State regulation of health insurance rates, which saved consumers and businesses an estimated $18 million in recent years, will end June 30 after the Legislature failed to agree on measures to extend the oversight.

"Now without regulation they can charge anything they want," said J.P. Schmidt, state Insurance Commissioner. "It's unfortunate."

The House and Senate couldn't agree on extending the law that went into effect in 2003 for three years. Proponents of rate regulation said the oversight was needed because the market was dominated by the Hawaii Medical Service Association and Kaiser Permanente Hawaii.

Since its implementation the state has turned down six insurer rate requests, including denying a 14 percent increase to Kaiser and an 11 percent HMSA increase in 2003. Instead, they were granted increases of 11 percent and 9.9 percent, respectively.

"I am deeply disappointed that the bill that would have continued health insurance rate regulation in Hawai'i will not pass this session," said Sen. Ron Menor. D-17th (Mililani, Waipi'o). "It has generated strong cost savings for businesses and consumers."

Critics of the measure said the 90-day review by the state's Insurance Division added to insurer's costs and took too much time. Insurers contended they offer low rates already.

"We had one of the lowest premiums in the country before rate regulation, and I am sure we will continue to be that way for a while," said Kaiser spokesman Chris Pablo. "Rate regulation does nothing to curb what drives healthcare costs."

HMSA spokesman Cliff Cisco declined comment.

The House passed a bill that cut the time for each rate review and modified some of the regulatory oversight. That conflicted with the Senate bill that proposed extending the law without changes. The two sides could not come to an agreement in talks and, barring a last-minute extension of the legislative session, the measure is dead.

Some business groups that are traditionally opposed to regulation, favored extending the rate regulation law. That included the Hawaii Association of Realtors and the Hawaii Business League.

Schmidt said the rate regulation was also a factor in the decision by Las Vegas-based Summerlin Life & Health Insurance Co. to enter the health insurance market here last year. The company has said the law gave it some assurances that larger insurers wouldn't cut rates dramatically to keep it from gaining business.

"To allow rate regulation to die or to be amended in such a way to cause healthcare rates to rise without third-party oversight and with the ability of HMSA and Kaiser Permanente to lower prices, temporarily, to drive out the new plans entering the market is unacceptable," wrote Rep. Bev Harbin, D-28th (Iwilei, Downtown, Makiki), in a letter to House leadership.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.