Hawaii Obamacare exchange projected to be financially viable — in 2022

By Malia Zimmerman | Watchdog.org

HONOLULU — Hawaii’s Obamacare exchange, Hawaii Health Connector, has been under fire for being the most costly in the nation, and a new report from the Hawaii Commerce and Consumer Affairs Department shows the Connector won’t be fiscally sustainable until 2022.

That’s based on an enrollment of 70,000 to 80,000, said its director, Jeff Kissel. The Connector had about 1,000 people enrolled at this time last year. As of Thursday, that number had grown to 16,000.

On the job less than 90 days, Kissel told Watchdog.org he believes the department’s prediction is accurate and attainable.

However, Reg Baker, an accountant who previously served as chief financial officer for the Hawaii Medical Assurance Association, said finally becoming self-sustaining after over 10 years of design and implementation effort “is very disappointing.”

“If the plan was to receive state funding for 10 years then that should have been incorporated into the Connector’s business plan from the beginning and thoroughly discussed and approved by the state Legislature,” Baker said.  “The funding source to keep the Connector operational should have been determined and secured a long time ago. This implies that they had other plans for funding operations that did not materialize for them — we all watched that unfold in the media.”

Numbers fell flat

When the Connector launched in Oct. 2013, then Gov. Neil Abercrombie said he expected “hundreds of thousands of people” to enroll.

Baker said the projected enrollment numbers are “questionable.”

“Having 70,000 to 80,000 participants by 2022 is curious. Is it coincidence that this just happens to be the estimated total of uninsured individuals in Hawaii that makes this a very politically correct and noble accomplishment, or hard for our elected officials to vote against?” Baker asked.

“The historical financial and operational results of the Connector do not provide much confidence that these newest projections will be any more accurate,” Baker said.

The federal government initially funded the Hawaii exchange with a $204 million grant, but the Connector was expected to be self funded after 2014. That isn’t possible based on current enrollment, but the Connector has changed its business model to improve viability moving forward, Kissel said.

The Connector annually collects a 2 percent fee per person who enrolled from private insurance companies. That percentage nearly doubles in the coming months to 3.5 percent.

The Connector also will receive $1.5 million in funding from the state this year.

More than 365 small businesses, with 2,400 enrollees, have joined the Connector through the Small Business Health Options Program, or SHOP, in part because of tax deductions available to them, Kissel said.

Another 50,000 people have been added to the Medicaid rolls in Hawaii, Kissel said. Whether those new enrollees were part of the 100,000 to 150,000 uninsured in Hawaii when the Connector launched in October 2013, or they’ve left other plans to get insurance, the Connector isn’t sure.

Either way, people and small businesses obtaining insurance through the Connector are likely seeing their premiums go down, Kissel said.

Baker said he believes many of the enrolled Connector participants were most likely already participating in other medical insurance plans.

“Many of the uninsured are being enrolled in Medicaid and never make it to medical plans offered on the Connector.  For the most part, these participant numbers appear to be a simple mixing around of those already insured,” Baker said. “Achieving these enrollment numbers would be very difficult, even for a well-managed insurance company or broker. And don’t forget, these other well-managed insurers and brokers will be going after these same participants.  They will not just stand by and let the Connector take their customers without a fight.”

Plan options are limited because just Kaiser and HMSA, the state’s largest health insurers, participate on the exchange. HMSA announced the company will no longer offer plans through SHOP as of March.

Kissel hopes to convince HMSA “it is in the community’s best interest” to stay on, as well as recruit two of the state’s smaller providers to join the exchange.

Technical difficulties

HMSA announced its decision in August after its top executive said the company’s employees spent 8,000 hours dealing with the exchange’s technical problems, which drained finances and staffing resources. Information on 133 patient accounts also vanished as they were transferred from the connector to HMSA.

“HMSA supported the Hawaii Health Connector in its development stage and at its launch last October. But it soon became evident that the Hawaii Health Connector’s technical challenges were so great that they severely impacted the public’s ability to use the site,” HMSA spokesman Floyd Takeuchi said in August. “In addition, technical issues were not resolved and, in fact, the site still has issues that haven’t been fixed.”

The site’s technical glitches are largely resolved, Kissel said, but improvements are still under way. A lot of data in the system need to be “reconciled and cleansed,” he said.

The portal must also be coordinated with 40 other systems, including federal and state agencies, some of which continue to change their requirements.

“That integration needs to be worked on,” Kissel said.

Several lawmakers have expressed concerns about the Connector’s financial viability and its service problems. Some even questioned whether Hawaii needs an Obamacare exchange when the state already has a Prepaid Healthcare Act, which mandates businesses provide health care coverage for their employees.

Kissel said he’s been meeting with lawmakers to reassure them the exchange provides a needed service and is cutting costs.

Staff has been reduced to 27 people from about 200 initially.

Kissel said he makes $150,000 annually, a fraction of what he made in the private sector, but he’s not the highest-paid employee at the Connector. Some executives make closer to $200,000 in salary.

Customer service, including the time it takes to register, has improved, Kissel said. Small businesses can sign up within the hour, whereas individuals can take as little time as 10 minutes, he said.

Baker said there may be better options for consumers.

“We need to know the total commitment the Connector is asking for over the next eight to 10 years and re-evaluate whether it is cost justified.  There may be more reasonably priced options available to us,” Baker said.

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