AlohaCare v. Ito

***FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER***

Electronically Filed
Supreme Court
SCAP-30276
25-JAN-2012
07:53 AM

IN THE SUPREME COURT OF THE STATE OF HAWAI#I

---o0o---

ALOHACARE, Petitioner/Appellant-Appellant,

vs.

GORDON I. ITO, INSURANCE COMMISSIONER, STATE OF HAWAI#I
DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS,
Respondent/Appellee-Appellee,

and

UNITED HEALTHCARE INSURANCE COMPANY dba EVERCARE;
WELLCARE HEALTH INSURANCE OF ARIZONA, INC., dba
OHANA HEALTH PLAN AND AFFILIATES; and
DEPARTMENT OF HUMAN SERVICES, STATE OF HAWAI#I,
Respondents/Intervenors-Appellees-Appellees.

NO. SCAP-30276

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(ICA NO. 30276; CIV NO. 09-1-1514)

JANUARY 25, 2012

RECKTENWALD, C.J., DUFFY, J., CIRCUIT JUDGE
NISHIMURA, ASSIGNED IN PLACE OF NAKAYAMA, J., RECUSED,
AND CIRCUIT JUDGE LEE, ASSIGNED BY REASON OF VACANCY,
WITH ACOBA, J., CONCURRING AND DISSENTING SEPARATELY

OPINION OF THE COURT BY RECKTENWALD, C.J.

AlohaCare, a health maintenance organization, submitted

a proposal to the Department of Human Services to bid for a Quest
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Expanded Access contract to provide healthcare services for aged,

blind, or disabled participants in the State’s Medicaid program.

AlohaCare was not one of the successful bidders. The Department

of Human Services instead awarded Quest Expanded Access contracts

to United HealthCare Insurance Company, dba Evercare (United),

and WellCare Health Insurance of Arizona, Inc., dba Ohana Health

Plan (Ohana).

AlohaCare petitioned the Insurance Commissioner of the

Department of Commerce and Consumer Affairs for declaratory

relief that accident and health insurers like United and Ohana

were not properly licensed to carry out the activities called for

under the Quest Expanded Access contracts and that a health

maintenance organization license issued pursuant to the Health

Maintenance Organization Act, Hawai#i Revised Statutes chapter

432D, quoted infra, was instead required. The Insurance

Commissioner concluded that a health maintenance organization

license was not required to offer the Quest Expanded Access

managed care product because the services required under the

contracts were not services that can be provided only by a health

maintenance organization. On appeal to the circuit court,

AlohaCare argued that the Insurance Commissioner’s Decision was

wrong, and, in effect, nullified the Health Maintenance

Organization Act. The circuit court upheld the Decision of the

Insurance Commissioner. On appeal, AlohaCare challenges the

circuit court’s judgment in favor of United, Ohana, the

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Department of Human Services and the Insurance Commissioner.

As set forth below, we hold that AlohaCare has standing

to appeal the Insurance Commissioner’s Decision. We further hold

that both accident and health insurers and health maintenance

organizations are authorized to offer the closed panel or limited

physician group model of care required by the Quest Expanded

Access contracts. We conclude that this holding does not nullify

the Health Maintenance Organization Act. Accordingly, we affirm

the circuit court’s judgment.

I. BACKGROUND

The following facts are taken from the agency record on

appeal, the circuit court record on appeal, including transcripts

of the proceedings before the circuit court, and the Insurance

Commissioner’s unchallenged findings of fact.

A. The QExA Request for Proposals

On October 10, 2007, the Department of Human Services

(DHS) issued Request for Proposals (RFP) No. RFP-MQD-2008-006

“QUEST Expanded Access (QExA) Managed Care Plans to Cover

Eligible Individuals Who Are Aged, Blind, or Disabled.” The RFP

provided, in part:
This [RFP] solicits participation by qualified and
properly licensed health plans to provide required
service coordination, outreach, improved access, and
enhanced quality healthcare services through a managed
care system for the State’s Medicaid aged, blind or
disabled (ABD) members who are currently not covered
through a managed care system across the continuum of
care. The services shall be provided in a managed
care environment with reimbursement to qualifying
health plans based on fully capitated rates for each
island.

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(Emphasis added).

The RFP defined “managed care” as “[a] comprehensive

approach to the provision of healthcare that combines clinical

services and administrative procedures within an integrated,

coordinated system to provide timely access to primary care and

other necessary services in a cost-effective manner.” The RFP

further provided that “QExA is a managed care program and, as

such, all acute, pharmacy and long-term care services to members

shall be provided in a managed care system.”

Regarding licensure, the RFP provided that:
The health plan shall be properly licensed as a health
plan in the State of Hawaii (See [Hawai#i Revised
Statutes (HRS) chapters 431, and 432, and 432D]). The
health plan need not be licensed as a federally
qualified HMO, but shall meet the requirements of
Section 1903(m) of the Social Security Act [(42 U.S.C.
§ 1396(m))] and the requirements specified by the DHS.

(Emphasis added).

The RFP’s definition of “Health Maintenance

Organization (HMO)” referred to its definition of “Managed Care

Organization,” which stated:
An entity that has, or is seeking to qualify for, a
comprehensive risk contract under the final rule of
the [federal Balanced Budget Act of 1997] and that is:
(1) a federally qualified HMO that meets the
requirements under Section 1310(d) of the Public
Health Service Act; (2) any public or private entity
that meets the advance directives requirements and
meets the following conditions: (a) makes the service
it provides to its Medicaid members as accessible (in
terms of timeliness, amount, duration, and scope) as
those services that are available to other Medicaid
enrollees within the area served by the entity and (b)
meets the solvency standards of 42 CFR Section 438.116
and HRS § 432-D-8 [sic].

The RFP also defined the term “Participating” as

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[w]hen referring to a provider, a healthcare provider
who is employed by or who has entered into a contract
with the health plan to provide covered services to
members. When referring to a facility, a facility
which is owned and operated by, or which has entered
into a contract with the health plan for the provision
of covered services to members.

The RFP required that successful bidders “develop and

maintain a provider network that is sufficient to ensure that all

medically necessary covered services are accessible and

available” to plan members. To that end, the RFP set forth the

minimum size of the plan’s provider network, including the number

of primary care physicians, specialists and hospitals required on

each island. Under the QExA RFP, if the health plan is unable to

provide medically necessary covered services to a member within

its network or on the island of residence, then the health plan

must provide the services out-of-network or transport the member

to another island to access the services.

No party disputes that the QExA RFP contemplated the

provision of a “closed panel” plan, “meaning that care must be

obtained from the contracted network of providers if it is

available within the network.”

B. AlohaCare, United, and Ohana’s eligibility to offer the
product required by the QExA RFP

AlohaCare alleges, and the other parties do not

dispute, that AlohaCare is licensed as a health maintenance

organization under HRS chapter 432D.1 United and Ohana are

1
HRS § 432D-1 defines a “[h]ealth maintenance organization” as
“any person that undertakes to provide or arrange for the delivery of basic
(continued...)

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licensed as accident and health insurers under HRS chapter

431:10A, quoted infra. It is undisputed that United and Ohana

are not licensed as health maintenance organizations under HRS

chapter 432D.

On October 30, 2007, prior to submitting its

application in response to the RFP, United inquired by letter to

the Insurance Division as to whether United would be able to

offer the closed panel managed care product called for under the

RFP pursuant to its accident and health insurer license. The

Health Branch Administrator at the Insurance Division responded

to United by letter on November 1, 2007, stating that the plain

text of HRS § 431:10A-205(b) would not allow United to offer a

“closed panel or limited physician group HMO model of care.”2

United replied by letter on November 12, 2007 providing

additional information and requesting a clarification of the

Health Branch Administrator’s letter. On November 13, 2007,

after conferring with the Insurance Commissioner, the Insurance

1
(...continued)
health care services to enrollees on a prepaid basis, except for enrollee
responsibility for copayments, deductibles, or both.” (Emphasis added).

2
HRS § 431:10A-205(b) (2005) provides:

Any group or blanket disability policy may provide
that all or any portion of any indemnities provided by
the policy on account of hospital, nursing, medical,
or surgical services may, at the insurer’s option, be
paid directly to the hospital or person rendering such
services, but the policy may not require that the
service be rendered by a particular hospital or
person. Payment so made shall discharge the insurer’s
obligation with respect to the amount so paid.

(Emphasis added).

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Division reversed its interpretation of HRS § 431:10A-205(b),

stating that “our interpretation is that the referenced statute

does not prohibit offering a closed panel HMO product for

Medicaid-Quest under the accident and health license.” (Emphasis

in original). On November 16, 2007, the Insurance Division

communicated by letter to United that its “[r]esponse in the

November 13, 2007 letter is based upon the information and/or

documentation provided by [United] and is informational in

nature.” On April 24, 2008, the Health Branch Administrator

provided a similar opinion to Ohana.3

On February 1, 2008, DHS awarded the QExA contracts to

United and Ohana. That same day, DHS sent AlohaCare a letter

informing AlohaCare that it was not chosen by DHS as one of the

health plans selected to provide the services in the QExA RFP.

The letter informed AlohaCare that the two health plans chosen

for the contract were Ohana and United. The letter also informed

3
The April 24, 2008 letter stated, in pertinent part:

Insurance Commissioner J.P. Schmidt has taken the
position that an accident and health or sickness
insurer under HRS article 431:10A or a mutual benefit
society under HRS chapter 432 can write an HMO
product. Therefore, it is our position that [Ohana]
could write QUEST HMO product business under its
existing license. . . .

The matter is not free from doubt, however, due to
language contained in HRS Section 431:10A-205(b) and
HRS section 432D-2(a). We think there are good
arguments that the language in these sections does not
prohibit the writing of an HMO product under another
type of license. That said, you should undertake your
own evaluation of the issues and risks.

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AlohaCare that DHS was
returning your business proposal(s) which [were]
unopened. Unfortunately, your proposal did not meet
the technical requirements necessary to forward the
business proposal on for review by our actuaries.
Enclosed are a copy of your proposal evaluation
worksheet for your technical proposal and a copy of
the Consensus Score Sheets used in the technical
proposal review.

On February 4, 2008, the contracts were executed.4

C. Proceedings before the Insurance Commissioner

On October 28, 2008, AlohaCare filed its Petition for

Hearing and Declaratory Relief with the Insurance Commissioner of

the DCCA. AlohaCare asserted that it was both an “interested

party” and an “aggrieved person.”5 The Petition named Jeffrey P.

4
AlohaCare subsequently challenged the contracts in a variety of
ways. On February 22, 2008, AlohaCare filed a protest of the QExA contract
awards with the DHS Director pursuant to HRS § 103F-501(b) (Supp. 2008),
arguing, inter alia, that United and Ohana were ineligible for the QExA
contracts on various grounds. This protest did not raise improper licensure
as a ground. The DHS Director upheld the procurement award. AlohaCare moved
for reconsideration pursuant to HRS § 103F-502(c) (Supp. 2008) and the Chief
Procurement Officer upheld the procurement award. AlohaCare appealed to the
Department of Commerce and Consumer Affairs (DCCA) for administrative review,
and the DCCA dismissed the appeal for lack of jurisdiction. AlohaCare
appealed the dismissal to the circuit court. The circuit court upheld the
dismissal, and the ICA affirmed. AlohaCare v. Dep’t of Human Servs., No.
29630, 2011 WL 3250430 (Haw. App. July 28, 2011). AlohaCare subsequently
filed an application for a writ of certiorari, which this court accepted on
December 12, 2011.
Additionally, on May 8, 2008, AlohaCare filed suit in the United
States District Court for the District of Hawai#i (district court) alleging
violations of federal law and the United States Constitution. The district
court dismissed the action, AlohaCare v. Dep’t of Human Servs., 567 F. Supp.
2d 1238, 1265 (D. Haw. 2008), and the Ninth Circuit Court of Appeals upheld
the dismissal, AlohaCare v. Dep’t of Human Servs., 572 F.3d 740, 747 (9th Cir.
2009).

5
“[A]ny interested person may petition [any authority of the DCCA]
for a declaratory ruling as to the applicability of any statutory provision or
of any rule or order adopted by the authority to a factual situation.”
Hawai#i Administrative Rules (HAR) § 16-201-48 (1990) (emphasis added); see
also HRS § 91-8 (1993).
“[A]ny aggrieved person may petition the authority or hearings
officer for a hearing to resolve a contested matter, including license
denials, within the authority’s jurisdiction.” HAR § 16-201-26 (1990)
(emphasis added).
(continued...)

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Schmidt, Insurance Commissioner, as the sole respondent.

AlohaCare sought, inter alia, an “official determination” that

Ohana “is not licensed pursuant to the HMO Act and is therefore

not properly licensed to perform the QExA [c]ontract.”6

In AlohaCare’s memorandum accompanying its Petition,

AlohaCare argued, inter alia, “that the work to be conducted

under the [QExA] contract is covered only by Hawaii’s [HMO]

statute and therefore can legally be performed only by entities

that hold Hawaii HMO licenses.” In support of that proposition,

AlohaCare argued that the QExA RFP involved the performance of

“HMO activities” and that “any entity performing HMO activities

as described in the HMO Act must have an HMO license.”7

(Emphasis in original).

5
(...continued)
HAR § 16-201-2 (1990) defines “aggrieved person,” as used in HAR
chapter 201, as:

any person who shall be adversely affected by an
action, decision, order or rule of the authority or
who shall be adversely affected by the action or
conduct of any person if the action or conduct is
within the authority’s jurisdiction to regulate, and
shall also include any person who requires the
authority’s permission to engage in or refrain from
engaging in an activity or conduct which is subject to
regulation by the authority.

6
AlohaCare did not make any explicit allegations concerning United
in either the Petition or AlohaCare’s memorandum accompanying the Petition.
However, AlohaCare’s contention that an HMO license was required under Hawai#i
law to perform the QExA contract would apply equally to Ohana and United,
which are both licensed as accident and health insurers under HRS chapter
431:10A.

7
Although AlohaCare’s Petition raised additional arguments
regarding the validity of the contracts, the Insurance Commissioner did not
address these arguments, and they are not at issue in this appeal.
Accordingly, these arguments are not discussed further.

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On December 8, 2008, DHS, which had not yet intervened

in the proceeding,8 filed an Amended Motion to Dismiss the

Petition in which United and Ohana joined. DHS argued that DHS

“does not believe that its contracts with Ohana and [United] are

contracts relating to the business of insurance[,]” and

therefore, DHS argued, the Insurance Commissioner “does not

possess the power” to provide the relief AlohaCare requests

because it would exceed the statutory authority of the Insurance

Commissioner. The Insurance Commissioner denied the motion.

United subsequently filed its memorandum in opposition

to the Petition, in which it contended that federal law did not

require Medicaid managed care organizations to be licensed as

HMOs. United further argued that Hawai#i law does not require an

HMO license to provide the QExA product because United’s

“provision of the QExA product is not precluded by HRS § 431:10A-

205(b)” and “the QExA program is ‘managed care,’ not an ‘HMO

activity.’” (Formatting altered).

Ohana filed a memorandum in opposition to the Petition

in which it argued, inter alia, that Hawai#i law permits Ohana to

provide the services under the QExA contract because the HMO Act

does not require Ohana to possess an HMO license to perform such

services. Accordingly, Ohana argued that it was permitted under

8
On January 7, 2009, the Insurance Commissioner entered orders
granting motions to intervene filed by DHS, United and Ohana. On January 9,
2009, the Insurance Commissioner entered an amended order granting United’s
motion to intervene that did not substantively affect the prior order.

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its accident and health insurance license to provide the services

under the QExA contract. Ohana also argued that the Insurance

Commissioner lacked jurisdiction to review the QExA contract

because the contract executed between DHS and Ohana was not a

contract of insurance.

On March 18, 2009, the Petition was heard and argued

before hearings officer Thomas M. Pico, Jr.9 On April 27, 2009,

the hearings officer issued his Recommended Decision. On June 2,

2009, the Insurance Commissioner issued his Decision, relying on

the hearings officer’s Recommended Decision. The Decision

contained Findings of Fact (FOFs) that discussed the terms of the

QExA contracts and recounted the RFP process. The Decision also

contained the following Conclusions of Law (COLs):
1. Petitioner is an “interested party” and so had
standing to file this Petition for declaratory relief
pursuant to [HAR] § 16-201-48.

2. Petitioner is also an “aggrieved person” within the
meaning of HAR § 16-201-2, because Petitioner will be
“adversely affected” by a decision of the Commissioner
with respect to the type of license required to offer
the QExA plan since a finding by the Commissioner that
[United] and/or [Ohana] are properly licensed to
perform the services required under the QExA contracts
in issue . . . is effectively a finding that those
entities can compete against Petitioner for an award
of the QExA contract in issue.

3. HAR § 16-201-50(1) [10] requires that a petition for

9
The agency record on appeal does not contain a transcript of the
March 18, 2009 hearing.

10
HAR § 16-201-50(1) (1990) provides:

The authority, as expeditiously as possible after the
filing of a petition for declaratory relief, shall:

(1) Deny the petition where:
(continued...)

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declaratory relief be denied where “[t]he matter is
not within the jurisdiction of the authority” and
whereA “[t]he petition is based on hypothetical or
speculative facts of either liability or damages.”
Cf. Citizens Against Reckless Development v. Zoning
Bd. of Appeals, 114 Hawaii 184, 194-95, 159 P.3d 143,
153-54 (2007) (explaining that an administrative
agency has discretion to deny declaratory relief on a
ground enumerated in an agency rule). The Petition
raised issues of interpretation of the Hawaii
Insurance Code that are within the jurisdiction of the
Hawaii Insurance Commissioner to interpret.

4. The QExA contracts entered into by DHS with [Ohana]
and [United] are not contracts of insurance.
HRS § 431:1-201(a) provides that “[i]nsurance is a
contract whereby one undertakes to indemnify another
or pay a specified amount upon determinable
contingencies.” Accordingly, determining the validity
of the QExA contracts is not the business of insurance
and is outside the jurisdiction of the Commissioner.
Except for relief in the form of a declaration that
neither [United] nor [Ohana] are properly licensed to
perform the services required under the QExA contract,
all other claims for relief based upon allegations of
the Petition regarding the validity of the contracts
entered into by DHS with [Ohana] and [United] are
denied as beyond the jurisdiction of the authority.
HAR § 16-201-50(l)(C).

5. The Petition also relies upon speculative and
hypothetical allegations regarding actions which may
(or may not) be taken by the Centers for Medicare &
Medicaid Services (“CMS”). Relief based upon those
allegations is denied pursuant to HAR

10
(...continued)
(A) The petition fails to conform substantially
with section 16-201-48 or is not supported by a
memorandum of law in support of the petition;

(B) The petition is frivolous;

(C) The matter is not within the jurisdiction of
the authority;

(D) The petition is based on hypothetical or
speculative facts of either liability or
damages;

(E) There is a genuine controversy of material
fact, the resolution of which is necessary
before any order or declaratory relief may
issue; or

(F) There is any other reason justifying denial
of the petition.

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§ 16-201-50(1)(D). Cf. Bremner v. City & County of
Honolulu, 96 Hawaii 134, 144,28 P.3d 350, 360 (App.
2001) (speculative nature of concerns regarding how
city would administer ordinance and effect of
ordinance led court to conclude that matter was not
ripe for adjudication).

6. The issue to be decided in this matter is whether a
license issued pursuant to the Health Maintenance
Organization Act, HRS Chapter 432D (“the HMO Act”) is
required to perform the QExA contract. If so, neither
[United] nor [Ohana] are properly licensed to perform
the services required under the QExA contracts.

7. The determination of the issue to be decided in
this matter involves interpretation of HRS
§§ 431:1-201, 431:1-205 and HRS Chapters 432D, 432E,
and 431:l0A. All of these statutes are within the
jurisdiction of the Insurance Commissioner.

8. Insurance is “a contract whereby one party
undertakes to indemnify another or pay a specified
amount upon determinable contingencies[.”] HRS
§ 431:1-201. Under this general definition, there are
several classes of insurance, one of which is accident
and health and sickness insurance. Accident and
health insurance, as defined in HRS § 431:1-205, is
“insurance against bodily injury, disablement, or
death by accident,A or accidental means, or the
expense thereof; against disablement or expense
resulting from sickness; and every insurance
appertaining thereto, including health and medical
insurance.” [Ohana] and [United] are each licensed as
risk-bearing entities to provide accident and health
or sickness insurance pursuant to HRS Chapter 431:10A
but not Chapter 432D, the HMO Act.

9. The QExA plan is also governed by federal law
relating to the Medicaid program. The Social Security
Act § 1903(m) and federal regulation at
42 C.F.R § 438.116(b)(l) expressly state that a
Medicaid managed care organization (“MCO”) may be
either a federally qualified HMO or “be licensed or
certified by the State as a risk bearing entity.”

10. Hawaii law does not support a conclusion that the
QExA plan must be provided by an HMO because the QExA
program does not require the entity to provide
services that can only be provided by an HMO under
Hawaii law.

11. HRS § 432E-1 defines a “managed care plan” to mean
“any plan, regardless of form, offered or administered
by any person or entity, including but not limited to
an insurer governed by chapter 431, a mutual benefit
society governed by chapter 432, a health maintenance
organization governed by chapter 432D, a preferred
provider organization, a point of service
organization, a health insurance issuer, a fiscal
intermediary, a payor, a prepaid health care plan, and

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any other mixed model, that provides for the financing
or delivery of health care services or benefits to
enrollees through:

(l) Arrangements with selected providers or
provider networks to furnish health care
services or benefits; and

(2) Financial incentives for enrollees to use
participating providers and procedures provided
by a plan;

provided, that for the purposes of this chapter,
an employee benefit plan shall not be deemed a
managed care plan with respect to any provision
of this chapter or to any requirement or rule
imposed or permitted by this chapter which is
superseded or preempted by federal law.”

12. HRS § 432D-1 defines a “health maintenance
organization” to mean “any person that undertakes to
provide or arrange for the delivery of basic health
care services to enrollees on a prepaid basis, except
for enrollee responsibility for copayments,
deductibles, or both.”

13. HRS § 432D-2(a) provides that “[n]o person shall
establish or operate a health maintenance organization
in this State without obtaining a certificate of
authority under this chapter.” There is no definition
of what it means to “operate a health maintenance
organization” in Chapter 432D HRS. Nor is there any
definition of “HMO activities” or “HMO product.”

14. The term “operate a health maintenance
organization” as used in HRS § 432D-2(a) is thus
interpreted to mean engaging in activities which only
an HMO is authorized to do. If a risk bearing entity
licensed by the Insurance Division under a statute
other than HRS Chapter 432D is authorized to engage in
the activities it has undertaken by the statute
pursuant to which it is licensed, it is not by virtue
of its engaging in permitted activities, “operat[ing]
a health maintenance organization” within the
prohibition of HRS § 432D-2(a).

15. The definition of a “managed care plan” in
HRS § 432E-l encompasses all types of plans that
provide for the financing or delivery of health care
services that meet the criteria of that section,
including HMOs licensed under HRS Chapter 432D and
risk bearing entities licensed under HRS Chapter
431:10A.

16. There is substantial overlap between the powers
granted to health maintenance organizations under HRS
Chapter 432D and entities licensed under HRS Chapter
431:10A. The key distinction is that HMOs are the
only licensed entities that may furnish health care
directly to their members through facilities that it

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owns or operates and utilizing the services of
physicians employed by the HMO and require that
coverage is only provided when a member either
utilizes its facilities and providers or is
specifically authorized by its providers to utilize
outside facilities or providers. An entity licensed
as an HMO is not limited to furnishing care directly
to its members through its owned facilities and
employed providers, but it is authorized to do so.
That authorization distinguishes entities licensed as
HMOs from other risk-bearing entities licensed by the
Insurance Commissioner in the State of Hawaii.
Conversely, risk bearing entities licensed under HRS
Chapter 431:10A are prohibited from requiring that
“service[s] be rendered by a particular hospital or
person.” HRS § 431:10A-205(b). For AlohaCare to
prevail in this matter, the law would have to define
an HMO in terms of having a closed panel. The law
simply does not do so.

17. HRS Chapter 393, the Hawai#i Prepaid Health Care
Act, confirms that a distinguishing feature of an HMO
is its ability to furnish care directly to its
members. In defining what constitutes a “prepaid
health care plan,” HRS § 393-3 distinguishes plans
which “furnish” health care from plans which “defray
or reimburse, in whole or in part, the expenses of”
health care. The prevalent plan in Hawaii of the type
which “furnishes” health care is the HMO offered by
Kaiser Foundation Health Plan, Inc.

18. The rules of statutory interpretation avoiding
implied amendment or repeal further support the
conclusion that, so long as a risk bearing entity
licensed by the Insurance Division under a statute
other than HRS Chapter 432D is authorized to engage in
the activities it has undertaken by the statute
pursuant to which it is licensed, it is not by
implication prohibited from doing so by HRS
§ 432D-2(a).

19. Had the QExA program been designed solely for
HMOs, the enrollees would have been limited to health
care services furnished directly to QExA enrollees
through facilities owned or operated by the HMO, and
utilizing the services of physicians employed by the
HMO.

20. Both [United] and [Ohana] are licensed as risk-
bearing entities pursuant to HRS Chapter 431:10A.
There is no prohibition under Hawaii law which
prevents an insurer licensed under HRS Chapter 431:10A
from offering the closed panel product required by the
QExA RFP.

21. HRS § 431:10A-205(b) states that “[a]ny group or
blanket disability policy may provide that all or any
portion of any indemnities provided by the policy on
account of hospital, nursing, medical, or surgical
services may, at the insurer’s option, be paid

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directly to the hospital or person rendering such
services, but the policy may not require that the
service be rendered by a particular hospital or
person. Payment so made shall discharge the insurer’s
obligation with respect to the amount so paid.”
([Emphasis] added).

22. Insurers licensed pursuant to HRS Chapter 431:10A
are not authorized to “require that the [covered
health care] service be rendered by a particular
hospital or person.” The plain meaning of the statute
prohibits a restriction that limits insureds to
receiving care from “a particular,” or a single,
designated hospital or person.

23. Insurers licensed under HRS Chapter 431:10A are
not prohibited from offering a closed panel or limited
physician group model of care by HRS § 431:10A-205(b)
as long as there is a choice of providers and
hospitals for its members.

24. There is nothing in the legislative history of HRS
§ 431:10A-205(b) to support an interpretation of the
provision as precluding the offering of a closed panel
product such as that required by the QExA program.
That provision has remained virtually unchanged since
it was enacted in 1955, while Hawaii was still a
territory.

25. The statutory language cannot have been intended
to prohibit closed panel or limited physician group
models of care, as those managed care models have only
developed in recent times. Moreover, if the
Legislature had intended to prohibit insurers from
requiring that services be obtained from a defined
network of providers, the statutory language would
have used the plural form instead of the singular
(“particular hospitals or persons”).

26. The language used in 1955 was taken from a model
law proposed by the National Association of Insurance
Commissioners. It is statutory language of
differentiation, by which policy designs that would
permit the insurer to direct the destiny of the cure
through the specific designation of the person or
facilities are prohibited. The phrase “may not
require that the service be rendered by a particular
hospital or person” distinguishes accident and
sickness policy standards from the standards of the
Workmens’ Compensation Laws common at that time that
expressly permitted an employer to select for the
treatment of his employee, specific physicians,
hospitals and even specific nurses. (See, Insurance
Com’rs v. Mutual Medical Ins., Inc., 251 Ind. 296, 241
N.E.2d 56 (1968)).

27. HRS § 431:10A-205(b) was intended to prevent
insurance companies from requiring that their insureds
receive their care from a single hospital or physician
under contract with the insurer. Based on the plain

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language and the legislative history of HRS § 431:10A-
205(b), there is no reason to conclude the statute was
intended to prohibit insurers from offering a closed
panel product with the choice of providers required by
the QExA.

28. The fact that the QExA RFP provided for
reimbursement to qualifying health plans at fully
capitated rates did not require that those QExA plans
be licensed as HMOs in the State of Hawaii.

29. Petitioner had both the burden of proof and the
burden of persuasion. Petitioner has failed to carry
its burden of proof and persuasion regarding its
allegations. There is no legal basis for concluding
that an HMO license is required for [United] and
[Ohana] to offer the QExA plan.

(Some brackets in original and some added) (record citations

omitted) (some formatting altered) (emphasis in original).

Based on the Decision’s FOFs and COLs, the Insurance

Commissioner ordered that:
1. The Amended Motion to Dismiss filed by DHS on
December 8, 2008, is denied on the grounds that the
Commissioner has jurisdiction; and,

2. An HMO license is not required to offer the QExA
managed care plan. The QExA managed care plan may be
offered by any risk-bearing entity licensed by the
Insurance Division, [DCCA], State of Hawaii; and

3. There is no legal or factual grounds for relief
under the Petition, and thus all relief requested in
the Petition is denied.

D. Appeal to the circuit court

On July 2, 2009, AlohaCare timely appealed the

Insurance Commissioner’s Decision to the circuit court pursuant

to HRS § 91-14.11 AlohaCare argued that it was an “aggrieved

11
HRS § 91-14 (2004) provides, in pertinent part:

(a) Any person aggrieved by a final decision and order
in a contested case or by a preliminary ruling of the
nature that deferral of review pending entry of a
subsequent final decision would deprive appellant of
adequate relief is entitled to judicial review thereof
(continued...)

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person” as that term is used in HAR § 16-201-2 because it was

“adversely affected by the Insurance Commissioner’s decision.”12

AlohaCare’s arguments on the merits centered on the contention

that the HMO Act requires an entity to have an HMO license in

order to conduct “HMO activities[.]”

United13 argued, inter alia, that AlohaCare’s

interpretation of the HMO Act, which was passed in 1995,

improperly nullified a portion of the definition of a “managed

care plan” in the Patients’ Bill of Rights and Responsibilities

Act (hereinafter Patients’ Bill of Rights Act), which was passed

in 1998.14 The Insurance Commissioner argued, inter alia, that

11
(...continued)
under this chapter; but nothing in this section shall
be deemed to prevent resort to other means of review,
redress, relief, or trial de novo, including the right
of trial by jury, provided by law. Notwithstanding any
other provision of this chapter to the contrary, for
the purposes of this section, the term “person
aggrieved” shall include an agency that is a party to
a contested case proceeding before that agency or
another agency.

(Emphasis added).

12
This argument was made in AlohaCare’s Statement of the Case.
AlohaCare’s opening brief to the circuit court did not address its standing to
appeal the Insurance Commissioner’s Decision.

13
Ohana and DHS joined United’s Answering Brief to the circuit
court.

14
The Patients’ Bill of Rights Act defines a “[m]anaged care plan”
as:

“Managed care plan” means any plan, regardless of
form, offered or administered by any person or entity,
including but not limited to an insurer governed by
chapter 431, a mutual benefit society governed by
chapter 432, a health maintenance organization
governed by chapter 432D, a preferred provider
organization, a point of service organization, a
health insurance issuer, a fiscal intermediary, a
(continued...)

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AlohaCare was not a “person aggrieved” under HRS § 91-14(a) and

lacked standing to appeal because “the purported interest of

AlohaCare in having a competitive advantage from its HMO license

is not a legally protected interest sufficient to confer standing

. . . under HRS chapter 91.”

On July 28, 2009, DHS filed a motion to dismiss for

lack of jurisdiction arguing, inter alia, that AlohaCare did not

have standing to appeal pursuant to HRS § 91-14 because it was

not an “aggrieved person,” and HRS chapter 432D does not confer a

private right of action that AlohaCare could enforce. In

response, AlohaCare argued that it had standing to appeal as an

aggrieved person.15

On September 16, 2009, the circuit court held a hearing

on DHS’s motion. At the outset of the hearing, AlohaCare

14
(...continued)
payor, a prepaid health care plan, and any other mixed
model, that provides for the financing or delivery of
health care services or benefits to enrollees through:

(1) Arrangements with selected providers or
provider networks to furnish health care
services or benefits; and

(2) Financial incentives for enrollees to use
participating providers and procedures provided
by a plan;

provided, that for the purposes of this chapter, an
employee benefit plan shall not be deemed a managed
care plan with respect to any provision of this
chapter or to any requirement or rule imposed or
permitted by this chapter which is superseded or
preempted by federal law.

HRS § 432E-1 (2000) (emphasis added).

15
AlohaCare did not argue that it had standing to appeal as an
“interested person” pursuant HRS § 91-8.

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clarified that, although AlohaCare’s petition for declaratory

relief was brought pursuant to HRS § 91-8, its appeal of that

ruling was brought pursuant to HRS § 91-14. United argued that:
In the proceeding before the Insurance
Commissioner, the petition for declaratory relief, it
was sufficient for AlohaCare to be an interested
party, and it could proceed as an interested party.
In that proceeding, there’s a different standard.
Aggrieved is a different level of involvement, a
different level of impact. And so that was the
argument that we made below, that certainly they’re an
interested party, the Commissioner can go ahead and
decide the issue because it’s an important issue, but
that AlohaCare was not aggrieved because it just
simply failed to meet the definition of an aggrieved
party. And under [HRS §] 91-14, I believe a party has
to be aggrieved in order to have a right to appeal.
That was the distinction.

(Emphasis added).

United further argued that:
only that subset of interested persons that are
actually aggrieved . . . is going to be allowed access
to the courts in an appeal. So it’s not as if no one
that files a declaratory relief petition can seek
appellate review . . . . The way it works together is
that you can’t be merely interested. You must also be
aggrieved in order to take up the resources of the
Judiciary in an appellate setting.

DHS agreed with United, and argued that, “under [HRS §]

91-8, an interested party can bring a declaratory relief action

or a declaratory judgment action. But in order to [appeal to

circuit court], you have to be an aggrieved person, not an

interested person or interested party.”

Although AlohaCare argued that declaratory rulings

under HRS § 91-8 were appealable to the circuit court under HRS

§ 91-14 pursuant to Lingle v. Hawaii Government Employees

Association, 107 Hawai#i 178, 111 P.3d 587 (2005), it did not

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argue that it could appeal the Insurance Commission’s Decision

without being aggrieved. Nevertheless, AlohaCare argued that the

Insurance Commissioner’s determination that AlohaCare had “two

bases for standing below,” i.e., as an interested party and as an

aggrieved party, was not clearly erroneous.

AlohaCare further argued that it was aggrieved because

it suffered an actual or threatened injury, which was traceable

to the Insurance Commissioner’s Decision, and that a favorable

decision would provide relief for its injury. With regard to its

actual or threatened injury, AlohaCare argued that the Insurance

Commissioner’s Decision would “impact AlohaCare’s business in the

future[,]” and that AlohaCare faced burdens in excess of those

faced by its competitors because it was required to maintain its

HMO license. AlohaCare conceded that the Insurance

Commissioner’s Decision could not declare United’s and Ohana’s

QExA contracts null and void, but that
[t]he effect of what the Insurance Commissioner would
decide would have an impact on DHS and their
requirement that the entity be properly licensed. In
other words, their RFP says you have to be properly
licensed. If [the circuit court] or the Insurance
Commissioner said they’re not properly licensed, that
ends their contract. But . . . this ruling goes
beyond simply that particular contract. It affects
the whole operation of AlohaCare in the future.

The circuit court took the matter under advisement,

noting that, “[i]f there is a showing of aggrieved party as that

is understood under [HRS § 91-14], then I will have

jurisdiction[.]” On September 29, 2009, the circuit court

entered a minute order, stating its intent to deny the motion and

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noting that “the court is persuaded on the basis of the rationale

in [Lingle] that the court has jurisdiction over this matter[.]”

On October 22, 2009, the circuit court filed an order denying the

motion without providing further reasoning.16

On December 23, 2009, the circuit court heard oral

argument on the merits of AlohaCare’s appeal and orally affirmed

the Decision of the Insurance Commissioner, on the ground that

the Decision was entitled to deference and “properly interpreted”

the statutes “to require reconciliation of the overlapping

structure[.]” The circuit court’s decision and order affirming

the Insurance Commissioner’s June 2, 2009 Decision, Findings of

Fact, Conclusions of Law and Order, was filed on December 28,

2009. The circuit court’s judgment was also filed on

December 28, 2009.

E. Appeal to the ICA

AlohaCare timely filed a Notice of Appeal to the ICA on

January 5, 2010 and the appeal was fully briefed in the ICA.

AlohaCare’s application for transfer of the appeal to this court

was accepted on October 12, 2010.

1. AlohaCare’s opening brief

In its opening brief, AlohaCare argues that “[t]he HMO

Act requires an entity that meets that Act’s description of an

16
Subsequently, during argument on the merits of the appeal, the
circuit court explained that “[AlohaCare] is aggrieved in a sense that the
context in which the matter arises is one that impacts potential future
competition.”

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HMO to obtain a certificate of authority (license) from the

Insurance Commissioner prior to engaging in an HMO Act covered

activity.” In support of this argument, AlohaCare contends that

the “legislature that passed the HMO Act did so based on an

understanding that the ‘field’ of activities to which the Act

applied (and for which it required a license) was not then

subject to State insurance regulation” and that the April 24,

2008 letter from the Insurance Division to United “was the exact

opposite of the understanding of the legislature that passed the

HMO Act.”

Next, AlohaCare contends that the Insurance

Commissioner’s Decision reaches inconsistent conclusions. For

example, AlohaCare notes that “the [D]ecision holds that although

[Ohana] and United are licensed or certified as risk-bearing

entities, the certification or license both hold does not extend

to their conduct under their QExA contracts.”17 As such, “they

were and are performing their QExA contracts under no licensing

authority.”

Finally, AlohaCare argues that the Decision ignored

canons of statutory construction when it considered the overlap

between HRS chapter 431:10A and HRS chapter 432D. Specifically,

17
This statement somewhat misstates the Insurance Commissioner’s
conclusion. As noted supra, the Insurance Commissioner held in COL 4 that
“[t]he QExA contracts entered into by DHS with [Ohana] and [United] are not
contracts of insurance.” However, as discussed infra, United and Ohana’s
conduct under their QExA contracts with QExA members does involve the
provision of insurance.

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AlohaCare argues that the plain language of the HMO Act is clear

and unambiguous and the Insurance Commissioner should not have

departed from the clear and unambiguous language. AlohaCare

further argues that even if the terms in HRS chapter 432D could

be construed as ambiguous, “the proper course of action is to

look to a dictionary to determine the ordinary meaning.”

Accordingly, AlohaCare argues that the Decision “is contrary to

[the] unambiguous language of the HMO Act and contravenes the

legislature’s stated intent of regulating HMOs in Hawaii.”

Finally, AlohaCare argues the HMO Act should be given full effect

because the HMO Act “‘covers the whole subject which it relates,’

all the way down to telling indemnity insurance licensees what to

do to be HMOs.”

2. United’s arguments

United18 contends that it and Ohana are properly

licensed to provide the QExA program. United makes three points

in support of this contention. First, United states that the

QExA program expressly called for a “managed care program,” not a

managed care program provided by an HMO, and that the services

required under the QExA contract are not “HMO activity” – “a term

made up by AlohaCare that appears nowhere in the HMO Act or its

legislative history.” Second, United contends that “AlohaCare’s

interpretation of the HMO Act would require that all health plan

18
Ohana joined United’s Answering Brief.

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coverage required to be provided by employers under the Hawai#i

Prepaid Health Care Act, HRS [c]hapter 393, be provided by a

licensed HMO.” Third, United argues that “AlohaCare’s

interpretation of the HMO Act would improperly nullify a later

enacted statute, HRS [c]hapter 432E, whereas the Commissioner’s

interpretation successfully reconciled these two statutes and

gave meaning to both.”

United also argues that the “Commissioner’s Decision is

supported by established rules of statutory construction” and

that the language of the HMO Act is not clear and unambiguous.

United also contends that using a dictionary to define terms in

HRS chapter 432D is not helpful, since “the issue [is] whether it

[is] possible to construe [HRS chapters] 432D, 432E and 431:10A

in such a way so as to give all of the statutes reasonable

meaning and to avoid implied amendment or repeal.” Finally,

United argues that the Insurance Commissioner’s Decision is

entitled to deference.

3. Insurance Commissioner’s arguments

The Insurance Commissioner puts forth five arguments in

its answering brief. First, the Insurance Commissioner argues

that this court lacks jurisdiction to consider the appeal because

AlohaCare is not a “person aggrieved” under HRS § 91-14(a).

Second, the Insurance Commissioner argues that AlohaCare fails to

show that “its substantial rights were prejudiced[,]” and

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therefore reversal is not warranted under HRS § 91-14(g).19

Instead, the Insurance Commissioner argues that “[n]othing about

any license or other interest of AlohaCare was at issue in the

declaratory relief proceedings[,]” since the Decision “was that

third party entities [Ohana and United] could perform the

services specified in the DHS QExA RFP.”

Third, the Insurance Commissioner contends that where,

as in this case, the Petition is based on hypothetical or

speculative facts, it is within the Commissioner’s discretion to

deny the Petition pursuant to HAR § 16–201–50. The Insurance

Commissioner argues that because COL 5, which found that certain

allegations in the Petition relied “upon speculative and

hypothetical allegations regarding actions which may (or may not)

19
HRS § 91-14(g) provides:

Upon review of the record the court may affirm the
decision of the agency or remand the case with
instructions for further proceedings; or it may
reverse or modify the decision and order if the
substantial rights of the petitioners may have been
prejudiced because the administrative findings,
conclusions, decisions, or orders are:

(1) In violation of constitutional or statutory
provisions; or

(2) In excess of the statutory authority or
jurisdiction of the agency; or

(3) Made upon unlawful procedure; or

(4) Affected by other error of law; or

(5) Clearly erroneous in view of the reliable,
probative, and substantial evidence on the whole
record; or

(6) Arbitrary, or capricious, or characterized
by abuse of discretion or clearly unwarranted
exercise of discretion.

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be taken by the Centers for Medicare & Medicaid Services[,]” was

unchallenged, the Petition was correctly denied.

Next, the Insurance Commissioner argues that because

AlohaCare did not challenge the FOFs and COLs that support the

Commissioner’s Decision, AlohaCare’s “points on appeal” are in

contravention of Hawaii Rules of Appellate Procedure (HRAP)

28(b)(4)(C).20 Finally, the Insurance Commissioner argues that

his interpretation and application of the statutes is entitled to

deference.

4. DHS’s arguments

In its answering brief, DHS primarily argues that

AlohaCare does not have standing to appeal because it is not an

“aggrieved person.”21 DHS also contends that AlohaCare does not

20
HRAP 28(b)(4) provides that opening briefs shall contain:

[a] concise statement of the points of error set forth
in separately numbered paragraphs. Each point shall
state: (i) the alleged error committed by the court or
agency; (ii) where in the record the alleged error
occurred; and (iii) where in the record the alleged
error was objected to or the manner in which the
alleged error was brought to the attention of the
court or agency. Where applicable, each point shall
also include the following:

. . .

(C) when the point involves a finding or conclusion of
the court or agency, either a quotation of the finding
or conclusion urged as error or reference to appended
findings and conclusions[.]

21
DHS also argues, without citation to case law or the record, that
“the decision of the Chief Procurement Officer is now res judicata, and
AlohaCare is not entitled to relitigate this issue.” (Emphasis in original).
Because DHS does not present a discernible argument regarding res judicata, we
do not address res judicata further. See, e.g., State v. Mark, 123 Hawai#i
205, 247, 231 P.3d 478, 520 (2010) (stating that if a party fails to
(continued...)

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have standing because HRS chapter 432D does not create a private

right of action.22 Third, DHS argues that AlohaCare does not have

standing because, it is not a party or third party beneficiary of

the QExA contract that may, under Hawai#i case law, statute, rule,

or regulation, seek a declaration that the contract is “‘null and

void’ due to alleged ‘illegality.’”

DHS next argues that AlohaCare waived its argument that

United’s and Ohana’s lack of HMO licenses disqualified them as

successful bidders for the QExA RFP because AlohaCare did not

raise this issue in its initial protest of the award to the DHS

Director in February 2008, which was subsequently upheld by the

Chief Procurement Officer.23 Finally, DHS argues, without

citation to case law or the record, that the Insurance

Commissioner should not have conducted a hearing on AlohaCare’s

Petition because the Insurance Commissioner “should have

21
(...continued)
explicitly explain an argument, an appellate court need not address matters as
to which the party has failed to present a discernible argument and the
argument may be disregarded).

22
Specifically, DHS asserts that no private right of action exists
because: 1) AlohaCare is not one of the class for whose especial benefit HRS
chapter 432D was enacted; 2) no legislative history evidencing an intent to
create the remedy sought by AlohaCare exists; and 3) AlohaCare’s remedy of
requesting this court to “enforce” the plain meaning of HRS § 432D-2(a) and
“decide” that an HMO license is required to conduct the QExA program is
inconsistent with the underlying purposes the legislature contemplated when
enacting HRS chapter 432D.
AlohaCare did not respond to DHS’ argument in its reply brief to
the Insurance Commissioner and DHS. As discussed infra in note 31, DHS’s
argument is without merit.

23
This argument relates to AlohaCare’s challenge to the procurement
process, discussed supra in note 4. Notably, DHS’ current argument contrasts
with its position before the hearings officer, to whom DHS asserted that
AlohaCare “previously raised the State of Hawaii licensing issue with the
State Procurement Officer.”

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recognized [AlohaCare’s] true purpose” of attempting to “overturn

the decision of the Procurement Officer, and evade the exclusive

remedy set by the state legislature[]” such that any appellate

review of that decision is improper.

5. AlohaCare’s reply briefs

In its reply to DHS’s and the Insurance Commissioner’s

answering briefs,24 AlohaCare argues that it has standing and that

the circuit court had jurisdiction over its appeal because it was

aggrieved “as that term is used in HRS § 91-14(a),” and because

this court held in Lingle that “rulings disposing of declaratory

actions have the same status as other agency orders” and are

therefore appealable pursuant to HRS § 91-14. In conclusion,

AlohaCare asserts that “[t]his [c]ourt has jurisdiction to hear

AlohaCare’s appeal of the [c]ircuit [c]ourt decision because

AlohaCare is an aggrieved party, and, as such, it is afforded the

right to appeal by HRS §§ 91-8 and 91-14.”

II. Standards of Review

A. Standing

“Whether the circuit court has jurisdiction to hear the

plaintiffs’ complaint presents a question of law, reviewable de

novo. A plaintiff without standing is not entitled to invoke a

court’s jurisdiction. Thus, the issue of standing is reviewed de

novo on appeal.” Hawaii Med. Ass’n v. Hawaii Med. Serv. Ass’n,

24
AlohaCare filed a separate reply to United’s answering brief, in
which it argued that the HMO Act “comprehensively and exclusively regulates”
entities that “do what licensed HMOs are authorized by that Act . . . to do.”

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Inc., 113 Hawai#i 77, 90, 148 P.3d 1179, 1192 (2006) (citing Mottl

v. Miyahira, 95 Hawai#i 381, 388, 23 P.3d 716, 723 (2001))

(formatting altered).

B. Secondary judicial review of an administrative decision

“On secondary judicial review of an administrative

decision, Hawaii appellate courts apply the same standard of

review as that applied upon primary review by the circuit court.”

Kaiser Found. Health Plan, Inc. v. Dep’t of Labor & Indus.

Relations, 70 Haw. 72, 80, 762 P.2d 796, 800-01 (1988). For

administrative appeals, the applicable standard of review is set

forth in HRS § 91-14(g) (2004), which provides:
Upon review of the record the court may affirm the
decision of the agency or remand the case with
instructions for further proceedings; or it may
reverse or modify the decision and order if the
substantial rights of the petitioners may have been
prejudiced because the administrative findings,
conclusions, decisions, or orders are:

(1) In violation of constitutional or statutory
provisions; or

(2) In excess of the statutory authority or
jurisdiction of the agency; or

(3) Made upon unlawful procedure; or

(4) Affected by other error of law; or

(5) Clearly erroneous in view of the reliable,
probative, and substantial evidence on the whole
record; or

(6) Arbitrary, capricious, or characterized by abuse
of discretion or clearly unwarranted exercise of
discretion.

Pursuant to HRS § 91-14(g)(5),
administrative findings of fact are reviewed under the
clearly erroneous standard, which requires [the
appellate] court to sustain its findings unless the
court is left with a firm and definite conviction that
a mistake has been made. Administrative conclusions

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of law, however, are reviewed under the de novo
standard inasmuch as they are not binding on an
appellate court. Where both mixed questions of fact
and law are presented, deference will be given to the
agency’s expertise and experience in the particular
field and the court should not substitute its own
judgment for that of the agency. To be granted
deference, however, the agency’s decision must be
consistent with the legislative purpose.

Peroutka v. Cronin, 117 Hawai#i 323, 326, 179 P.3d 1050, 1053

(2008) (citations and internal quotation marks omitted).

C. Statutory interpretation

“Questions of statutory interpretation are questions of

law reviewable de novo.” Gump v. Wal-Mart Stores, 93 Hawai#i 417,

420, 5 P.3d 407, 410 (2000) (formatting altered).

III. Discussion

As a threshold matter, we hold that AlohaCare has

standing to appeal the Insurance Commissioner’s Decision.

Regarding the merits, we hold that both accident and health

insurers and HMOs are authorized pursuant to their licensing

schemes to offer the closed panel or limited physician group

model of care as required by the QExA contracts. We conclude

that this holding does not nullify the HMO Act.25 Accordingly, we

25
The parties disagree whether the Insurance Commissioner’s Decision
is entitled to deference. “Where an agency is statutorily responsible for
carrying out the mandate of a statute which contains broad or ambiguous
language, that agency’s interpretation and application of the statute is
generally accorded judicial deference on appellate review.” Haole v. State,
111 Hawai#i 144, 150, 140 P.3d 377, 383 (2006) (quoting Vail v. Emps. Ret.
Sys., 75 Haw. 42, 59, 856 P.2d 1227, 1237 (1993)). However, “an
interpretation by an agency of a statute it administers is not entitled to
deference if the interpretation is plainly erroneous and inconsistent with
both the letter and intent of the statutory mandate.” Id. (citing Kahana
Sunset Owners v. County of Maui, 86 Hawai#i 66, 72, 947 P.2d 378, 384 (1997)).
As set forth below, the Insurance Commissioner’s analysis is correct.
Accordingly, we need not further address whether deference should be accorded.

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affirm the judgment of the circuit court.

A. AlohaCare is a “person aggrieved” and has standing to appeal

AlohaCare brought its petition for declaratory relief

as an “interested person” pursuant to HRS § 91-8. HRS § 91-8

allows “[a]ny interested person [to] petition an agency for a

declaratory order as to the applicability of any statutory

provision or of any rule or order of the agency.” However, HRS

§ 91-8 does not address the procedures or requirements for the

appeal of an agency’s declaratory order. Instead, those

procedures and requirements are set forth in HRS § 91-14.26 See

HRS § 91-14; Lingle, 107 Hawai#i at 186, 111 P.3d at 595 (noting

that “orders disposing of petitions for declaratory rulings under

HRS § 91-8 are appealable to the circuit court pursuant to HRS

§ 91-14”).

HRS § 91-14(a) provides that “[a]ny person aggrieved by

a final decision and order in a contested case . . . is entitled

to judicial review thereof under [chapter 91.]” (Emphasis

added). This court has recognized that judicial review of orders

disposing of petitions for declaratory rulings pursuant to HRS §

91-8 are also subject to judicial review, although those orders

may not result from contested cases. Lingle, 107 Hawai#i at 185,

111 P.3d at 594. Put another way, an order disposing of a

26
We therefore respectfully disagree with the dissent’s assertion
that AlohaCare may appeal the Insurance Commissioner’s decision “under HRS
§ 91-8.” See dissenting opinion at 24-25, 41, 45. Moreover, we note that
AlohaCare indicated in the circuit court that its appeal was brought pursuant
to HRS § 91-14.

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petition for a declaratory ruling brought pursuant to HRS § 91-8

fulfills the requirement in HRS § 91-14(a) that the decision or

order at issue be entered “in a contested case.”

In the instant case, it is undisputed that the

Insurance Commissioner’s Decision did not result from a

“contested case.” See HRS § 91-1(5) (defining a contested case

as “a proceeding in which the legal rights, duties, or privileges

of specific parties are required by law to be determined after an

opportunity for agency hearing”). Nevertheless, the Insurance

Commissioner’s Decision was appealable pursuant to HRS § 91-14,

because it was an order disposing of a petition brought pursuant

to HRS § 91-8. Lingle, 107 Hawai#i at 185, 111 P.3d at 594. In

addition, as set forth below, Alohacare is a “person aggrieved”

by the Insurance Commissioner’s Decision, because it faced

increased competition from allegedly improperly licensed

competitors in the QExA contract process, and the Decision held

that AlohaCare’s competitors were in fact properly licensed to

offer the services required under those contracts. See HRS § 91-

14(a). Accordingly, AlohaCare has standing to appeal the

Insurance Commissioner’s Decision.

1. AlohaCare is a “person aggrieved” because it suffered
an injury-in-fact

HRS chapter 91 does not define the term “person

aggrieved,” but this court has noted that “‘person aggrieved’

appears to be essentially synonymous with someone who has

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suffered ‘injury in fact.’” E & J Lounge Operating Co. v. Liquor

Comm’n of the City and Cnty. of Honolulu, 118 Hawai#i 320, 345

n.35, 189 P.3d 432, 457 n.35 (2008) (citation and some quotation

marks omitted). Whether a party has suffered an “injury in fact”

is determined under a three-part test: “(1) whether the person

‘has suffered an actual or threatened injury as a result of the

[agency’s decision],’ (2) whether ‘the injury is fairly traceable

to the [agency’s decision],’ and (3) whether ‘a favorable

decision would likely provide relief for [the person’s] injury.’”

Id. (some brackets added and some in original) (quoting Keahole

Def. Coal., Inc. v. Bd. of Land & Natural Res., 110 Hawai#i 419,

434, 134 P.3d 585, 600 (2006)).

In its reply brief, AlohaCare argues that it suffered

an “actual or threatened injury” on two grounds. First,

AlohaCare agrees with the Insurance Commissioner’s determination

that AlohaCare was aggrieved because “a finding by the

Commissioner that [United] and/or [Ohana] are properly licensed

to perform the services required under the QExA contracts in

issue . . . is effectively a finding that those entities can

compete against [AlohaCare] for an award of the QExA contract in

issue.” Second, AlohaCare contends that its HMO license has been

“taken away” or “substantially diminished” by the Insurance

Commissioner’s Decision.27 AlohaCare argues that this effect on

27
AlohaCare’s arguments that the Insurance Commissioner’s Decision
“strips [it] of its license” and that its license was “taken away” are not
(continued...)

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its license “is not limited to QExA, but applies to any activity

which involves arranging for the delivery of health care

services.”

AlohaCare’s argument concerning the effect of the

Decision on its other activities is not supported by the record.

Neither the record on appeal nor the administrative record on

appeal contain any documents, exhibits, or testimony that would

establish AlohaCare’s possible injury relating to other

activities. See United Pub. Workers, Local 646, AFSCME, AFL-CIO

v. Brown, 80 Hawai#i 376, 380-81; 910 P.2d 147, 151-52 (App. 1996)

(holding that a union did not have standing because its asserted

possible injuries of future “charges” or “civil suits against the

Union” that could affect its financial resources were not

demonstrated in the record through documents, exhibits or

testimony). Accordingly, this injury is not sufficient to

establish that AlohaCare is a “person aggrieved[.]”

However, as noted by the Insurance Commissioner,

AlohaCare was “adversely affected” by the Decision “with respect

to the type of license required to offer the QExA plan” because

the conclusion that United and Ohana are properly licensed to

perform the services required under the QExA contracts “is

27
(...continued)
supported by the record. The Decision did not make a determination regarding
AlohaCare’s license, revoke AlohaCare’s license, or limit AlohaCare’s ability
to operate an HMO. AlohaCare may still participate in the business it has
chosen by “provid[ing] or arrang[ing] for the delivery of basic health care
services to enrollees on a prepaid basis,” as set forth in HRS § 432D-1.

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effectively a finding that those entities can compete against

[AlohaCare] for an award of the QExA contract in issue.”

Accordingly, AlohaCare sustained a concrete injury because it

faced increased competition from allegedly improperly licensed

competitors in the QExA contract process, and the Decision held

that AlohaCare’s competitors were in fact properly licensed to

offer the services required under those contracts.28

In addition, AlohaCare’s injury of increased

competition by allegedly improperly licensed competitors for the

award of the QExA contract is fairly traceable to the Decision,

see E & J Lounge, 118 Hawai#i at 346 n.35, 189 P.3d at 458 n.35,

because the Decision held that United and Ohana were properly

licensed to perform the services required under the QExA

contracts.29

28
The Insurance Commissioner expressly noted that “determining the
validity of the QExA contracts is not the business of insurance and is outside
the jurisdiction of the Commissioner.” Accordingly, the Insurance
Commissioner denied AlohaCare’s claims for relief that were “based upon
allegations . . . regarding the validity of the contracts entered into by DHS
with [Ohana] and [United.]”
We agree with the dissent that this conclusion was proper, and
that the Insurance Commissioner did not have jurisdiction to declare the
contracts null and void or issue a declaration as to whether DHS complied with
the provisions of the RFP. See, e.g., dissenting opinion at 29-31. Instead,
COLs 7 and 8 noted the proper basis for the Insurance Commissioner’s
jurisdiction, i.e., that the issue to be decided was whether an HMO license is
required to perform the QExA contract and that “this matter involves
interpretation of HRS §§ 431:1-201, 431:1-205, and HRS [c]hapters 432D, 432E
and 431:10A.” See HAR 16-201-2 (1990) (defining “declaratory relief” as “the
authority’s declaration as to the applicability or nonapplicability with
respect to a factual situation of any rule or order of the authority or of a
statute which the authority is required to administer or enforce”) (emphasis
added); HRS § 431:2-201(b) (2005) (providing that the Insurance Commissioner
“shall enforce” the Insurance Code, HRS chapter 431).

29
DHS contends that AlohaCare’s injury is not traceable to the
Decision because it was DHS, rather than the Insurance Commissioner, who
selected United’s and Ohana’s bids over AlohaCare’s bid. DHS further contends
(continued...)

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Finally, a favorable decision would provide AlohaCare

relief from its injury. See E & J Lounge, 118 Hawai#i at 345

n.35, 189 P.3d at 457 n.35. If this court were to find that an

HMO license is necessary to offer the services required under the

QExA contracts, AlohaCare would be relieved of competition from

United and Ohana in bidding for such contracts, unless United and

Ohana obtained an HMO license.30

Based on the foregoing, AlohaCare is a “person

aggrieved” that has standing to appeal pursuant to HRS § 91-

14(a).31

29
(...continued)
that even if the Decision had been adverse to United and Ohana, AlohaCare
would not have been awarded the contract because AlohaCare’s bid proposal was
rejected for not meeting the technical requirements of the RFP. However,
DHS’s arguments rest on the assumption that AlohaCare’s injury was not being
awarded a QExA contract. Instead, as noted above, AlohaCare’s injury was
facing increased competition by allegedly improperly licensed competitors in
the QExA RFP process. This injury is fairly traceable to the Decision.

30
Although the Insurance Commissioner was without jurisdiction to
void the contracts, it is possible that such a decision might eventually
result in the voiding of the contracts by DHS. In that regard, DHS argues
that “AlohaCare would not attempt to bid on any new RFP (if it was issued)”
because AlohaCare challenged the procurement process and therefore “has
already taken the position that QExA is itself ‘illegal[.]’” However, DHS’s
contention regarding AlohaCare’s unwillingness to bid on a subsequent RFP is
without support in the record.

31
We further conclude that DHS’s argument that HRS chapter 432D does
not provide for a private cause of action is without merit. AlohaCare had a
right to bring its petition for declaratory relief pursuant to HRS § 91-8 and
HAR § 16-201-50 as an “interested person.” Because AlohaCare was aggrieved by
the Decision, AlohaCare had the right to appeal the Decision through the
procedures set forth in HRS § 91-14(a).

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2. We need not resolve whether an “interested person” may
appeal an order entered on a petition brought pursuant
to HRS § 91-8

Because we conclude that AlohaCare is a “person

aggrieved,” we need not resolve whether, as asserted by the

dissent, AlohaCare had standing to appeal the Decision as an

“interested person.” See Richard v. Metcalf, 82 Hawai#i 249, 254,

921 P.2d 169, 174 (1996) (listing, “in order from the broadest to

the narrowest category, the respective classes of potential

litigants under HRS chapters 91 and 92” as “any person,” “any

interested person,” and “persons aggrieved . . . in a contested

case”) (citations and footnote omitted). Moreover, we note that

Alohacare has not argued that it has standing to appeal the

Insurance Commissioner’s Decision as an “interested person.”32

Finally, we note that the cases cited by the dissent, see

dissenting opinion at 24-25, do not resolve, either expressly or

impliedly, whether an “interested person” may appeal a

declaratory order that did not result from a contested case.

For example, in Lingle, this court addressed whether

the circuit court had jurisdiction, pursuant to HRS § 91-14, to

review an agency’s refusal to issue a declaratory order. 107

Hawai#i at 184-86, 111 P.3d at 593-95. The petitioners argued

32
AlohaCare argued in the circuit court that, pursuant to Lingle, a
HRS § 91-8 order disposing of a declaratory petition is appealable pursuant to
HRS § 91-14. However, AlohaCare further argued that it was “aggrieved” by the
Insurance Commissioner’s Decision, and it did not argue that it could appeal
without being aggrieved. AlohaCare continues to argue on appeal that it has
standing because it is aggrieved by the Decision.

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that the circuit court did not have jurisdiction because the

order “did not result from a contested case.” Id. at 183, 111

P.3d at 592. This court noted that it had “consistently

recognized that circuit courts have jurisdiction, pursuant to HRS

§ 91-14, to review orders disposing of petitions for declaratory

rulings.” Id. at 185, 111 P.3d at 594 (citations omitted). This

court explained that, pursuant to HRS § 91-8, “[o]rders disposing

of petitions [for declaratory rulings] shall have the same status

as other agency orders[,]” and that the phrase “other agency

orders” was intended to “permit review of petitions for

declaratory relief.” Id. (some brackets in original and some

added). Relying on legislative history, this court determined

that the refusal to issue a declaratory order “in itself would be

an agency order,” and therefore would be reviewable. Id.

Accordingly, this court held that the circuit court had

jurisdiction over the agency appeal. Id. at 186, 111 P.3d at

595.

However, it does not appear that any of the parties in

Lingle contested the appellants’ standing to appeal,33 and the

basis for the appellants’ standing, i.e., the question of whether

an appellant must be “aggrieved” or merely “interested” to appeal

a declaratory order, was not addressed. Id. at 184-86, 111 P.3d

33
“[T]he standing inquiry focuses on whether a particular private
party is an appropriate plaintiff.” Cnty. of Hawai#i v. Ala Loop Homeowners,
123 Hawai#i 391, 406 n.20, 235 P.3d 1103, 1118 n.20 (2010) (emphasis in
original) (citation omitted).

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at 593-95; see also Vail v. Emps. Ret. Sys., 75 Haw. 42, 47, 52-

66, 856 P.2d 1227, 1231, 1233-1240 (1993) (addressing an appeal

of an agency’s declaratory order on the merits, where the

appellant’s standing to seek judicial review was neither

challenged nor discussed); Kim v. Emps. Ret. Sys., 89 Hawai#i 70,

73, 75-76, 968 P.2d 1081, 1084, 1086-87 (App. 1998) (same).

Thus, we respectfully disagree with the dissent’s conclusion that

this court has “impliedly determined” that a party appealing a

declaratory order need not be aggrieved. Dissenting opinion at

24. While Lingle and the cases cited therein determined that a

declaratory order is appealable, those cases did not determine by

whom such an order may be appealed.34

Accordingly, we respectfully decline to resolve whether

AlohaCare had standing to appeal as an “interested person,” and

hold that AlohaCare had standing as a “person aggrieved.”35

34
Similarly, the legislative history of HRS chapter 91, the Hawai#i
Administrative Procedures Act (HAPA), indicates that one of the “basic
purposes” of the HAPA was “[t]o provide for judicial review of agency
decisions[.]” H. Stand. Comm. Rep. No. 8, in 1961 House Journal at 655.
However, this broad statement of purpose does not clarify the legislature’s
intent with regard to standing, and does not evidence an intent to impose a
lower standing threshold for appeals of declaratory orders than of orders in
contested cases.

35
We respectfully disagree with the dissent’s assertion that we have
“erect[ed] barriers to review the declaratory orders entered under HRS § 91-8”
by declining to resolve this issue. Dissenting opinion at 4. To the
contrary, we recognize that orders entered pursuant to HRS § 91-8 are
appealable pursuant to HRS § 91-14, see Lingle, 107 Hawai#i at 183, 111 P.3d
at 592, and hold that AlohaCare had standing to challenge the order at issue
in the instant case.
We also respectfully disagree with the dissent’s assertion that we
have imposed a “new, substantive requirement” on appeals of HRS § 91-8 orders.
Dissenting opinion at 41. The requirement that an administrative appeal be
brought by a “person aggrieved” is set forth in HRS § 91-14. The cases cited
by the dissent do not alter this requirement. See Lingle, 107 Hawai#i at 184-
(continued...)

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B. Both accident and health insurers and HMOs are authorized to
provide the closed panel plan required by the QExA contracts

In COL 16, the Insurance Commissioner identified a

“substantial overlap between the powers granted to health

maintenance organizations under HRS Chapter 432D and entities

licensed under HRS [article] 431:10A.” The Insurance

Commissioner went on to state that a
key distinction is that HMOs are the only licensed
entities that may furnish health care directly to
their members through facilities that it owns or
operates and utilizing the services of physicians
employed by the HMO and require that coverage is only
provided when a member either utilizes its facilities
and providers or is specifically authorized by its
providers to utilize outside facilities or providers.
An entity licensed as an HMO is not limited to
furnishing care directly to its members through its
owned facilities and employed providers, but it is
authorized to do so. That authorization distinguishes
entities licensed as HMOs from other risk-bearing
entities licensed by the Insurance Commissioner in the
State of Hawaii. Conversely, risk bearing entities
licensed under HRS [article] 431:10A are prohibited
from requiring that “service[s] be rendered by a
particular hospital or person.” HRS § 431:10A-205(b).

(Emphasis added).

AlohaCare argues that the two statutory provisions do

not overlap and the Insurance Commissioner’s interpretation of

HRS 431:10A-205(b) “effectively [] repealed [the HMO Act] by

administrative fiat.”

As set forth below, HRS chapter 432D and HRS article

431:10A authorize both HMOs and accident and health insurers to

provide the closed panel product envisioned by the QExA program.

35
(...continued)
86, 111 P.3d at 593-95; Vail, 75 Haw. at 47, 52-66, 856 P.2d at 1231, 1233-
1240; Kim, 89 Hawai#i at 73, 75-76, 968 P.2d at 1084, 1086-87.

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Moreover, this interpretation of the statutory schemes does not

nullify the HMO Act.

1. The HMO Act and HRS article 431:10A authorize HMOs and
accident and health insurers to provide closed panel
products

This court must determine whether both HRS chapter 432D

and HRS article 431:10A authorize the provision of health care

services as required by the QExA contracts.36 Initially, we note

that the RFP appears to contemplate that both HMOs and accident

and health insurers could provide the closed panel product

required by the QExA RFP.37 Nevertheless, the question for

decision here is whether, under Hawaii’s insurance code, accident

and health insurers are authorized to provide that product.

There is no dispute that the HMO Act authorizes HMOs to

provide or arrange for the services required under the QExA

contracts. The plain language of HRS § 432D-1 indicates that

HMOs are authorized to “provide or arrange for the delivery of

36
As noted in COL 9, the QExA program also is “governed by federal
law relating to the Medicaid program.” No party disputes the Insurance
Commissioner’s finding that the “Social Security Act § 1903(m) and federal
regulation at 42 C.F.R. § 438.116(b)(1) expressly state that a Medicaid
managed care organization [] may be either a federally qualified HMO or ‘be
licensed or certified by [Hawai#i] as a risk bearing entity.’” Accordingly,
we will not address federal law further.

37
The RFP did not specifically require that an entity seeking to
perform the QExA contract be licensed as an HMO, but stated that providing
“health plans” must be “qualified and properly licensed[.]” The RFP also
provided that “[t]he health plan shall be properly licensed as a health plan
in the State of Hawaii (See Chapters 431, and 432, and 432D HRS).” The RFP
defined “health plan” as “[a]ny healthcare organization, insurance company or
health maintenance organization, which provides covered services on a risk
basis to members in exchange for capitation payments.” It thus appears that
both “qualified and properly licensed” HMOs and insurers would be eligible to
provide the QExA closed panel services under the terms of the RFP.

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basic health care services to enrollees on a prepaid basis,

except for enrollee responsibility for copayments, deductibles or

both.” “[B]asic health care services” are defined in HRS § 432D-

1 as “preventive care, emergency care, inpatient and outpatient

hospital and physician care, diagnostic laboratory services, and

diagnostic and therapeutic radiological services.” Applying

those definitions to the instant case, it is clear that properly

licensed HMOs, like AlohaCare, are authorized pursuant to HRS

§ 432D-1 to “provide or arrange[,]” at their option, for the

closed panel health care services required under the QExA

program. Although the QExA RFP did not define “healthcare

services[,]” the foregoing definitions appear to coincide with

HMOs’ authorization to provide or arrange for “preventive care,

emergency care, inpatient and outpatient hospital and physician

care, diagnostic laboratory services, and diagnostic and

therapeutic radiological services.” See HRS § 432D-1.

Therefore, HRS § 432D authorizes HMOs to provide or arrange for

the closed panel services required under the QExA RFP.

The plain language of HRS § 431:10A-205(b), on the

other hand, is not as clear as HRS chapter 432D regarding whether

the statute authorizes accident and health insurers to offer the

closed panel product required by the QExA contracts, because the

statute prohibits a risk-bearing entity licensed as an accident

and health insurer from requiring that medical services be

rendered by “a particular hospital or person.” The plain

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language of HRS § 431:10A-205(b) is written in the singular,

indicating that insurers may not require that services be

rendered by a single “hospital or person.” Accordingly, it

appears that HRS § 431:10A-205(b) would allow accident and health

insurers like United and Ohana to provide the QExA closed panel

product because the RFP required that “enhanced quality

healthcare services” be obtained from a network of providers and

not a single “hospital or person.” See HRS § 431:10A-205(b).

Nevertheless, the use of singular language is not

determinative. Nobriga v. Raybestos-Manhattan, Inc., 67 Haw.

157, 163, 683 P.2d 389, 394 (1984) (“The use of words in a

statute signifying the singular is . . . not conclusive.”). HRS

§ 1-17 sets forth the general rule of statutory construction that

“[w]ords . . . in the singular or plural number signify both the

singular and plural number[.]” HRS § 1-17 (1993). This

provision suggests that HRS § 431:10A-205(b) would not simply

prohibit an accident and health insurer from requiring that

services be rendered by “a particular hospital or person,” but

also by “particular hospitals or persons.” If HRS

§ 431:10A-205(b) prohibits accident and health insurers from

providing services by “particular hospitals or persons[,]” United

and Ohana would not be able to provide the closed panel product

required under the QExA contracts with their accident and health

insurance licenses because the RFP required that services be

rendered by a designated “provider network[.]”

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This court has interpreted statutes using the statutory

presumption in HRS § 1-17 only after reviewing the legislative

history and context in which a statute was passed to determine

whether the legislature intended to signify both the singular and

plural forms of a word. See Nobriga, 67 Haw. at 163, 683 P.2d at

394 (looking to the legislative objective of HRS § 663-14 to

determine that the legislature did not intend for there to be a

different result based on whether the singular or plural form of

the phrase “one joint tortfeasor” and the word “release” was used

in the Uniform Contribution Among Joint Tortfeasors Act); see

Wong v. Hawaiian Scenic Tours, Ltd., 64 Haw. 401, 403-05, 642

P.2d 930, 932-33 (1982) (per curiam) (reviewing the relevant

legislative history and applying HRS § 1-17 to the term “person”

to mean “persons” in a comparative negligence statute).

Therefore, this court must look to legislative history to

determine whether the legislature intended for HRS § 431:10A-

205(b) to prohibit an accident and health insurer from requiring

that services be rendered both by “a particular hospital or

person,” and also by “particular hospitals or persons.”

The legislative history of HRS § 431:10A-205(b) is

silent on whether accident and health insurers are prohibited

from requiring that services be rendered by “particular hospitals

or persons.” See, e.g., S. Stand. Comm. Rep. No. 713, in 1955

Senate Journal, at 668. The legislative history also is silent

regarding whether the statute precludes accident and health

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insurers from offering a closed panel product, such as required

by the QExA program. See id. Nevertheless, because of the

historical context in which HRS § 431:10A-205(b) developed, it

appears that the legislature did not intend to prohibit accident

and health insurers from requiring that services be rendered by

“particular hospitals or persons” when it adopted HRS

§ 431:10A-205(b). Although HRS § 431:10A-205(b) was enacted in

1987, the statute has remained virtually unchanged since 1955,

when it was originally codified as Revised Laws of Hawai#i (RLH)

§ 181-55(b).38 The text of HRS § 431:10A-205(b) also

“substantially conforms” to a model law proposed by the National

Association of Insurance Commissioners. See Digest of Bills

Passed, 14th Legislature, Regular Session of 1987, p. 374-75.

Closed panel plans, however, became popular only more recently

and were unlikely to have been discussed in 1955, when the

language of HRS § 431:10A-205(b) was first drafted. See, e.g.,

Nw. Med. Labs., Inc. v. Blue Cross and Blue Shield of Oregon,

Inc., 794 P.2d 428, 432, n.2 (Or. 1990) (citation omitted)

38
RLH § 181-55(b) provided:

Any group or blanket disability policy may provide
that all or any portion of any indemnities provided by
any such policy on account of hospital, nursing,
medical, or surgical services may, at the insurer’s
option, be paid directly to the hospital or person
rendering such services, but the policy may not
require that the service be rendered by a particular
hospital or person. Payment so made shall discharge
the insurer’s option the insurer’s obligation with
respect to the amount so paid.

(Emphasis added).

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(stating that in 1973, Congress enacted the federal HMO Act, 42

USC § 300(e), which specifically authorized “closed panel” HMOs).

Other jurisdictions have interpreted the phrase

“particular hospital or person” in similar statutes to mean a

single “hospital or person” and not “hospitals or persons[.]” In

Insurance Commissioners v. Mutual Medical Insurance, Inc., 241

N.E.2d 56, 60-61 (Ind. 1968), superceded by statute on other

grounds as held in Huffman v. Office of Envtl. Adjudication, 811

N.E.2d 806, 811-12 (Ind. 2004), the Indiana Supreme Court looked

to the intent of the Indiana legislature when it required, “as a

basic provision of individual and group accident and sickness

policies, that ‘the policy may not require that the service be

rendered by a particular hospital or person[.]’” In that case,

the “Appellant-Commissioner contend[ed] that this language

reflects the legislative intent that no policy defeat an

insured’s right of recovery for medical services covered in the

policy when the services are rendered by a person duly qualified

in Indiana to perform them.” Id. The case arose after insurers,

under the applicable insurance laws of Indiana, allegedly did not

compensate podiatrists for the performance of podiatry services

because the podiatrists did not hold unlimited licenses to

practice medicine in Indiana. Id. at 57-58. The Indiana Supreme

Court held:
It is our opinion that the language relied on by the
appellants before the Commissioner is statutory
language of differentiation, by which policy designs
that would permit the insurer to direct the destiny of

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the cure through the specific designation of the
person or facilities, are prohibited. The phrase ‘may
not require that the service be rendered by a
particular hospital or person’ distinguishes accident
and sickness policy standards from the standards of
the Workmens’ Compensation Laws, which expressly
permit and authorize an employer to select for the
treatment of his employee, specific physicians,
hospitals, nurses, or spiritual healers. Burns’
Indiana Statutes, Anno., (1965 Repl.), s [sic] 40-
1225. Therefore, Burns’ ss [sic] 39-4253 and 39-4260
(supra) serve to prohibit this selective and
discretionary designation of personnel for the
treatment of the ill, rather than to affirmatively
require insurers to indemnify for all attempted cures
which are legally rendered.

Id. at 61 (emphasis added).

The same statutory language also was at issue in

Herring v. American Bankers Insurance Co., 216 So. 2d 137 (La.

App. 1969). In Herring, the Court of Appeal of Louisiana

considered whether an insurance policy provision that benefits

would be paid for confinement only in hospitals recognized by any

of three medical associations violated a Louisiana statute

providing that such insurance policies may not require that

services be rendered by “a particular hospital or person.” Id.

at 138-39. The Court of Appeal held:
We do not construe the provision requiring treatment
by a hospital recognized by at least one of the
associations named in the policy as naming a
particular hospital. The statute is not intended to
prevent a provision in a policy requiring an
institution to meet certain standards before it may be
classed as a hospital within the meaning of the
policy. We believe that the intent of the statute in
prohibiting the naming of a particular hospital has
reference to the specification in the policy that an
insured must go to a certain hospital designated in
the contract by its trade name. We do not believe
that the statute intended to prohibit a contract
containing a provision prescribing a quality or status
which an institution must possess before it will be
included under the definition of an acceptable
hospital within the terms of the policy. The statute,
we feel, was intended to prevent any practice of

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favoritism between an insurance company and some
particular hospital or institution. This is not the
situation in the case under consideration.

Id. at 140 (emphasis added).

Similar to the provision at issue in Herring, the QExA

RFP did not require that QExA members go to a “particular

hospital or person” to receive health care. Instead, the QExA

RFP required that members receive services in the QExA network,

and if medically necessary covered services were not available in

the network or on the island of residence, that the member be

provided services out-of-network or transported to another island

to access the services. The analyses in Mutual Medical Insurance

and Herring support the conclusion that HRS § 431:10A-205(b) only

applies to a single “particular hospital or person,” and that the

statute should be read without resorting to HRS § 1-17.

Moreover, prohibiting accident and health insurers from

requiring that services be rendered by particular “hospitals or

persons” would be inconsistent with the ability of those insurers

to offer “managed care plan[s,]” as recognized under HRS § 432E-

1.39 HRS § 432E-1 was enacted in 1998 – 43 years after the

39
The Patients’ Bill of Rights Act, HRS § 432E-1, defines a
“[m]anaged care plan” as:

any plan, regardless of form, offered or administered
by any person or entity, including but not limited to
an insurer governed by chapter 431, a mutual benefit
society governed by chapter 432, a health maintenance
organization governed by chapter 432D, a preferred
provider organization, a point of service
organization, a health insurance issuer, a fiscal
intermediary, a payor, a prepaid health care plan, and
any other mixed model, that provides for the financing
(continued...)

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“particular hospital or person” provision in HRS § 431:10A-205(b)

was first codified – and recognized that authorized insurers may

provide “for the financing or delivery of health care services or

benefits to enrollees through . . . [a]rrangements with selected

providers or provider networks to furnish health care services or

benefits.” Prohibiting accident and health insurers from

requiring that services be rendered by particular “hospitals or

persons” would conflict with the recognition of authority in HRS

§ 432E-1, thereby repealing a portion of the later-enacted

statute. See G. ex rel K. v. State Dep’t of Human Servs., 676 F.

Supp. 2d 1046, 1081 (D. Haw. 2009).40

39
(...continued)
or delivery of health care services or benefits to
enrollees through:

(1) Arrangements with selected providers or
provider networks to furnish health care
services or benefits; and

(2) Financial incentives for enrollees to use
participating providers and procedures provided
by a plan;

provided, that for the purposes of this chapter, an
employee benefit plan shall not be deemed a managed
care plan with respect to any provision of this
chapter or to any requirement or rule imposed or
permitted by this chapter which is superseded or
preempted by federal law.

HRS § 432E-1. (Emphasis added).

40
The district court in G. ex rel K. addressed the same facts at
issue in the instant case and also found that HRS § 431:10A-205(b) should not
be read in light of HRS § 1-17 because “such a construction would be
inconsistent with the legislative intent expressed in a later-enacted statute,
HRS § 432E-1.” 676 F. Supp. 2d at 1081, n.24. Although the decisions of
federal courts on matters of state law are not dispositive, they can be
persuasive. Cf. Arquero v. Hilton Hawaiian Joint Venture LLC, 104 Hawai#i
423, 429-30, 91 P.3d 505, 511-12 (2004) (stating that the federal courts’
interpretation of Title VII of the Civil Rights Act of 1964 is “persuasive,
but not controlling” when interpreting analogous Hawai#i state laws).

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Such a result would violate two rules of statutory

construction. First, “[t]he general rule is that repeals by

implication are not favored and that if effect can reasonably be

given to two statutes, it is proper to presume that the earlier

statute is to remain in force and that the later statute did not

repeal it.” State v. Pacariem, 67 Haw. 46, 47, 677 P.2d 463, 465

(1984) (quoting State v. Gustafson, 54 Haw. 519, 521, 511 P.2d

161, 162 (1973) (per curiam)); see also Richardson v. City &

Cnty. of Honolulu, 76 Hawai#i 46, 55, 868 P.2d 1193, 1202 (1994)

(quoting Mahiai v. Suwa, 69 Haw. 349, 356-57, 742 P.2d 359, 366

(1987))(stating that “where there is a ‘plainly irreconcilable’

conflict between a general and a specific statute concerning the

same subject matter, the specific will be favored. However,

where the statutes simply overlap in their application, effect

will be given to both if possible, as repeal by implication is

disfavored[]”). Second, “[l]aws in pari materia, or upon the

same subject matter, shall be construed with reference to each

other. What is clear in one statute may be called upon in aid to

explain what is doubtful in another.” HRS § 1-16 (1993). Here,

it is possible to give effect to HRS § 431:10A-205(b) and HRS §

432E-1 by reading the former statute in the singular, thereby

avoiding repeal by implication.

Accordingly, both HMOs and accident and health insurers

are authorized to arrange for medical services for members using

a defined network of providers, i.e., particular “hospitals or

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persons.” HRS § 432D-1; HRS § 431:1-201(a). We note, however,

that only an HMO is authorized to arrange for services to be

rendered by a single “hospital or person.” In addition, an HMO,

unlike an accident and health insurer, may “provide” “for the

delivery of basic health care services” in facilities it owns or

operates utilizing the services of physicians employed by the

HMO. See HRS § 432D-1.

Based on the foregoing, HRS article 431:10A and chapter

432D authorize accident and health insurers and HMOs, as risk-

bearing entities, to provide the closed panel product required by

the QExA contracts.

2. Allowing accident and health insurers to provide closed
panel products does not nullify the HMO Act

AlohaCare contends that, by allowing accident and

health insurers to provide a closed panel product, the Decision

authorized these insurers to “operate an HMO” in violation of HRS

chapter 432D. AlohaCare presents two arguments in support of its

position: 1) the HMO Act unambiguously provides that no person41

shall operate a health maintenance organization without a

license, and providing services pursuant to the QExA contracts

requires an HMO license; and 2) the legislature intended for the

HMO Act to occupy the “‘field’ of activities to which the [HMO]

41
For the purposes of HRS chapter 432D, “[p]erson” is defined as
“any natural or artificial person including by not limited to individuals,
partnerships, associations, trusts, or corporations.” HRS § 432D-1.

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Act applie[s] (and for which it require[s] a license)” thereby

prohibiting other risk-bearing entities from engaging in

activities authorized by HRS chapter 432D. For the reasons set

forth below, AlohaCare’s arguments are meritless.

a. The HMO Act is ambiguous and cannot be construed
literally without repealing HRS § 432E-1

AlohaCare contends that the Insurance Commissioner

improperly departed from the broad, literal meaning of the phrase

“operate a health maintenance organization” in HRS § 432D–2(a).

HRS § 432D–2(a) provides, in pertinent part: “No person shall

establish or operate a health maintenance organization in this

State without obtaining a certificate of authority under this

chapter.” HRS § 432D–2(a) (emphasis added).

AlohaCare contends that the words “shall”42 and

“operate” in HRS § 432D-2(a) are not ambiguous and indicate that

the HMO Act preempts the field of activities to which the HMO Act

applies. Moreover, even if the terms are ambiguous, AlohaCare

contends that the “proper course of action is to look to a

dictionary to determine the ordinary meaning[s,]” which confirm

that the HMO Act preempts the field of activities to which it

applies.

42
No party disputes that the term “shall” in HRS § 432D-2(a) is
mandatory, as opposed to discretionary. See Clark v. Arakaki, 118 Hawai#i
355, 370, 191 P.3d 176, 191 (2008) (defining the word “shall” according to
Blacks’s Law Dictionary as mandatory); Blacks’s Law Dictionary 1499 (9th ed.
2009) (defining the word “shall” as “[h]as a duty to; more broadly, is
required to . . . . This is the mandatory sense that drafters typically
intend and that courts typically uphold[]”). Accordingly, we will not address
this argument further.

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As set forth below, the language of HRS § 432D–2(a) is

not clear and unambiguous. Moreover, a literal interpretation

would have the effect of repealing a portion of HRS § 432E-1,

which was enacted three years after the HMO Act.

The HMO Act does not define the word “operate” or what

it means to “operate a health maintenance organization[.]” See

HRS § 432D-1. An HMO, however, is defined pursuant to

HRS § 432D-1 as “any person that undertakes to provide or arrange

for the delivery of basic health care services to enrollees on a

prepaid basis, except for enrollee responsibility for copayments,

deductibles, or both.” (Emphasis added).

It is true that “when a term is not statutorily

defined, this court may resort to legal or other well accepted

dictionaries as one way to determine its ordinary meaning.”

Estate of Roxas v. Marcos, 121 Hawai#i 59, 66, 214 P.3d 598, 605

(2009) (internal quotation marks and citation omitted). “Operate”

is defined in the sixth edition of Black’s Law Dictionary as

“[t]o perform a function, or operation, or produce an effect.”

Black’s Law Dictionary 1091 (6th ed. 1990).43 Webster’s Third New

International Dictionary similarly defines “operate,” as it

relates to an entity, as “to manage and put or keep in operation

whether with personal effort or not[.]” Webster’s Third New

International Dictionary 1581 (1966). If this court defined

43
The ninth, and most recent, edition of Black’s Law Dictionary does
not define “operate.” The word “operate” also is not defined in the seventh
or eighth editions.

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“operate” for purposes of HRS § 432D–2(a) according to the

dictionaries above, as AlohaCare requests, any “provi[sion] or

arrange[ment] for the delivery of basic health care services[]”

would require a “certificate of authority under [HRS chapter

432D].”

However, this broad definition conflicts with the

conclusion that accident and health insurers, pursuant to HRS

article 431:10A, may provide a closed panel product like the one

required by the QExA contracts pursuant to their insurance

licenses. AlohaCare’s proffered definition also conflicts with

the plain text of HRS § 432E-1, which recognizes that “managed

care plan[s]” (like the one required by the QExA RFP) can be

offered or administered by several types of risk-bearing entities

licensed by the Insurance Division, including both HMOs licensed

under HRS chapter 432D and insurers governed by HRS article

431:10A. See HRS § 432E-1. Therefore, if AlohaCare’s definition

of “operat[ing] a health maintenance organization” is correct,

the definition would nullify the portion of HRS § 432E–1 that

recognizes that risk-bearing entities other than HMOs are

authorized to offer or administer managed care plans.

In the instant case, the Insurance Commissioner

properly gave effect to all three relevant statutory schemes, and

thereby avoided possible repeal by implication, by defining

“operate a health maintenance organization” in HRS § 432D-2(a) as

“engaging in activities which only an HMO is authorized to do.”

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See Pacariem, 67 Haw. at 47, 677 P.2d at 465 (noting that repeals

by implication are disfavored). Under this definition, accident

and health insurers licensed pursuant to HRS article 431:10A may

still offer managed care plans as recognized in HRS § 432E-1.

Accordingly, it is not appropriate to define the word “operate”

in HRS § 432D–2(a) in the way suggested by AlohaCare, because to

do so would be to ignore the interplay among HRS chapters 432D,

432E and article 431:10A, and would nullify a portion of HRS §

432E-1.

This definition does not nullify the HMO Act – or strip

AlohaCare of its HMO license – because HMOs may still “provide or

arrange for the delivery of basic health care services” in

accordance with HRS § 432D-1. Instead, this definition focuses

on a distinguishing feature of HMOs – their authorization to

provide or furnish health care directly to their members through

facilities they own or operate and utilizing the services of

physicians employed by the HMO. See HRS §§ 432D-1 and 432D-

3(a)(3); see also G. ex rel K., 676 F. Supp. 2d at 1081, n.24.44

b. Legislative history indicates that the HMO Act was not
enacted to preempt the field of managed care regulation

In support of its position that the Decision nullifies

the HMO Act, AlohaCare contends that the legislature intended for

the HMO Act to occupy the field of activities to which the HMO

44
HRS § 432D-3(a)(3) provides that HMOs may “[furnish] health care
services through providers, provider associations, or agents for providers
which are under contract with or employed by the [HMO.]”

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Act applies, thereby disallowing other risk-bearing entities to

engage in activities authorized by HRS chapter 432D. AlohaCare

contends that “the legislature was clear in its desire to

regulate HMOs because they were not being regulated by any law

even though a number were already in business.”

However, AlohaCare misstates the applicable legislative

history, which conversely indicates that the HMO Act was not

enacted to preempt the field to which it applies. Prior to the

HMO Act’s enactment in 1995, HMOs were, in fact, regulated by the

Department of Labor and Industrial Relations and were not

unregulated entities. See H. Stand. Comm. Rep. No. 168, in 1995

House Journal, at 1091. Thus, contrary to AlohaCare’s assertion,

the legislative history does not indicate that the act was passed

to “fill a regulatory void.” See H. Stand. Comm. Rep. No. 168,

in 1995 House Journal, at 1091. Instead, the legislative history

repeatedly reveals that the HMO Act was passed in order to

monitor the financial soundness of HMOs.45 See S. Stand. Comm.

45
Accordingly, AlohaCare’s reliance on Gardens at West Maui Vacation
Club v. County of Maui, 90 Hawai#i 334, 340-41, 978 P.2d 772, 778-79 (1999),
for the proposition that the HMO Act “should be given full effect” because the
HMO Act was intended to cover the field is misplaced. In Gardens at West
Maui, this court found that constitutional provisions and legislative acts
covered the whole subject of property taxation power and embraced the entire
law in that regard thereby repealing another statute by implication. Id. In
making its determination, this court relied on the text of the constitutional
amendment that “expressly and manifestly [was] designed to transfer to the
counties broad powers of real property taxation” and the proceedings of the
1978 constitutional convention, in which it was explicitly noted that “[the]
Committee changed this amendment to include the phrase . . . in order to
clarify the standing committee’s intent to grant all taxing powers relating to
real property to the counties, except Kalawao. . . . Your Committee rejected
an amendment to return this section to its original language which rests all
taxing powers with the State.” Id. at 341, 978 P.2d at 779. In the instant
(continued...)

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Rep. No. 1283, in 1995 Senate Journal, at 1309 (stating that

“HMOs in Hawaii are not regulated or monitored on a continuing

basis for financial soundness[;]” “this bill will provide for the

prudent financial regulation of HMOs that is needed in Hawaii[;]”

and that “[t]he purpose of this bill is to provide for the

financial regulation of [HMOs] in [Hawai#i]”) (emphasis added); H.

Stand. Comm. Rep. No. 418, in 1995 House Journal, at 1181

(stating that “the purpose of this bill is to authorize the

regulation of the financial soundness of [HMOS]”) (emphasis

added); S. Stand. Comm. Rep. No. 884, in 1995 Senate Journal, at

1161 (stating that “[s]upporters [of the bill] were interested in

guarding against insolvencies in these organizations and

protecting the consumers enrolled in these plans from losses[]”)

(emphasis added); H. Stand. Comm. Rep. No. 168, in 1995 House

Journal, at 1091 (stating that “[t]he purpose of this bill is to

regulate [HMOs], including the establishment of minimum financial

requirements to ensure the stability of these entities[]”)

(emphasis added).

The underlying purpose of regulating the financial

soundness of HMOs is further clarified when it is considered that

prior to 1995, health insurance companies and mutual benefit

societies, like Hawai#i Medical Services Association, were

routinely monitored for financial soundness by the Insurance

45
(...continued)
case, unlike in Gardens at West Maui, neither the text of the HMO Act nor the
legislative history reveal an intent to cover the whole field.

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Division of the DCCA, but HMOs were not. See H. Stand. Comm.

Rep. No. 168, in House Journal, at 1091.

Because the HMO Act does not cover the field of managed

care regulation, and because the relevant statutes can be read

together and there is no explicit language or policy reason not

to give each statute effect, we do not read the HMO Act as

repealing HRS chapter 432E by implication. Cf. Gardens at West

Maui, 90 Hawai#i at 340-41, 978 P.2d at 778-79 (finding that

constitutional provisions and legislative acts covered the whole

subject of property taxation power and embraced the entire law in

that regard thereby repealing another statute by implication);

see also Gustafson, 54 Haw. at 520, 511 P.2d at 162 (reading two

statutes together recognizing the rule of statutory

interpretation avoiding implied amendment or repeal, and holding

that a later-enacted statute did not repeal by implication an

earlier-enacted statute because there was an “absence of any

clear countervailing policy reason to disregard our maxims of

statutory construction”).

C. AlohaCare’s argument that United and Ohana are “performing
their QExA contracts under no licensing authority” is
without merit

AlohaCare’s argument that United and Ohana are

“performing their QExA contracts under no licensing authority” is

rooted in COL 4. COL 4 provides:
The QExA contracts entered into by DHS with [Ohana]
and [United] are not contracts of insurance.
HRS § 431:1-201(a) provides that “[i]nsurance is a
contract whereby one undertakes to indemnify another

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or pay a specified amount upon determinable
contingencies.” Accordingly, determining the validity
of the QExA contracts is not the business of insurance
and is outside the jurisdiction of the Commissioner.
Except for relief in the form of a declaration that
neither [United] nor [Ohana] are properly licensed to
perform the services required under the QExA contract,
all other claims for relief based upon allegations of
the Petition regarding the validity of the contracts
entered into by DHS with [Ohana] and [United] are
denied as beyond the jurisdiction of the authority.
HAR § 16-201-50(l)(C).

(Emphasis added).

AlohaCare’s contention is based on a multi-step

argument. AlohaCare appears to assert that because the Insurance

Commissioner concluded that the QExA contracts entered into by

DHS with United and Ohana are not contracts of insurance, the

services required to be provided by the contracts are not

insurance. AlohaCare then appears to contend that because the

services under the contracts are not insurance, United and

Ohana’s insurance licenses pursuant to HRS article 431:10A do not

authorize them to perform the services. Therefore, AlohaCare

contends that United and Ohana are performing the QExA contracts

“under no licensing authority.” AlohaCare asserts that the only

entity that may perform the services is an HMO, because any

“activities” performed by HMOs are, by definition, not insurance.

AlohaCare’s interpretation of COL 4 is incorrect.

Although the relationship between DHS and the QExA plans is not

insurance, the relationship between United and Ohana and their

respective QExA members does involve the provision of insurance.

See G. ex rel K., 676 F. Supp. 2d at 1081-82. AlohaCare has not

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appealed the factual bases underlying COL 4, namely that United

and Ohana have agreed to operate a managed care program that

provides health care services to QExA members – not DHS –

according to the terms of the RFP and as set out by the Insurance

Commissioner in his FOFs. Because AlohaCare did not challenge

any findings of fact on appeal, the findings of fact are binding

on this court. See #Æ lelo: The Corp. for Cmnty. Television v.

Office of Info. Practices, 116 Hawai#i 337, 348-49; 173 P.3d 484,

495-96 (2007) (“Findings of fact . . . that are not challenged on

appeal are binding on the appellate court.”) (quoting Okada

Trucking Co., Ltd. v. Bd. of Water Supply, 97 Hawai#i 450, 458, 40

P.3d 73, 81 (2002)). When the uncontested requirements of the

QExA RFP are read alongside the text of HRS § 431:1-201(a),46

defining the term “insurance,” it is clear that United and Ohana

have agreed to assume a risk based on a relationship with QExA

members – not DHS – and are “undertak[ing] to indemnify another

or pay a specified amount upon determinable contingencies.” See

HRS § 431:1-201(a). DHS merely aids in the provision of

insurance through the QExA contract. Or, stated differently:

“The risk that the companies bear is associated with the coverage

they provide to their enrollees - insurance coverage. The State

DHS facilitates that insurance by contracting with the plans and

paying them for the risks they assume.” G. ex rel K., 676 F.

46
HRS § 431:1-201(a) (2005) provides that “[i]nsurance is a contract
whereby one undertakes to indemnify another or pay a specified amount upon
determinable contingencies.”

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Supp. 2d at 1082.

Accordingly, AlohaCare’s argument that United and Ohana

are “performing their QExA contracts under no licensing

authority” is wrong. United and Ohana hold insurance licenses

pursuant to HRS article 431:10A and were contracted to provide

insurance services for QExA members.

IV. CONCLUSION

For the foregoing reasons, we affirm the December 28,

2009 judgment of the circuit court.

Edward C. Kemper for
petitioner/appellant- /s/ Mark E. Recktenwald
appellant.
/s/ James E. Duffy, Jr.
James F. Nagle, Deputy
Attorney General, for /s/ Rhonda A. Nishimura
respondent/appellee-appellee.
/s/ Randal K.O. Lee
John F. Molay, Deputy
Attorney General, for
respondent/intervenor-
appellee-appellee Department
of Human Services.

Dianne W. Brookins (Alston
Hunt Floyd & Ing) for respondent/
intervenor-appellee-appellee
United Healthcare Insurance Co.

Lorraine H. Akiba (McCorriston
Miller Mukai MacKinnon) for
respondent/intervenor-appellee-
appellee Wellcare Health Insurance of
Arizona, Inc., dba Ohana Health Plan.

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