New legislation pushes back against reduced Medicaid plan options on neighbor islands

A new bill moving through the Hawaii State Legislature is pushing back against the Department of Human Services’ plan to reduce the number of Medicaid health plan options on neighbor islands.

DHS released its QUEST Integration Medicaid Managed Care RFP at the end of August, where the Department announced its intent to contract with four health plans to provide services for Medicaid and CHIP members in Hawaii. All four plans would serve members in Oahu, with just two operating on neighbor islands.

At the end of January, Med-QUEST announced HMSA and UnitedHealthcare as the winners of the statewide contract, and AlohaCare and Ohana Health Plan as the Oahu-only plans.

AlohaCare was quick to protest the decision and Med-QUEST has since announced that “all QI Contract Award implementation activities are suspended until further notice,” due to the protest.


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But now, DHS is facing pressure from the legislature. HB 668 HD1 calls DHS’s decision to limit the number of plans on neighbor islands discriminatory and unfair.

The Department of Human Services should focus on fair access to health care for Medicaid members statewide and that limiting health plans for Medicaid members on the neighbor islands to only two but providing a choice of four health plans to Medicaid members on Oahu is both explicitly and inherently unfair to neighbor island residents,” reads the bill.

The bill states that the reduction in plan options may worsen quality of care, reduce coverage, and increase the administrative burden on DHS.

By limiting the number of contracts on the neighbor islands to two, compared to four for Oahu residents, the request for proposals may result in a reduction of coverage and threaten the quality of health care options for Medicaid beneficiaries. Furthermore, reducing health plan options will also increase administrative costs for the Department of Human Services due to the need for outreach and reassignment of nearly fifty thousand Medicaid members to a new health plan,” the bill continues.

HB 668 HD1 would require DHS to receive approval from the legislature through a two-thirds vote in each chamber prior to executing a contract that would reduce the number of Medicaid plans available in any part of Hawaii.

The bill also requires an audit and a taskforce to review DHS’s RFI and RFP processes related to the Med-QUEST decision.  

The bill had a public hearing in the House Committee on Human Services & Homelessness and the Committee on Health on February 13.  

In testimony on the bill, the Department of Health asked the committee to “look deeper” into why Medicaid chose to contract with two plans for neighbor islands.

“On the neighbor islands, where health care resources are almost always more limited than on Oahu, having too many plans who are essentially competing for both members and a limited workforce creates a diffusion of effort to increase access and coordinate resources,” wrote the DOH.

The DOH notes that differences in each plan’s administrative processes, billing and reimbursement, and provider reporting make it difficult to coordinate limited resources.

An earlier proposed version of the bill would have prohibited DHS from reducing the number of plan options on neighbor islands compared to Oahu, and would have given all Medicaid-enrollees the option to choose from the four health plans awarded contracts.

Hana Health, West Hawaii Community Health Center, Lanai Community Health Center, Waimanalo Health Center, Molokai General Hospital, Kaiser Permanente Hawaii, Pediatric Therapies Hawaii, Green Wheel Food Hub, AlohaCare, Alii Health Center, No Shame Hawaii, Hoola Lahui Hawaii, and others offered testimony in support of this version.

DHS, the State Procurement Office, the Department of the Attorney General, HMSA, and UnitedHealthcare voiced opposition for either the entire proposed bill or parts of it.

The bill was then amended to its current version.

HB 668 passed out of the House Committees on Health and on Human Services & Homelessness with amendments on Thursday. It was then referred to the House Finance Committee on February 14.