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 will cease June 15). The Connector has 33 staff members, and layoffs will commence July 1; all of the staff will be let go by May 2016.
It’s not entirely clear whether state-based exchanges that use Healthcare.gov will be impacted by the outcome of King v. Burwell if the Supreme Court rules that subsidies aren’t legal in the federally-run exchange, although most analysts believe that the federally-supported state-based model is probably safe, even if subsidies are struck down in states with exchanges that are run entirely by the federal government.
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.
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.
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.
More than 13,000 people signed up for 2015 coverage through Hawaii Health Connector during the second open enrollment period. Since the marketplace launched in the fall of 2013, more than 30,000 people have enrolled in private insurance and about 60,000 people have enrolled in Medicaid through Hawaii’s marketplace.
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.
Hawaii Health Connector had the lowest enrollment of all marketplaces in 2014, and the exchange continues to face significant challenges.
Executive Director Jeffrey Kissel 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 is not integrated with the state’s Medicaid system, which is another reason the exchange isn’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.
A major problem with Hawaii Health Connector is 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 hope to make the feature available on the state exchange at some point.
Hawaii Health Connector faces financial challenges
In addition to administrative and technical problems, Hawaii Health Connector is confronting financial problems. 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. Connector officials will seek the additional $2.5 million during the 2015 session.
Hawaii Health Connector planned to use a 2 percent fee on premiums to fund its ongoing operations. Given low enrollment, the premium fee isn’t generating enough revenue to meet annual expenses, estimated at anywhere between $4.5 and $15 million, according to the Associated Press.
While resolving technology and process problems will eventually make it easier to enroll through Hawaii Health Connector, the revenue shortfall will persist unless the funding mechanism is modified. Current enrollment is low, and the total potential market is small.
As of July 2014, Hawaii had about 75,000 uninsured residents — about 6 percent of the population. About half of those who are currently uninsured are expected to qualify for Medicaid — meaning the market for the Connector is less than 40,000. Marketplace officials are looking for alternative funding models as well as ways to cut expenses.
Hawaii Health Connector expects to break even by 2022 if operating costs remain 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.
The Senate also approved SB 1338, which includes several measures to increase the number of potential Hawaii Health Connector customers. The bill would allow employers with up to 100 employees use the small business exchange beginning in 2017. Currently, businesses with up to 50 employees can use the SHOP. SB 1028 would also end enrollment in transitional or “grandmothered” health plans at the end of 2015. Finally, the bill would require, starting in 2020, that individuals eligible for COBRA plans be informed that affordable coverage can be purchased through the Connector.
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 continues the Health Connector as a nonprofit.
ACA presents 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. Hawaii enjoys a low uninsured rate, health insurance plans must cover a core set of benefits, and employer-provided coverage is 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 overall market means it is unlikely the Health Connector can fund its ongoing operating costs solely with a premiums tax and will need ongoing allocations from the state.
Hawaii health insurance exchange links
Hawaii Health Connector
State Exchange Profile: Hawaii
The Henry J. Kaiser Family Foundation overview of Hawaii’s progress toward creating a state health insurance exchange.