Court shuts down dental insurer

Impact on Kaua’i unknown as state investigates

The “red flag” went up, and state Insurance regulators responded.

The red flag was a rash of unpaid claims and corresponding complaints to the state Department of Commerce and Consumer Affairs insurance division about Hawai’i Dental Health Plan (HDHP), a pre-paid dental plan.

There were over 50 complaints, and the company didn’t respond to any of them, said Wayne Metcalf, state insurance commissioner.

And as a result of the company also not answering to the state’s requests for information and action, a court is now ordering HDHP to respond to the complaints, make its books available to state investigators, and stop collecting premiums or selling new dental plans in Hawai’i until further notice from the court.

Metcalf said state investigators are in California, trying to figure out why HDHP has not been paying claims or responding to complaints.

He said the company likely has money trouble.

“Unpaid claims are a red flag that often indicates that an insurer is experiencing financial difficulties,” Metcalf said.

To protect HDHP’s policyholders and dentists, the state must examine the company’s financial condition, he said.

“By the end of this week, we should have a pretty good idea of what their financial condition’s like, how many policyholders they have, what the total number of complaints are that they’ve received that we may not be aware of,” and other pertinent information, Metcalf said.

An HDHP spokesman could not be reached for comment yesterday.

The state investigators are in HDHP’s home office in California to try to determine how many Hawai’i policyholders the company has, the number of unpaid claims and the reasons they’re unsettled. The answers won’t be known until later this week or early next week, Metcalf said.

Metcalf said the number of unpaid claims in cases like these is usually much higher than the number of complaints filed with the state.

Compounding problems for fledgling health-plan companies in Hawai’i is the fact that Hawai’i Dental Service (HDS) and Hawai’i Medical Service Association (HMSA) hold the lion’s share of dental and medical insurance coverages, respectively, in a small-market state that with around 1 million residents. It isn’t an easy market to break into, he said.

Small companies find” that it’s much more difficult to succeed in the environment that exists in Hawai’i,” he said.

“Hawai’i is a small market, and when you have well-entrenched players in a small market, other would-be competitors are more likely to make an investment where the potential market share justifies the size of the investment necessary to go toe-to-toe with a large competitor. That’s true with health as well as dental,” he said. “Other would-be competitors are going to think twice before they decide to go toe-to-toe with a well-entrenched player in a small market.

“It doesn’t make it impossible, but it sort of limits the desirability of this particular market to major competitors,” Metcalf continued.

“From the point of view of the division, as a matter of public policy, we’d like to encourage competition and choice. Given the realities of the situation, we certainly want to ensure that consumers are being protected.”

Few complaints against HMSA or HDS are received by the state, he observed.

“It’s an anomaly,” he said of insurance companies in financial trouble in Hawai’i. “Generally speaking, insurance is doing very well in virtually all lines except in the area of healthcare plans.

“We’ve seen a number of problems in this area, some owing to economic misfortune, and others involving irregularities of one kind or another among the insurers.”

In some cases, the companies getting into trouble have tried to build financial bases of prepaid premiums before paying out claims.

For the consumer, if a prepaid health plan and its premiums sound too good to be true, it likely is, Metcalf said.

Staff Writer Paul C. Curtis can be reached at mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224).