Hawaii justices examine doctors’ ability to challenge denied health insurance claims

The high court is weighing whether Hawaii Medical Service Association’s arbitration rules unfairly block doctors from disputing denied claims — raising questions that could reshape insurer-provider contracts statewide and beyond.

by Jeremy Yurow, Court House News, June 10, 2025

HONOLULU (CN) — The Hawaii Supreme Court on Tuesday expressed concern over whether the state's largest health insurer has erected unfair barriers that prevent doctors from challenging denied claims.

Justices questioned Hawaii Medical Service Association’s attorney, Randall Whattoff, about arbitration clauses in physician contracts that require doctors to split costly arbitrator fees equally with the insurer — even for small payment disputes.

The case stems from a 2022 lawsuit filed by Hilo OB-GYN Dr. Frederick Nitta, who claims the insurer wrongfully denied coverage for medically necessary treatments he prescribed to 30 patients.

In one case, Hawaii Medical Service Association denied coverage for nifedipine, a drug used to prevent preterm labor, prescribed to pregnant patient Charlene Orsino. She eventually paid for the medication herself, but her condition worsened, and she had to be airlifted to Oahu, where she delivered dangerously early at 25 weeks. Her baby weighed under three pounds.

In another case, the association initially denied an MRI recommended for Adrian “Scott” Norton, approving only physical therapy. When the MRI was finally authorized, doctors discovered advanced prostate cancer. He died in 2023; his son attended Tuesday’s hearing.

A trial court ruled in February that Hawaii Medical Service Association contracts were “unconscionable” and unenforceable, denying the insurer’s motion to compel arbitration. The association appealed, contending that courts must review arbitration provisions on their own terms — without considering the fairness of the contract as a whole.

During Tuesday’s arguments, justices raised concerns about Hawaii Medical Service Association’s portrayal of its contracts as genuinely negotiated agreements. Chief Justice Mark Recktenwald questioned whether the Hawaii Medical Service Association meaningfully represents individual doctors like Nitta, noting that the Hawaii Medical Service Association speaks for “physicians across the state… including physicians who may have wildly different points of view about insurance coverage issues.”

Justice Vladimir Devens highlighted that Nitta had tried to negotiate the arbitration clause but was told it was nonnegotiable. Whattoff dismissed the proposed edits as “nonsensical” and submitted after the deadline.

“But there was an attachment from Dr. Nitta,” Devens said. “He actually went down, he asked to discuss this arbitration clause, and they said, ‘Too bad, too sad,’ basically. And he said, it’s nonnegotiable. How do you square that with what you just said?”

Plaintiff attorney Ted Hong urged the court to strike the entire contract, using a vivid metaphor: “If there’s a banana, and part of it is rotten, Mr. Whattoff is saying you cut off the rotten part and eat the rest. My whole point of view in this particular case, from the beginning, is that the entire banana has to go out the door.”

Hong also argued that Hawaii Medical Service Association has assumed too much control over patient care decisions, with “clerks now making decisions” about medical necessity instead of doctors. He cited recordings of association representatives saying the agreements are “standard contracts that everyone signs,” with no room for negotiation.

Justice Todd Eddins raised concerns about the arbitrator selection process, suggesting it unfairly favors the insurer. “The home team is picking the ref,” he said. “And the ref might not call any more games if the ref rules against HMSA.”

Whattoff defended the association’s practices, arguing that arbitration ensures quick, cost-effective resolutions. He described the arbitration provisions as “vanilla” — standard, neutral clauses that he said do not favor either party.

A ruling in favor of the plaintiffs could shift more power back to physicians in Hawaii and potentially influence similar contract disputes nationwide. Hawaii Medical Service Association is part of the Blue Cross Blue Shield Association, one of the largest health insurance networks in the country.

The court took the matter under advisement and will issue a written decision in the coming months.

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COVERAGE:

HNN: Hawaii's biggest insurer defends provider contracts before state Supreme Court

HTH: High court mulls Nitta case - Hawaii Tribune-Herald