Troubled exchange to get $1.5M boost

A key committee of House and Senate lawmakers has granted the Hawai‘i Health Connector $1.5 million of the $4.7 million it said is necessary to run the troubled health insurance exchange for the first half of next year.

The Connector, which is responsible for implementing President Barack Obama’s Affordable Care Act in Hawaii, is projecting a $4.7 million deficit for the first six months of 2015 once the remainder of $204.3 million in federal funds expires at the end of 2014.

The Connector will need to reduce spending to survive.

"Obviously the decision was just made, so we’re going to have to go back and evaluate and figure out how we can operate," Tom Matsuda, the Connector’s interim executive director, said Friday. "This is not going to take effect until the first half of calendar year 2015, so we have eight months to make some adjustments. We just have to figure out how to make it work."

The bill still must be approved by the full House and Senate.

The nonprofit online marketplace has spent roughly half of the $204.3 million to build a system that has been plagued with software problems since its launch on Oct. 15, two weeks late.

The federal government didn’t grant the Connector an extension to spend the remaining federal dollars beyond this year, and its only source of revenue is a 2 percent fee on health insurance plans sold on the exchange.

"It’s disappointing. It’s not what we had wanted," said Sen. Roz Baker (D, South Maui-West Maui), who blamed a budget crunch and other priority programs on the limited amount of funding. "It just means we’re going to have to come back because you can only squeeze so much blood out of a turnip."

Lawmakers scrapped a proposal to impose a fee on all insurers to keep the Connector afloat at least until 2017 when the state will seek an innovation waiver that potentially could eliminate the exchange altogether.

The state opted to run its own exchange under Obama­care even though it could have chosen to use the federal exchange.

The main reason, state officials say, was to protect Hawaii’s Prepaid Health Care Act of 1974, the law that requires employers to provide medical coverage for full-time workers and is responsible for insuring the bulk of the population.

"This isn’t about state money to bail out the Connector. This is state money to save (the Prepaid Health Care Act). I can’t stress that enough," said Rep. Angus McKelvey (D, West Maui). "If the feds come in with an exchange, it will wipe out Prepaid" because it would supersede the state law.

On Friday, Oregon gave in to its frustration after months of trying to get its problem-plagued online health exchange to work and became the first state to drop its state portal and switch to the federal website.

The Hawai‘i Health Connector, which has endured its own problems, collected more than 24,000 applications as of the March 31 deadline but enrolled fewer than 8,000 people. It is projecting enrollment to grow to 37,100 in 2015 and 51,400 in 2016.

In addition to funding, lawmakers also approved measures to increase legislative oversight of the organization and changed the composition of the board of directors to eliminate health insurers. The board’s makeup has been a source of contention among community groups who argue including health insurers poses a conflict of interest.

Residents must obtain health coverage or face tax penalties beginning this year under the health care law. The next open enrollment period is Nov. 15 through Feb. 15.