A state law that took effect last month is designed to make it easier for self-employed consumers in Hawai'i to get affordable health insurance plans.

State insurance commissioner J.P. Schmidt, who supported HB 2224, said the initiative requires group health insurers to offer small group health plans to self-employed individuals.

The sole proprietors must be registered by the state Department of Commerce and Consumer Affairs and be located in the insurance group's service areas. Schmidt estimates the new law will help reduce the number of uninsured people among some 12,000 sole proprietor businesses statewide.

He said the number of Hawai'i residents without health insurance has been growing even though the state prepaid healthcare law results in broader coverage here than in most states.

"A lot of people were denied coverage or were quoted a very high price for the premium," Schmidt said.

Some of those who were without coverage sell real estate. The Hawai'i Association of Realtors testified that a membership survey revealed that 18 percent of members who responded did not have health insurance plans and were interested in enrolling.

Kaiser Permanente officials expressed concern about the move, which creates a voluntary pool of participants.

In written testimony, government affairs director Phyllis Dendle said: "Experience tells us that a voluntary pool will have participants that use more healthcare."

She added, "This is because they may choose not to purchase health coverage when they are healthy but will buy it when they need healthcare services."

A mandatory pool includes the healthiest people who use fewest services, which balances out those tapping the system more, she said.

Schmidt said his office gets complaints when consumers are declined for health insurance.

"In the past, sole proprietors could only be in a small-business pool if they were incorporated," he said.

And that often excluded smaller companies that don't want to go through the expense of incorporating.

He said individuals who applied for coverage found insurers reviewing their medical history and charging more.

"Under this new law, they can't be denied and they should see significant savings in their premiums," Schmidt said.

Gov. Linda Lingle signed the bill into law in May and it took effect Sept. 1.

The National Federation of Independent Business in Hawai'i supported the intent of the new law but had some concerns.

A national survey that included Hawai'i businesses indicated that health insurance costs were identified as the No. 1 small business issue, according to NFIB/Hawaii state director Melissa Teves Pavlicek.

"We definitely saw a need," Pavlicek said. "We really want to lower costs for small businesses."

But because the bill applies to sole proprietorships, some members worried that it could be used by those with other resources rather than the target audience, she said.

"We also had some concerns and wanted to make sure that it was truly small businesses that could take advantage of it," she said. "We're waiting to see if it works as it was intended. We're still cautiously optimistic at this point."

Are You Buying This? is a weekly consumer column. Curious about consumer issues or have a tip to share? Reach Robbie Dingeman at 535-2429 or rdingeman@honoluluadvertiser.com.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com or 535-2429.