Monopoly Gatekeepers: HMSA, Kaiser Sneak Back onto Prepaid Health Care Advisory Council
Excerpted from The Public Disclosure Project, May 25, 2026
The Prepaid Health Care Advisory Council reviews and recommends approval or disapproval of health insurance plans sold to Hawaii employers. It advises the Director of the Department of Labor and Industrial Relations, who holds final authority over which plans can legally operate in Hawaii’s mandatory-participation health insurance market.
Hawaii Pacific Health announced on January 7, 2026 that it would merge with HMSA — Hawaii’s dominant health insurer — under a new nonprofit parent entity called One Health Hawaii. That merger is currently under review by the US Department of Justice, the Hawaii Attorney General, the State Health Planning and Development Agency, and the Insurance Commissioner.
Wayne Graves, Director of Human Resources at Hawaii Pacific Health, sits on the Prepaid Health Care Advisory Council. Another member, Lauren Yee, was appointed to the board in 2024, one year after retiring from a 28-year career with Kaiser Permanente.
Under Hawaii Revised Statutes Section 393-7(a), the minimum benefit floor for all employer health plans in Hawaii is defined as the plan with the largest number of subscribers in the state. That plan is HMSA’s. It has been HMSA’s since at least 1975.
Every health plan sold to Hawaii employers must provide benefits equal to or better than HMSA’s current plan design. HMSA updates that design annually. The PHC Advisory Council reviews the update. The DLIR Director approves it. And the new floor takes effect — setting the minimum compliance standard for every competitor in the market, as determined by the dominant competitor’s own product decisions.
From 1975 until February 2003, HMSA and Kaiser employees served as voting members of the council directly.
The Honolulu Advertiser, August 19, 2001, described the anti-competitive result: “A special panel that includes Hawai'i's largest medical insurer recommended the rejection of nearly every Mainland employer-sponsored health plan that tried to enter the state's insurance market last year.”
In January 2003, Governor Lingle proposed their removal in her State of the State address. Both voluntarily resigned shortly after. The Legislature codified the prohibition in statute later that year.
Now HMSA and Kaiser are sneaking back in.
The downstream effect of this mechanism is not abstract.
HMSA holds approximately 70% of Hawaii’s commercial health insurance market. It serves roughly 760,000 members — about 55.8% of the state’s total population.
On five of Hawaii’s six major islands, HMSA is the only carrier available in the individual market. There is no competitive alternative for those residents. The mandate applies. The plan is HMSA. The floor is whatever HMSA decided this year.
The Hawaii Employer-Union Health Benefits Trust Fund — the EUTF — administers health benefits for approximately 195,000 covered lives: state and county employees, retirees, and their dependents. The EUTF is governed by a ten-member board appointed entirely by the governor, placed administratively under the Department of Budget and Finance.
The EUTF’s insurance contracts are with HMSA and Kaiser. But the mechanism connecting HMSA’s annual plan update to public budgets is not just a contract. It is embedded in collective bargaining agreements covering every major public sector union in Hawaii.
HMSA updates its 80/20 plan premium annually, through a process reviewed by the PHC Advisory Council and approved by the DLIR Director. That update triggers employer contribution obligations across every state and county agency employing members of these bargaining units. No legislative action is required. No vote is taken. The formula is already embedded in the contracts.
When the rate rises, it automatically increases the state’s public contribution while simultaneously taking a direct bite out of the take-home pay of public servants, who are locked into covering the remaining 40% of the premium out-of-pocket.
For instance, the University of Hawaii Professional Assembly contract, Article XXII, states the employer contribution amount shall be based on 60% of the total premium of the HMSA 80-20 medical plan. The Hawaii State Teachers Association 2025 reopener settlement uses identical language, covering 60% of the 2025-2026 and 2026-2027 monthly premiums for the HMSA 80/20 PPO Plan, with a 90% cap. The same formula appears in Hawaii Government Employees Association agreements covering units 2, 3, 4, 6, 8, 9, 13, and 14. The City and County of Honolulu resolution uses the same structure.
In fiscal year 2025, state and county employer contributions to the EUTF totaled $1,145,052,767. The State of Hawaii’s share alone was $821,984,000. The City and County of Honolulu contributed $190,911,000.
That $1.1 billion annual public expenditure is anchored to a private carrier’s annual rate decision. Every year. Automatically.
The HSTA’s 2025 reopener settlement noted explicitly that the state was unwilling to adjust the formula. The anchor is not a negotiated outcome — it is a fixed structural feature that the state has declined to alter when given the opportunity.
The EUTF OPEB Trust — the fund covering retiree health obligations — holds $6.3 billion in assets as of June 30, 2023. The State of Hawaii’s attributed portion is $4.4 billion. This fund exists outside the state treasury, controlled by the same governor-appointed board that awards EUTF insurance contracts to HMSA and Kaiser.
As of the publication of this report, the DOJ review of the HMSA-HPH combine is in an active phase. DOJ officials visited Honolulu the week of April 9, 2026. A secondary review is expected, which could last several months. The DOJ will either grant clearance or file a federal lawsuit to block the integration.
Read ... The Public Disclosure Project
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2001: New health plans blocked | The Honolulu Advertiser | Hawaii's Newspaper
2004: How HMSA Used Health Care Advisory Council to Establish Medical Monopoly