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hawaii guide to health insurance

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Hawaii health insurance exchange / marketplace

Proposed weighted average rate increase = 35%; Exchange continues transition to Healthcare.gov

2016 rates and carriers

Hawaii Health Connector offers individual plans from two carriers:  BCBS’s Hawaii Medical Service Association (HMSA), and Kaiser Permanente.

For 2016, HMSA has proposed a 45.5 percent rate increase for their individual HMO plan, and nearly a 50 percent rate hike for their individual PPO plan (49.1 percent overall).  The carrier justified their rate hikes based on claims costs, explaining that while virtually everyone in Hawaii was already insured, the uninsured pool – many of whom purchased new ACA-compliant plans – had significant medical needs.

The following day, Kaiser proposed an 8.7 percent rate increase for their individual market policies.

HMSA’s rate increase would apply to about about 21,000 people, while Kaiser’s would apply to about 13,000 people.  There have been very conflicting reports about Hawaii Health Connector’s total enrollment over the last year and a half (the executive director’s report from July 10 shows 33,479 individuals enrolled, but HHS was reporting only 8,200 people with effectuated coverage as of March 31).

So I contacted the exchange to clear up the confusion.  Executive Director Jeff Kissel explained that the larger number is much more accurate.  He said that the discrepancy stemmed from a significant lag time in enrollment reporting from carriers.  Kissel confirmed that the Connector’s current in-force enrollment numbers are roughly 20,000 people with HMSA and 11,000 people with Kaiser.

That accounts for nearly all of the individual enrollments that are slated to be impacted by the proposed rate increases for HMSA and Kaiser – apparently very few of them are off-exchange enrollments.  And as far as market share for Hawaii Health Connector, it looks like HMSA has about 65 percent of the current effectuated enrollments, while Kaiser has the other 35 percent.  That puts the weighted average proposed rate increase at just under 35 percent (if you include off-exchange plans as well, the proposed weighted average rate increase is slightly lower, at 33.7 percent).

Insurance Comissioner Gordon Ito said that HMSA’s proposed rates would be “closely scrutinized” this summer.  Last December, Ito’s office announced that they had approved an 8.4 percent rate hike for HMSA’s transitional (grandmothered) plans, which was less than half of the 19 percent rate increase the carrier had requested – so clearly, the Commissioner does not shy away from rejecting excessive rate hikes.  But Ito noted that if it turns out that the new rates proposed by HMSA are justified by claims costs, the Commissioner’s ability to lower the rates will be “limited.”

Switching to Healthcare.gov

On June 5, the Hawaii Health Connector Board approved a plan to transition to Healthcare.gov by October, in time for the coming 2016 open enrollment period that begins November 1.  The exchange will be a federally-supported state-based model, similar to Oregon, Nevada, and New Mexico.  Healthcare.gov will handle enrollment, but the state will still provide customer service and outreach.

The exchange’s current enrollees will be able to retain their coverage for 2015, but will have to re-enroll through Healthcare.gov for 2016 coverage, much the way people in Nevada and Oregon had to do during the 2015 open enrollment period.  The exchange will continue to enroll applicants with qualifying events until the end of September (small business enrollments ceased June 15).  The Connector has already laid off 29 staff members; all of the remaining staff will be let go by May 2016.

Hawaii Health Connector is currently in phase 1 of their transition plan, which will continue through the end of July and includes transferring plan management functions.  Phase 2 (August through December) will include transferring IT data, as well as transferring portions of the exchange to various state agencies.  Phase 3 (January through April) will involve winding down the exchange’s IT systems, transferring IRS reporting to the federal system, archiving data, and other tasks to finish up the transition.

The exchange is currently working to train people in the community who will be able to take over outreach efforts once the exchange is no longer functioning as its own entity.  One of the challenges involved with the transition is that while Healthcare.gov supports enrollment in numerous languages, there are languages spoken in Hawaii that are not available on Healthcare.gov.  So the exchange is working with the state to make sure that effective outreach and enrollment assistance will remain available once the state absorbs the remaining functions of the exchange next year.

Funding issues led to demise

On May 5, the Hawaii legislature approved just $2 million in funding for Hawaii Health Connector – a far cry from the $10 million the exchange had requested.  Lawmakers has been considering up to $5.4 million for the exchange, but ultimately approved less than half that amount (SB 1028 is the legislation that granted the $2 million).

HHS notified the state in March that Hawaii Health Connector wasn’t complying with the requirement that it be financially self-sustaining as of Janaury 2015.  As a result, the federal government began preparations for a possible transition to Healthcare.gov, and the remaining $70 million in federal funding for the exchange was frozen ($204 million had been allocated to the Hawaii Health Connector; $130 million had already been spent by the time the federal government notified the exchange that a switch to Healthcare.gov would likely be necessary).

The funding issue was a major problem for the exchange, leaving them with essentially no choice but to transition to Healthcare.gov.  Exchange officials were in a race against the clock in May, attempting to secure additional funding.  But they also prepared the contingency plan that was ultimately put into motion in early June.

Two contractors that performed services for Hawaii Health Connector did so this year without a contract, but under the assumption that they would eventually be paid using the remaining federal grant money.  They’re trying to recoup $2.7 million in payment from Hawaii Health Connector, but it’s unclear whether they will be successful.

2015 enrollment

As of July 10, Hawaii Health Connector was reporting individual enrollment of 33,479 people.  And the executive director confirmed that total effectuated enrollment is around 31,000.  Both of those numbers are dramatically higher than the 13,000 people who were reported to have enrolled during open enrollment, and the 8,200 people that HHS said had private coverage in force through Hawaii Health Connector as of March 31.

The discrepancy stems from reporting lag times from the carriers, but the total number of private plan enrollees for 2015 has surpassed 30,000 as of July.

Since the marketplace launched in the fall of 2013, about 60,000 people have enrolled in Medicaid through Hawaii’s marketplace, including nearly 33,000 who enrolled between November 2014 and February 2015.  The state expanded Medicaid under the ACA, and as a result the uninsured population has been dramatically reduced.

Open enrollment for 2015 has ended, although people who experience a qualifying life event can sign up for coverage within 60 days of the event, and Medicaid enrollment is open year-round.

Troubled marketplace

In January, Executive Director Jeffrey Kissel (who took over the exchange in October) acknowledged “deficiencies in the planning process, procurement, and governance” following the release of a highly critical state audit. The audit found inadequate planning by the Connector’s board of directors led to an unsustainable health exchange, and improper procurement processes, contract administration, and financial oversight put federal grants at risk.

The Connector’s eligibility system was not integrated with the state’s Medicaid system, which is another reason the exchange wasn’t compliant with federal regulations. The disconnect causes big delays, as the enrollment process used in Hawaii requires that all consumers seeking coverage through the marketplace first be screened for Medicaid eligibility. Those deemed ineligible for Medicaid continue through the enrollment process toward selecting private health insurance.

Hawaii Health Connector suspended payments to Mansha Consulting, the vendor responsible for data transfers between the exchange and the Medicaid system. Mansha representatives say the company is owed $4.2 million for work already completed. A state audit found that Mansha didn’t dedicate the agreed upon number of workers, and both the acting state auditor and a legal team hired by Hawaii Health Connector are continuing to evaluate if Mansha delivered contracted services.

Another  major problem with Hawaii Health Connector was the lack of anonymous browsing. Consumers must create an account before they can compare plans. That same design flaw was a major source of congestion and frustration with the original version of HealthCare.gov, the federal marketplace. HealthCare.gov was revamped to allow browsing, and Hawaii Health Connector officials had hoped to make the feature available on the state exchange at some point.

Hawaii Health Connector’s small business exchange originally had two carriers (HMSA and Kaiser), but HMSA announced in August 2014 that they would not be offering small business plans through the Connector starting in 2015, due mainly to the technological problems with the exchange.  That left Kaiser as the only small business option on the Connector in 2015.

Insurmountable financial challenges

In addition to administrative and technical problems, Hawaii Health Connector faced financial challenges, mostly because of relatively low enrollment and a small pool of eligible enrollees. Federal funding for state-run marketplace operations ran out at the end of 2014. The state allocated $1.5 million of a $4 million request to fund exchange operations through June 2015, the end of the fiscal year.

Hawaii Health Connector planned to use a 2 percent fee on premiums to fund its ongoing operations. Given low enrollment, the premium fee wasn’t generating enough revenue to meet annual expenses, estimated at anywhere between $4.5 and $15 million, according to the Associated Press.

As of July 2014, Hawaii had about 75,000 uninsured residents — about 6 percent of the population. About half of them are expected to qualify for Medicaid — meaning the market for the Connector is less than 40,000. Marketplace officials spent much of 2014 looking for alternative funding models as well as ways to cut expenses.

Hawaii Health Connector had expected to break even by 2022 if operating costs had remained stable. The Hawaii Senate in 2015 approved a bill that would allow Hawaii Health Connector to issue up to $28 million in state bonds over ten years to fund its operations until it becomes self-supporting. However, a House committee stripped the bonding provision from the bill.

In another effort to prop up the exchange, the state Senate also approved SB 1338, which included several measures to increase the number of potential Hawaii Health Connector customers (the bill did not pass however; the House added amendments that the Senate didn’t approve). The bill would have allowed employers with up to 100 employees – instead of 50 – use the small business exchange beginning in 2017 (ultimately, SHOP enrollment ceased in May 2015 in order to allow the exchange to transition to Healthcare.gov).

SB 1338 would also have ended enrollment in transitional or “grandmothered” health plans at the end of 2015 (current provisions in the state allow grandmothered plans to continue to renew until October 2016, and remain in force until September 2017). Finally, the bill would have required, starting in 2020, that individuals eligible for COBRA plans be informed that affordable coverage can be purchased through the Connector.

Exchange governance

The Hawaii Health Connector is overseen by a 15-member board and led by an executive director.

Jeffrey Kissel was named as the executive director in October 2014. While Kissel is an experienced leader, he is new to the health insurance industry. Kissel is the former president and CEO of Hawaii Gas. Tom Matsuda served as interim executive director of the exchange from December 2013 through September 2014. Matsuda replaced Coral Andrews, who resigned.

The Hawaii House in 2014 considered a bill that would have made the marketplace a state agency as a way to address the poor performance of the Connector. However, with some legislators worried about taking on the marketplace’s revenue problems, lawmakers eventually passed a bill that continued the Health Connector as a nonprofit.

ACA presented unique challenge for Hawaii

Many of the concerns that prompted national health care reform and the 2010 passage of the Affordable Care Act are not prominent in Hawaii. Some experts have even raised concerns that the Affordable Care Act is a threat to the quality of health insurance coverage in Hawaii. Long before the ACA brought health reform to the whole country, Hawaii already enjoyed a low uninsured rate, health insurance plans were required cover a core set of benefits, and employer-provided coverage was quite affordable.

This good state of affairs is largely due to the Hawaii Prepaid Health Care Act, which was enacted in 1974. The Prepaid Health Care Act requires employers to provide health insurance to employees who work more than 20 hours a week and to pay 50 percent of premiums. “Affordability” for employees is defined as 1.5 percent of income, compared to 9.5 percent under the ACA.

Given Hawaii’s small population and its historically low uninsured rate, implementing a state-run exchange was a questionable financial decision. According to Kaiser Health News, the Hawaii Health Connector was the nation’s most expensive exchange on a per-enrollee basis: $23,899 per 2014 enrollee. As noted above, the small individual market in Hawaii made it difficult – impossible, really – for the exchange to be financially self-sustaining.

Hawaii health insurance exchange links

Hawaii Health Connector
877-628-5076

State Exchange Profile: Hawaii
The Henry J. Kaiser Family Foundation overview of Hawaii’s progress toward creating a state health insurance exchange.