refusal to issue a declaratory order constitutes an agency order, making it subject to review. Consequently, the court affirmed that the circuit court had jurisdiction over the agency appeal. Notably, in the case of Lingle, the standing of the appellants to appeal was not contested, nor was the issue of whether an appellant must be “aggrieved” or merely “interested” addressed. The standing inquiry centers on whether a private party is a suitable plaintiff. Previous cases, including Cnty. of Hawai#i v. Ala Loop Homeowners and Vail v. Emps. Ret. Sys., involved appeals of agency declaratory orders where standing was neither challenged nor discussed. The court disagrees with the dissenting opinion that implies a determination that an appellant need not be aggrieved, clarifying that while Lingle established the appealability of declaratory orders, it did not address who may appeal such orders. The court concludes that AlohaCare had standing as a “person aggrieved.” Legislative history of HRS chapter 91, the Hawai#i Administrative Procedures Act, aims to provide judicial review of agency decisions but does not clarify standing thresholds for declaratory order appeals compared to contested case orders. The court also refutes the dissent’s claim of imposing barriers to review declaratory orders, affirming that such orders are appealable under HRS. 91-14 and that AlohaCare had standing for the challenge at hand. The requirement for appeals to be brought by a “person aggrieved” is established in HRS. 91-14, and prior cases do not alter this requirement. Additionally, the Insurance Commissioner recognized a significant overlap between the powers of health maintenance organizations and those licensed under a different article.
HMOs (Health Maintenance Organizations) are uniquely authorized to directly provide healthcare to their members through their owned facilities and employed physicians, requiring members to use their services or get specific authorization to use external providers. This distinguishes HMOs from other licensed risk-bearing entities in Hawaii, which cannot mandate that services be rendered by specific hospitals or individuals. AlohaCare contends that the Insurance Commissioner's interpretation effectively nullifies the HMO Act, arguing that the two statutory provisions do not overlap. However, both HRS chapter 432D and HRS article 431:10A permit HMOs and accident and health insurers to offer the closed panel product envisioned by the QExA program. The court must evaluate if accident and health insurers can provide this product under Hawaii's insurance code, with the understanding that the HMO Act clearly allows HMOs to fulfill the services required by QExA contracts. The RFP for QExA indicates that both HMOs and accident and health insurers could provide the necessary closed panel product, without specifically mandating HMO licensing, as long as the health plans are properly licensed in Hawaii. The definition of "health plan" includes any healthcare organization or insurance company that offers services on a risk basis for capitation payments.
Both “qualified and properly licensed” Health Maintenance Organizations (HMOs) and insurers may provide QExA closed panel services as outlined in the RFP. Basic health care services, defined under HRS 432D-1, include preventive care, emergency care, inpatient and outpatient hospital and physician care, diagnostic laboratory services, and diagnostic and therapeutic radiological services. Properly licensed HMOs, such as AlohaCare, are authorized to deliver or arrange these services under HRS 432D-1.
While the QExA RFP does not specify "healthcare services," the definitions align with the services HMOs are permitted to provide. In contrast, HRS 431:10A-205(b) presents ambiguity regarding whether accident and health insurers can offer the required closed panel product, as it prohibits risk-bearing entities from mandating that services be provided by a specific hospital or individual. The singular wording in the statute suggests that insurers cannot impose such restrictions, implying that insurers like United and Ohana may still offer the QExA closed panel product since the RFP necessitates services from a network rather than a single entity.
However, this singular language is not definitive, as HRS 1-17 indicates that singular and plural terms can be interpreted interchangeably. Thus, if HRS 431:10A-205(b) bans insurers from requiring services from "particular hospitals or persons," United and Ohana would be barred from providing the closed panel product under their accident and health insurance licenses. The court has historically interpreted statutes in light of their legislative history and context to ascertain legislative intent regarding singular and plural terms.
The legislature's intent regarding the Uniform Contribution Among Joint Tortfeasors Act is clarified in context to the terminology "one joint tortfeasor" and "release," indicating that no distinction is meant between singular and plural forms. The court examines legislative history to assess whether HRS. 431:10A-205(b) restricts accident and health insurers from mandating services be provided by specific hospitals or individuals. The legislative history is silent on this issue, implying no prohibition exists against such requirements. Despite HRS. 431:10A-205(b) being enacted in 1987, its language has remained largely unchanged since its original 1955 codification, suggesting the statute does not intend to limit insurers from enforcing conditions on the service providers. The statute aligns with a model law from the National Association of Insurance Commissioners, though it predates the recent popularity of closed panel plans. Historical context indicates that such plans likely weren’t considered when the statute was drafted. Other jurisdictions have similarly interpreted related statutes to suggest that terms like "particular hospital or person" refer to a single entity rather than multiple, as illustrated by Indiana case law.
The Appellant-Commissioner argued that legislative intent prohibits any insurance policy from undermining an insured’s right to recover costs for medical services provided by qualified professionals in Indiana. The dispute arose when insurers allegedly failed to compensate podiatrists because they lacked unlimited medical licenses. The Indiana Supreme Court determined that the relevant statutory language restricts insurers from designating specific providers or facilities for treatment, distinguishing it from the Workmen's Compensation Laws, which allow employers to choose specific healthcare providers. This statute aims to prevent selective designation rather than require insurers to cover all legally rendered treatments.
The same statutory language was examined in Herring v. American Bankers Insurance Co., where the Louisiana Court of Appeal assessed whether a policy mandating that benefits be paid only for services from hospitals recognized by certain associations violated state law. The court ruled that such a provision did not constitute naming a specific hospital and clarified that the statute aimed to prevent favoritism towards particular institutions rather than to disallow quality or status requirements for hospitals included in the policy. The QExA Request for Proposals (RFP) similarly did not mandate that members seek care from a specific hospital or provider.
The QExA RFP mandates that members receive services within the QExA network, with provisions for out-of-network services or transportation to another island if necessary services are unavailable. According to the analyses in Mutual Medical Insurance and Herring, HRS 431:10A-205(b) is specific to individual hospitals or providers and should be interpreted independently of HRS 1-17. Additionally, restricting accident and health insurers from designating specific hospitals or providers for service delivery would contradict the framework established under HRS 432E-1, which recognizes the authority of insurers to manage care through selected provider networks. HRS 432E-1, enacted in 1998, defines managed care plans and emphasizes insurer arrangements with providers, while also allowing for financial incentives for using participating providers. The district court in G. ex rel K. concluded similarly, stating that HRS 431:10A-205(b) should not be interpreted alongside HRS 1-17, as such an interpretation would conflict with the legislative intent of the later statute. This interpretation aligns with principles of statutory construction and acknowledges the persuasive, though non-controlling, nature of federal court decisions on state law matters.
Repeals by implication are generally disfavored in law, with a preference for interpreting statutes in a way that allows both to remain effective. When conflicts exist between a general and a specific statute on the same subject, the specific statute is prioritized. However, if statutes overlap without a clear conflict, courts aim to harmonize them. In this context, HRS 431:10A-205(b) and HRS 432E-1 can coexist by interpreting the former in the singular, thereby avoiding implied repeal. Both Health Maintenance Organizations (HMOs) and accident and health insurers are permitted to organize medical services through specific provider networks, though only HMOs can contract with a single provider and deliver basic healthcare through their facilities.
AlohaCare argues that permitting accident and health insurers to offer closed panel products violates the HMO Act, which mandates licensure for operating an HMO and suggests that the HMO Act intends to exclusively govern such activities. However, the court finds these claims to be without merit, noting that the HMO Act is ambiguous and cannot be interpreted strictly without negating the provisions of other relevant statutes.
AlohaCare argues that the Insurance Commissioner incorrectly interpreted the phrase “operate a health maintenance organization” in HRS 432D-2(a), which mandates that no person may establish or operate a health maintenance organization (HMO) in Hawaii without a certificate of authority. AlohaCare asserts that the terms “shall” and “operate” are clear and indicate that the HMO Act preempts the relevant field of activities. Even if ambiguities exist, AlohaCare suggests that dictionary definitions should be employed to confirm this preemption. The term "shall" is recognized as mandatory, reinforcing AlohaCare's position.
However, the language of HRS 432D-2(a) is deemed not entirely clear and straightforward, as a literal reading could contradict parts of HRS 432E-1, enacted three years later. The HMO Act does not define “operate,” but it describes an HMO as a person providing or arranging for basic health care services on a prepaid basis. The court may refer to dictionaries to ascertain the ordinary meaning of undefined terms. Definitions from Black’s Law Dictionary and Webster’s Third New International Dictionary indicate that to “operate” involves managing or keeping something in action. AlohaCare's interpretation of “operate” as requiring a certificate of authority conflicts with the conclusion that accident and health insurers can offer certain products under different regulatory provisions, specifically under HRS article 431:10A. Furthermore, AlohaCare's broad definition conflicts with the explicit language of HRS 432E-1, which acknowledges managed care plans.
Managed care plans can be administered by various risk-bearing entities licensed under Hawaii's insurance laws, including HMOs and insurers. AlohaCare's interpretation of "operating a health maintenance organization" would negate the provisions of HRS 432E-1 that permit non-HMO entities to offer managed care plans. The Insurance Commissioner appropriately defined "operate a health maintenance organization" in a manner that preserves the roles of all relevant statutes, preventing an unintended repeal. This definition allows licensed accident and health insurers to provide managed care plans, ensuring that HMOs remain authorized to deliver health care services directly to their members.
AlohaCare argues that the HMO Act was meant to monopolize managed care regulation; however, legislative history shows that HMOs were regulated prior to the Act's enactment and that the Act's purpose was primarily to ensure the financial stability of HMOs rather than to eliminate competition or preempt other regulatory frameworks. Thus, AlohaCare misinterprets the legislative intent, which did not aim to create a regulatory void but to enhance oversight of existing entities.
The argument that the HMO Act should be fully effective due to its intended comprehensive coverage is erroneous. In the case of Gardens at West Maui, the court determined that constitutional provisions and legislative acts regarding property taxation encompassed the entire subject and repealed conflicting statutes by implication. This conclusion was based on the constitutional amendment's text, which aimed to transfer extensive real property taxation powers to counties, as noted during the 1978 constitutional convention. The committee explicitly clarified its intent to grant all taxing powers related to real property to the counties, except for Kalawao, while rejecting an amendment that would revert powers to the State.
In contrast, the HMO Act lacks similar intent or comprehensive language within its text or legislative history. Prior to 1995, health insurance companies were monitored for financial soundness, whereas HMOs were not. The legislative history indicates that the purpose of the HMO Act is to regulate the financial stability of HMOs, but it does not imply that it covers the entire field of managed care regulation. Consequently, the HMO Act does not repeal HRS chapter 432E by implication, allowing for the statutes to coexist without conflict.
The excerpt analyzes the validity of QExA contracts between the Department of Human Services (DHS) and the health plans Ohana and United, focusing on AlohaCare's claims regarding licensing authority. AlohaCare argues that since the Insurance Commissioner determined these contracts are not insurance, United and Ohana lack the necessary licensing to operate under them. However, COL 4 clarifies that while the contracts themselves are not insurance, the relationship between the health plans and their QExA members involves insurance provisions. Consequently, the court finds AlohaCare's interpretation incorrect, noting that AlohaCare did not appeal the factual findings supporting COL 4, which establish that United and Ohana are operating a managed care program providing health services to QExA members. As a result, these factual findings remain binding and affirm that United and Ohana are assuming risk in their dealings with QExA members, thereby maintaining their licensing authority.
Indemnification involves one party agreeing to compensate another for specific losses under defined conditions, as outlined in HRS 431:1-201(a). The Department of Human Services (DHS) supports insurance provision via the QExA contract, which entails risk management by the insurance companies for their enrollees. The DHS contracts with insurance plans and compensates them for the risks undertaken. The argument made by AlohaCare that United and Ohana operate without licensing authority is incorrect; both companies are licensed under HRS article 431:10A and are authorized to provide insurance services to QExA members. The circuit court's judgment from December 28, 2009, is affirmed. Various legal representatives for the involved parties are listed, affirming their roles in the case.
