The state Insurance Division says it has no regulatory approval authority in the sale of Summerlin Life and Health Insurance Co.'s health plan membership to the Hawaii Medical Assurance Association.

Two weeks ago, the health insurers announced they had reached an agreement on a sale that would form the third-largest health insurer in the state. At that time, HMAA and Summerlin said they needed to get state approval to consummate the transaction.

But, according to state Insurance Commissioner J.P. Schmidt, the Insurance Division said a review of materials submitted by the insurers determined he didn't have the authority to approve or disapprove of the transaction because of the structure of the sale.

"So they can move ahead," Schmidt said. "However, we will be watching to make sure proper notices are being given to people and that they are following the law as they move ahead."

HMAA said it will have about 48,000 members once it absorbs the 22,800 members in Summerlin's preferred-provider program.

The transaction comes about five years after Summerlin entered the state, promising to boost competition in the health insurance business. Its departure will be a setback for proponents of bringing in more companies to compete with the large insurers that dominate Hawai'i's market.