BY JIM DOOLEY – Yielding to criticism from consumer groups and retirees, two state House panels voted Monday to ban health insurance companies from directly shaping Hawaii’s version of the federally-mandated program meant to provide health coverage to all residents of the Islands.
The state is facing impending federal deadlines to establish a website, called the Hawaii Health Connector, where all 
uninsured residents will be required to obtain health coverage.
Hawaii pioneered a form of mandatory health coverage with passage of the prepaid health care law in 1974 that requires businesses to arrange health insurance for their workers and families.
But some 100,000 Isle residents don’t qualify for prepaid coverage and the Hawaii Health Connector is meant to satisfy the requirements of the federal Affordable Care Act (known to many as Obamacare) that mandates health insurance for all.
The value of the uninsured market here is estimated to be at least $300 million annually and various insurance carriers are jockeying for a piece of the pie.
The federal program is under attack in various courts around the country and has been assailed by Republican candidates vying to run against President Barack Obama in November’s general election.
The law is on the books now, as is enabling legislation passed earlier by state lawmakers that laid the groundwork for the Hawaii Health Connector website.
Questions about who is in charge of the Health Connector program and whether the state can meet impending federal performance deadlines were raised at a joint hearing of two House of Representatives committees.
Under current state law, four large health insurance providers hold seats on the interim board of directors of a nonprofit corporation responsible for establishing the Health Connector program.
A variety of community groups called that a conflict of interest at an afternoon press conference and in testimony to the Judiciary and Consumer Protection/Commerce Committees of the House of Representatives.
“The consumer is not served and (it) is contrary to good public policy to allow board membership to individuals representing organizations who stand to gain financially by board policy and decisions,” said Barbara Kim Stanton, head of the politically influential local chapter of the American Association of Retired Persons.
Hawaii Insurance Commissioner Gordon Ito acknowledged apparent conflicts of interest in the board structure, but said his office represents consumer interests in board affairs.
“I know there’s a perception issue with respect to health insurers being on the connector board. We can’t get away from that,” Ito said.
But he said his office “insisted” on consumer protections and “retained the power to qualify health plans and health insurers” who will participate in the program.
The state received a $14.4 million federal grant to establish the Health Connector program, which Ito said will operate like “an Orbitz or Travelocity” website. Customers will enter their personal data and then be matched with coverage offers from various firms, he said.
But the clock is ticking and federal deadlines are looming, said Ito.
By January of next year, federal officials must be satisfied that the state has the ability to meet the requirements of the federal law.
“Right now, we all gotta get together and work together and not be divisive in terms of getting this connector up,” he said.
But at the close of the hearing, the lawmakers voted to fundamentally alter not just the makeup of connector board but also the basic structure of the program itself.
Board members can’t work for insurance companies or firms even indirectly involved in arranging health insurance coverage, committee members decided.
House Consumer Protection and Commerce Committee vice chairman Ryan Yamane said insurance industry personnel can advise the board on its work, but cannot serve as voting members.
The committees voted for other changes, too.
The connector program as now designed splits the customers who must buy insurance between individuals and small business owners seeking coverage for their employees.
Critics testified that those two groups should be combined into a single pool of customers that will spread the risk and keep rates as low as possible.
Committee members agreed and also adopted another change that would require the connector board to follow ”sunshine” requirements in state law, opening more of its activities to public view.
Yamane said that the nonprofit corporation in charge of the connector program technically isn’t covered by the sunshine law, but amendments can be made to the law that increase the board’s transparency.
It’s not clear how the proposed amendments – which would have to be approved by the full House, Senate and Governor – would affect the board’s ability to meet federal deadlines or clash with other measures pending at the Legislature.
Interim connector board members now include executives from Hawaii Medical Service Association, Ohana Health Plan and Hawaii Dental Service. Harris Nakamoto, an official with Kaiser Permanente, resigned recently from the connector board after leaving Kaiser to take a position with Ohana Health Plan.
Governor Neil Abercrombie nominated 11 individuals, including Nakamoto and three other insurance executives, to serve on the non-profit’s permanent board of directors. The governor has withdrawn Nakamoto’s nomination, but the remaining nominees are to be considered for confirmation by a state Senate committee Friday.
Ito said if the state can’t meet federal deadlines, control of the connector program will default to the federal government.
Hawaii’s health insurance landscape differs from other states because of the prepaid health care program already in operation here, said Ito.
Residents insured through their employers are exempted from the federal law and Ito said he doubted federal overseers could or would craft a hybrid program to fit Hawaii’s situation.
“The feds will not build an interface” that combines Hawaii’s prepaid health program with the Affordable Care Act requirements, said Ito.