The proposed arrangement between Hawaii Medical Service Association (state’s largest insurance provider) and Hawaiʻi Pacific Health (major health care system) is being framed by both organizations as a partnership under a new entity, One Health Hawaiʻi, and not a typical merger.
With One Health Hawaiʻi poised to control 70% of the state’s insurance market, some health policy observers are worried the decision-making power of One Health Hawaiʻi could limit patient choice and squeeze out independent providers over time.
Patient choice Rainier Dennis D. Bautista, MD, DABFM, FAAFP, independent physician practitioner and a part of a physicians group practice said, “The most pressing concern is patient choice. Even if the system remains nominally ‘open,’ patients will naturally gravitate toward the path of least resistance — and in an integrated system, that path leads inward. Over time, independent providers and community-based practices may find themselves at a structural disadvantage, not because anyone intended to squeeze them out, but because the incentives quietly point in that direction. In Hawaiʻi, where access is already fragile in many communities, that drift could cause real problems.”
Dr. Arcy Imasa, a practicing physician in a physician’s group, echoed a similar concern. “I am not confident that patient care, equity, and access are truly at the top of the mission for this merger. I worry that increased consolidation of payer and provider power could further limit patient choice, make it harder to get approvals for needed services, and ultimately reduce access to care especially for the most vulnerable patients I serve,” she said.
HMSA President Dr. Mark Mugiishi sought to alleviate some of these concerns, saying, “At HMSA, we know we pay one-third of our dollars to Queen’s, one-third of our dollars to independent providers, and one-third of our dollars to Hawai‘i Pacific Health,” he said.
“There is no universe in the world that where we can say, ‘Well, we’ll just take two-thirds of them and not have them anymore.’ We need all of them. We need 100% of the providers to come along. We want our members to be able to see the doctor of their choice, to go to the facility of their choice.”
HMSA plans will remain “open access” and keep a broad provider network; patients can typically pick any in-network primary care doctor/specialist and sometimes go out-of-network (usually at higher cost or with more limits).
However, healthcare observers say in a tightly integrated HMSA–HPH system, the easiest referrals, scheduling, records-sharing, and approvals tend to work best inside the integrated network. Even without an explicit rule banning outside doctors, that convenience can steer patients toward One Health Hawaiʻi doctors and facilities — effectively shrinking choice over time.
Critics of the merger also say even with a more cost-effective integrated system – less duplicated admin work, better coordination, tighter networks, shared data/records, etc – it doesn’t automatically mean lower premiums or copays. Savings can be kept within the system unless there are binding commitments, some experts say.
Queen’s Health Systems opposes the proposed partnership. Its President Jason Chang explained that if HPH becomes HMSA’s preferred network, it could push away those commercial patients. Queen’s system serves a disproportionate share of vulnerable residents, including patients on Medicaid and Medicare and those who are uninsured. If an HMSA–HPH combined entity steers more privately insured patients into its own network — for example through “preferred” benefits like lower cost-sharing or fewer authorization hurdles — Queen’s could be left with a higher share of Medicaid/Medicare/uninsured patients and less commercial revenue to support those services.
Chang elaborates, “If 5% of our commercial business were to shift, it’s approximately $50 million of impact,” he said. “Think about these core services and these critical services. Critical services are those safety net services like behavioral health care and trauma. If you can’t support some of those programs, I think hard decisions have to be made.”
HMA President Dr. Nadine Tenn Salle, said “increased consolidation pressures on independent and rural practices that may unintentionally be the straw that breaks the camel’s back for many private practices in our rural communities or neighbor islands, which will expand what are already existing health care deserts.”
Not a typical merger The consolidation is currently under review by the U.S. Department of Justice, the Hawaii Attorney General, the Insurance Commissioner and State Health Planning and Development Agency.
Regulators will be looking at financial information and do modeling to try to predict what the outcomes might be and whether there could be harm to patients or employers in the form of anti-competitive high prices or unfair practices such as steering patients to a preferred provider group or health system, said Jamie Godwin, a senior analyst on hospital costs at KFF, a nonpartisan health policy research, polling and news organization, State Senator Joy San Buenaventura, chair of the Senate committee on Health and Human Services, describes the proposed integration and the State Legislature’s current position. “The legislature is not in a position at this time to approve or disapprove of the vertical integration. It is not a merger because the entire company is not swallowed into another company like that of Hawaiian/Alaska and all other legal mergers. The integration was described to us as a consolidation of the administrative aspects–specifically billing between the provider HPHA (Straub-Kapiolani Children’s hospital, etc) and the insurer HMSA and other duplicative billing practices.
Aim is to reduce costs Mugiishi and HPH President Ray Vara point to double digit increases in the cost of providing healthcare in Hawaii, exacerbated by federal cuts to Medicaid and Affordable Care Act premiums. It’s under these conditions that changes need to be made, they say. Their plan would streamline care and cut administrative costs, potentially saving as much as $2 billion over the next decade. They also said they would reinvest any savings to tackle systemwide problems, including physician shortages and rising demand for behavioral health services.
“Without change, those pressures will only increase, so I would argue that danger to safety net procedures and provider mix and all of that are far more concerning in the current status quo than they would be in an integrated model,” Vara told lawmakers.
With premiums and out-of-pocket expenses rising, advocates argue that a shakeup that promises simpler approvals and less paperwork could benefit patients and physicians alike.
Sen. San Buenaventura is also concerned about rising healthcare costs. “The biggest consideration which no one seems to be talking about is the huge financial strain on the current health industry and the health insurance industry in particular. The combined effects of the ACA premium credit expiration and the federal passage of the One Big Beautiful Bill which has caused significant cutbacks on Medicaid is projected to cause a 6-8% disenrollment – which means a huge number of medically uninsured. The largest projected medically uninsured since the 1990’s when the state initiated a State Health Insurance Plan. The less subscribers in health plans, the more pressure it is to cut costs as premium increases are highly regulated.
“All 4 of the Medicaid insurance companies are under financial stress as a result: One is closing its doors, the other sought a grant from the state to stay afloat, a third – United healthcare – had cut costs to the point of having a desperate subscriber assassinating its CEO – and the 4th, HMSA is seeking to integrate with HPHA.. The benefit is that its 2 local companies who want to stay in Hawaii instead of a mainland company like Blue Cross/Blue shield merging with HMSA,” Sen. San Buenaventura said.
Lori, 54, last name withheld, Kapolei “My main concern is that an HMSA-HPH would have a huge market share of the local healthcare industry which could make healthcare more expensive for patients as we see in other industries with high concentration. Call it two independent subsidiaries under one entity, an integration, consolidation, or whatever, it still looks to be a monopolization.
“I agree that reform is necessary because healthcare cost is out of control. HMSA-HPH deserves credit for seeking ways to cut costs. But state and federal regulators and lawmakers must really examine this new model thoroughly and look after the best interests of patients first and foremost before giving their approval. Reduced competition can lead to higher costs and less services,” said Lori.
Sen. San Buenaventura said, “Concerns as to whether Queens or non-HPHA members will be treated differently are valid. I do not see rising costs as being valid because premiums are regulated. The fear is if this is not successful, will HMSA be merged into a mainland company and HPHA be merged into a mainland company like Banner (such merger was fought earlier when Hilo Medical Center was proposed at one time decades ago to be merged into Banner because of employee/staff issues) – and local insurers will be out; or will the State be required to step in to prop up HPHA or HMSA – Since the state has only HHSC as its model, which model has cost the state millions of tax payer dollars every year as the state hospitals operate at a loss; the state has not proven to be a financially successful model to prop up either company. Although we can regulate premiums, we cannot regulate all aspects of costs for the healthcare industry,” Sen. San Buenaventura said.
Still not sold on the consolidation/merger A few physicians opposed to the merger have chosen not to go on record. Some acknowledge rising healthcare costs, federal support shrinking and agree with the intention of structural reform. But they still have concerns.
“In my experience as a practicing physician in a physician’s group, I receive denials on services with some regularity: denials of visits, of patients’ essential medications, and of referrals and work-up tests that I believe are clinically necessary. After attending many meetings about the proposed HMSA-HPH merger, the details of the proposal remain vague to me, and I am still not convinced that this consolidation will resolve these problems or improve the care I am able to provide to my patients. From what has been presented, it seems that a key driver of the merger is that HMSA has not been meeting its target profit margins in recent years, and this merger is the strategy that has been put forward to address that,” Dr. Imasa said.
“Based on my direct clinical experience with denials and the information shared so far about the merger, I do not support the proposed HMSA-HPH merger. I am concerned that, rather than solving existing problems, it may worsen them in terms of access, timeliness, and affordability of care for my patients,” she adds.
Dr. Bautista said, “The need for change is real. But on the evidence available, I am not yet in a position to support this arrangement — and the historical record gives significant cause for concern.
There is also the risk of administrative harm — consequences that arise when care decisions are made far from the bedside and applied at scale. A single misaligned policy, in a system covering hundreds of thousands of people becomes a public health crisis.
“The organizations behind One Health Hawaiʻi should provide transparent commitments and enforceable structures that would make support possible,” he said. “On its face, the goals sound worthwhile. But good intentions are not the same as reliable outcomes — and the track record here warrants caution before extending the benefit of the doubt.”
Dr. Bautista said, “start with prior authorization. The administrative burden on physicians is real and well-documented. Research from the University of Hawaiʻi John A. Burns School of Medicine found that physicians and their staff spend roughly 20 hours per week on prior authorizations alone — time taken directly from patients. But during last year’s legislative session, when the Legislature considered prior authorization reform, HMSA testified that proposed changes were ‘premature’ — pointing to approaching federal regulations while defending prior authorization as something that ‘help[s] to keep health care premiums affordable’ and supports ‘the long-term sustainability of Hawaii’s overall healthcare system.’ That testimony was only a year ago. This partnership does not erase the institutional instincts behind it.”
Dr. Bautista adds, “The second concern is structural. If prior authorization requirements are relaxed for patients within One Health Hawaiʻi while remaining entrenched for those outside it, the system will effectively operate on two different standards — one for insiders, one for everyone else. Independent providers and their patients would bear a disproportionate administrative burden, not as a matter of policy, but as a consequence of market design. That is not reform. That is reorganizing who carries the weight.”
Cost savings are another flash point. While efficiency gains are possible in theory, consolidation in healthcare markets nationally has produced mixed results, with savings often staying within health systems instead of flowing to consumers. Bautista said HMSA’s CEO has acknowledged that costs may not fall outright, but that the rate of increase could slow—an outcome that may still leave many families struggling in the near term.
“The details of implementation, oversight, and accountability have not been resolved. “One Health Hawaiʻi has described an opportunity to do something genuinely transformative — to lift independent practices rather than marginalize them, to extend administrative relief beyond its own network, and to measure success by outcomes across all of Hawaiʻi. Whether those commitments will be made binding, and who will enforce them, remains unclear to me,” said Dr. Bautista.
There must be safeguards in place before approval Critics of the proposed consolidation say they want to see specific, measurable, enforceable safeguards to hold One Health Hawaii to its promises. There are concerns over pricing power with little accountability, reduced competition leading to fewer choices for patients, potential for “cherry-picking patients, risk of worsening physician shortage, and more.
Advocates of One Health Hawaiʻi have cast the partnership as a chance to reshape the state’s health care system, saying it could strengthen community providers and focus on statewide outcomes rather than performance inside a single network. But critics say questions remain about how it would be implemented, what independent oversight would exist and who would enforce any commitments, leaving uncertainty over whether the integration would expand access across Hawaiʻi or mainly benefit patients within the new system.
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