Hawaii Doctors and Policy Experts Raise Alarms Over Proposed HMSA-Hawaii Pacific Health Merger
Why It Matters
Hawaii’s proposed merger between HMSA and Hawaii Pacific Health is drawing scrutiny from physicians and health policy advocates who argue the deal will worsen the state’s already severe doctor shortage and fail to lower costs for residents. The debate cuts to the heart of how Hawaii structures its healthcare system — and who bears the burden when that system falls short.
With insurance premiums having doubled in recent years and primary care access increasingly strained, particularly on the neighbor islands, the stakes for Hawaii families and taxpayers are significant.
What Happened
The proposed merger between HMSA and Hawaii Pacific Health has been promoted by its supporters as a cost-reduction strategy centered on expanding “value-based” payment models. Under this approach, doctors and hospitals receive up-front payments per member or per episode of care and are held accountable for both cost and quality outcomes.
Critics, including recently retired Honolulu internist and psychiatrist Dr. Stephen Kemble, argue that this rationale is fundamentally flawed. Kemble, a longtime health policy advocate and member of Physicians for a National Health Program, contends that Hawaii does not suffer from excessive “volume” of medical care — the core problem that value-based payment is designed to solve. Instead, he says, the state faces a severe shortage of doctors and inadequate access to care.
Kemble notes that HMSA began aggressively implementing value-based payment with primary care capitation starting around 2011, following passage of the Affordable Care Act. He argues this shift has constrained physician pay, increased administrative burdens, and made primary care practice financially unviable — particularly on the neighbor islands.
By the Numbers
Third-lowest commercial premiums nationally: Prior to the ACA and the shift to value-based payment, Hawaii ranked third-lowest in the country for commercial insurance premiums while offering broad benefits and low patient cost-sharing.
Lowest per-capita Medicare spending: In 2009, Hawaii had the lowest per-capita Medicare spending in the nation, along with strong physician participation in both Medicaid and Medicare.
Doubled premiums: Since HMSA began implementing value-based payment models, health insurance premiums in the state have approximately doubled, according to Kemble’s analysis.
Potential 15% savings: Kemble estimates that switching to a simpler, standardized fee-for-service payment system could reduce total healthcare costs by approximately 15%, accounting for administrative savings for both payers and providers.
15 years of failed results: Neither Medicare nor HMSA has successfully delivered lower costs through value-based payment models over roughly 15 years of implementation, according to Kemble.
Zoom Out
Hawaii’s healthcare consolidation debate mirrors a national trend of hospital systems and insurers pursuing large-scale mergers under the banner of cost control and coordinated care. Across the country, critics of value-based payment models have raised similar concerns — that these systems impose heavy administrative costs on physician practices, create incentives to avoid high-risk patients, and have not delivered the promised savings.
Hawaii’s situation is further complicated by its unique geography and cost-of-living pressures. The neighbor islands face disproportionate physician shortages, and any policy that further squeezes physician take-home pay risks accelerating the exodus of doctors from those communities. As Hawaii lawmakers continue to weigh major policy decisions affecting residents — from housing bills critics say benefit investors over local families to criminal code overhauls reducing drug penalties — the healthcare merger represents another pressure point on the state’s ability to serve its citizens effectively.
What’s Next
Kemble and other critics are calling on Hawaii’s Legislature and successive state administrations to reassess their long-standing reliance on HMSA as the primary architect of healthcare solutions in the state. They argue that meaningful reform requires listening to practicing physicians — particularly in primary care and psychiatry, where shortages are most acute — rather than deferring to insurance company models.
The proposed path forward, as outlined by Kemble, involves returning to an improved fee-for-service payment structure that compensates physicians for documentation, care coordination, and time spent on non-face-to-face patient activities, while eliminating the administrative overhead that has made practice in Hawaii increasingly untenable.
Whether Hawaii regulators will approve the merger, impose conditions, or reject it outright remains to be seen. For the state’s dwindling pool of primary care physicians — especially those serving rural and neighbor island communities — the outcome could prove decisive.