INTRODUCTION

So much is uncertain about how health care reform will play out across the country, but part of the local picture seems clear: Hawaii residents will notice some change but not as radical a shift as in other states.

In part, that’s because Hawaii’s employer-based prepaid health insurance system has been in place for decades. Those without insurance comprised only 5 percent of the total population in the 1980s. It’s at least doubled in size since then, but the uninsured sector here is still relatively small.

This means the industry experts here will find it a bit easier than some states to adjust to expansions in benefits that are already being compelled by the passage of the Patient Protection and Affordable Care Act of 2010 (see box), because the pool of paying health insurance subscribers is somewhat larger.

"When we looked at implementing all those provisions, all we saw was a 1 or 2 percent increase in premiums," said Michael Stollar, vice president of marketing and communications at Hawaii Medical Service Association, the state’s largest health insurer. "This includes extending the age of dependents until 26, and coverage of preventive services, and a lot of them were covered already."

That said, the number of people covered by government programs such as Medicaid and Medicare, which reimburses practitioners at low rates, is large and growing. That has curbed revenues for hospitals and physician groups that are also straining under losses from services to the uninsured.

So insurers are watching intently to see that courts uphold the constitutionality of the individual mandate, on which the whole reform structure depends. Without essentially everyone required to have insurance, executives say, the expanded coverage of health care reform becomes unsustainable.

What they’re ignoring is the political chatter about repealing the reform act. Even if congressional Republican opposition to the legislation could get past a presidential veto — and most concede it can’t — the law is on the books now and the industry has to abide by it.

"It will improve quality and reduce costs over time," said Pressler, executive vice president for Hawaii Pacific Health. "It will be better care, in getting patients involved in their own wellness. The actual outcome of the (midterm) election doesn’t change anything for us."

Fred Fortin, senior vice president at Hawaii Medical Service Association, the state’s largest health insurer, agrees. He says that the transition away from a fee-for-services model to one in which providers are reimbursed more for the effectiveness of care is needed to stem the rise in costs.

"Even without health care reform, the need for payment reform would have been something we would have engaged in anyway," Fortin says. "We’ve been working on this since this time last year."

It was a key element in negotiations between HMSA and Hawaii Pacific Health over contracts for its hospital network, comprising Kapiolani, Pali Momi, Straub and Wilcox. After some high-profile acrimony, the talks on Oct. 27 produced an "agreement in principle" — details not disclosed — "to create a payment system that ties financial incentives to improved quality and delivery of care and positive patient outcomes," according to the formal statement.

That’s one example of health care providers here ramping up early for reform provisions that are set to go into effect down the road. By 2012, the Department of Health and Human Services will set quality standards, allowing providers who treat Medicare patients to receive incentive payments if they meet standards for quality of care — fewer patients readmitted to the hospital for the same illness, better outcomes overall.

This is how the federal government hopes to nudge American health care toward more effective treatments, less excessive use of services and, ultimately, lower costs.

Another nudge: Health care reform includes demonstration projects providing incentives for primary-care doctors as well as general surgeons practicing in areas with doctor shortages, starting next year. This is part of a push toward more coordinated care with the primary-care doctor at the center, tracking the patient’s care by other practitioners and specialists.

It’s what’s known in the industry now as the "patient-centered medical home," an approach that Kaiser Permanente Hawaii practitioners say fits comfortably within the nonprofit health-maintenance organizational model. Just two weeks ago, Kaiser executives announced that its Hawaii Kai clinic was the first to get federal recognition as a patient-centered medical home program.

Coordinated care works well at Kaiser, said Jason Hall, vice president and chief administrative officer, because there’s already an efficiently integrated electronic medical records system — something that’s now being replicated by other provider networks.

For example, Pressler said, Hawaii Pacific Health has rolled out its $58 million electronic system among all providers employed at its facilities and is beginning to expand it among private physicians in the community who are part of its network. Further, she said, the system has launched its "My Health Advantage" medical-home program, with 12,000 patients enrolled.

Adjusting to this way of care delivery is a big adjustment, she acknowledged.

"It requires more resources up front for a primary care office," Pressler added. "You have to be in communication and accessible to patients at all times. But we know from other models on the mainland, you can reduce costs over time." She cited as an example Washington state’s Group Health system, which reported savings in the first 12 months after launching a medical-home model.

Improving the efficiency and quality of care is one of the cornerstones of the health reform effort, but improving access is another. Hall said he’s watching to see how the new state health insurance exchanges will be created across the country. These will operate like online marketplaces that will make it easier for people who don’t get insurance through an employer to purchase it more affordably.

Hawaii is just starting down this road, said Gordon Ito, the state insurance commissioner, who is heading a newly formed task force to examine the concept and rules of operation.

"The task force we have established will study the issue of whether Hawaii should put up an exchange, and it so, what form the exchange should look like," Ito told the Star-Advertiser by e-mail. "Hopefully by September of next year, the task force will have a report and rec ommendation."

The group wants to make sure the exchange could work well with the state’s existing prepaid health-care law and whether those who now qualify for Medicaid could use it, Ito said.

Michael Stollar, HMSA’s vice president of marketing and communications, said he and other health executives in Hawaii were relieved to hear states would have flexibility in the creation of its exchange — the state could set its own standards to control which plans could be offered — and that the private system of insurance could be maintained.

"We’re sort of committed to have a private sector of health care," he said. "We want to see that thrive. More important: Is it going to achieve what we want it to achieve — better cost and access."