Dueling diagnoses

State Rep. Angus McKelvey likes the metaphor: Finding the best fix for the Hawaii Health Connector is like trying to fix an airplane after takeoff. You have to do it very carefully, he said. That is the whole approach to the current version of House Bill 2529, originally a proposal to make the Connector a state agency.

"That’s a good analogy," McKelvey said. "It’s why we rewrote it It would have been like taking the wings off in flight."

Nobody really expected it to loom so large as an issue this session, McKelvey said. But it’s more than likely that a lot of midnight oil will be burned addressing various problems with the Connector the private nonprofit that runs Hawaii’s online health insurance exchange, set up under the federal Affordable Care Act.

Before and after its October launch, critics have said the whole thing should have been more open to the public, that there shouldn’t be industry officials making decisions who can plainly vote their companies’ interest. There are several bills that attempt to make various changes (see story, page E4).

But the biggest headache the thing that could bring the plane crashing down is the lack of funding to keep the agency running. What’s worrying everyone is that the nonprofit is subsisting now on more than $204 million in federal grants that expire at year’s end; beyond that, sustainability is in doubt. The presumed funding source fees assessed on enrollments in plans sold through the Connector is not penciling out.

Every Tuesday the most current enrollment figures are posted at the site (hawaiihealthconnector.com). Last week’s update: Since Oct. 1 there have been 4,297 enrollments in the individual marketplace, and 444 employers applying for small-business coverage plans.

Considering the March 31 enrollment deadline is just over a month away, those aren’t good numbers. The original projection had been that the Connector needed to sell 300,000 plans within two years in order to be self-sufficient.

The cost to run the agency in 2015 has been estimated at $15 million, said Steven Tam, director of advocacy for AARP Hawaii, one of the public interest groups involved in discussions about the exchange from the start.

"It appears also and no one has disputed it that they don’t have a plan; the revenue to cover it is insufficient," Tam said.

The competing options at this point:

» The House proposal is to bring the nonprofit more closely under state supervision and have an oversight panel decide whether or not taxpayer support is necessary.

» The Senate idea is to leave the nonprofit more independent but assess a sustainability fee from everyone who buys insurance.

Tam isn’t sure he likes the idea of subsidies: The state doesn’t yet know what it’s buying, he said, and should get more information before owning a piece of the Connector.

"Before you do anything, you have to look before you leap," he said. "You’re in essence agreeing to buy a house without an inspection."

The person crunching the numbers right now is Tom Matsuda, who took over as acting director of the Connector when the former chief executive, Coral Andrews, resigned last fall.

And the problem, Matsuda said, is that the numbers are likely to keep changing over the coming years, as a series of deadlines set in the ACA take effect. Also, the adjustments in these deadlines made by the Obama administration have changed the calculations as well.

One instance he cited: States currently have the option to define the maximum number of employees a company can have to qualify for tax credits if they buy insurance on the exchange.

"The state last year elected to stick with the current definition, which is 50 employees or less," Matsuda said. "But in 2016, under the ACA federal law, it becomes a mandatory 100 or less.

"That expands the number of employers who potentially could sign up on the exchange," he said. "That’s just a simple example of how the upcoming rules really affect enrollment, and therefore it affects sustainability."

Another example: The tax credits themselves are due to expire in 2016.

"It’s meant to attract businesses into signing up for ACA plans on the exchange," Matsuda said. "I don’t know what the thinking was for the Congress to have it cut off after two years but I think it was to build momentum.

"But from a sustainability standpoint, for us, if that incentive disappears after a couple of years, what is that going to do to enrollment? We don’t know."

Lawmakers are asking Matsuda to come up with a financial plan, but he said that all the changes and uncertainty means that it won’t be a simple plan but one sketching out different scenarios.

McKelvey, who chairs the House Consumer Protection and Commerce Committee, is working on the issue with state Rep. Della Au Belatti, who chairs the Committee on Health. Belatti said she believes changing the Connector to a state agency would be a difficult but possible transition, and ultimately, that may be the long-term destination for the exchange.

"Hawaii was unique in taking the option to create a nonprofit that, at its inception, was largely independent of state government, Belatti said.

"I think the decision-making at the time was sort of, What could we do, how would it be most expedient, in the sense that there would be flexibility, given the tight timelines, the opportunity to do something innovative?’" she said.

Earlier this session McKelvey heard the assertions by Matsuda and state attorneys that a sudden conversion from private entity to state agency could disrupt federal grants in progress (see chart, page E5). But while Belatti has joined McKelvey on staking out a middle path, she’s not entirely convinced it was necessary.

"I don’t think it’s quite as onerous as some of them are making it out to be," she said. "Because really, the only amounts of money that they have is federal grants. And my understanding is that our federal partners have been made aware of the legislation moving."

That middle path described in the House bill would allow the state to "take a proactive oversight role to monitor the Connector and review its financial and operational plans," while it remains legally a nonprofit.

It was adapted from the approach taken in Colorado, McKelvey said, and would create a legislative oversight panel of 12 members appointed from House and Senate Health, Consumer Protection and Finance committees.The panel would review the sustainability plan for the Connector and determine what kind of fee it could charge.

By contrast, Senate Bill 2471 would simply authorize the levy of a fee on all health and dental insurance plans issued in the state, whether or not it was issued through the Connector.

On one point in particular, the House and Senate are in agreement: The governing board of the Connector would no longer include voting members from the health or dental insurance industry. Among the proposals likely to come before the conference committee later this session is one creating an advisory panel on which industry representatives would sit so that the Connector could have access to their expertise, McKelvey said.

That’s a point of satisfaction to the AARP, which had argued vociferously against including health executives as voting members in the first place.

Tam said a public briefing set for this week should help address one of the principal shortcomings of the state’s relationship with the Connector: the free flow of information. As a private entity, the exchange has not been subject to state sunshine law, but now, open-meeting requirements are likely to be added.

In any case, Tam said, the public needs to know what they’re getting and should insist on something approaching a financial plan before absorbing any of the costs.

"Our main point to the Legislature is to get the due diligence first, find out before you make any decisions," he said. "What do they project at this point in time? What is their best estimate of the revenues they will get in 2015?

"What we’re asking for is, give us information."