Health Connector tries to lure small businesses

Hawaii’s health insurance exchange is making a final push to capture a share of the small-business market as the bulk of groups renew policies in July.

Despite significant computer glitches that initially stunted its growth, the Hawaii Health Connector is aggressively marketing the Small Business Health Options Program, known as SHOP, the piece of the Affordable Care Act intended to increase insurance options for workers.

But changing the mindset of frustrated employers may be difficult.

"I had quite a bit of interaction with them, none of which ever came to fruition. It was a rather strenuous, time-consuming process that resulted in a big circle," said Don Wakeman, owner of Aloha Key Awards & Gifts, who provides insurance for eight employees, all of whom could qualify for tax credits on the Connector.

Wakeman said he unsuccessfully tried to get rate quotes on the Connector for each of his workers. For at least one employee, he is paying about $394 monthly through University Health Alliance, and was quoted $778 a month for a comparable plan on the Connector, though he anticipated a 46.7 percent tax credit.

The Connector was "not willing or are unable to provide me with rate quotes on each of my employees even though I provided them all the information … so I quit," he said. "They did not have resources to provide me with the information to make an informed decision. It was a huge waste of time."

So far the exchange has struggled to attract employers to the online marketplace, enrolling just 965 employees and their dependents as of June 21, according to the Connector’s website, which listed 643 as the number of employers that have applied.

The Connector has been funded by $204.3 million in federal grants, but access to that money expires at year’s end.

The exchange, which began offering health plans in October, was set up to give consumers one place where they could compare plans from several different companies, with the hope that the competition would drive costs lower. But only two companies — Hawaii Medical Service Association and Kaiser Permanente Hawaii — are offering plans, so it’s difficult to say it accomplished that goal.

Marilyn Niwao, a certified public account on Maui, said none of her business clients plan to use the Connector as many have older workers and will likely see rates skyrocket because of that.

Health plans on the Connector are rated by age — rather than utilization — meaning a business with an older workforce would get higher premiums than one with younger employees.

"This whole thing with ‘Obama­care’ is going to be a total mess," she said. "The biggest problem is they’re going to age-rate, so older employees will pay three times as much as younger employees for premiums. I’m angry about that because it hits the small businesses that have a lot of baby boomers or older workers."

Under the law, businesses with fewer than 50 workers will be subject to age-rating, but companies with more than 50 employees are not subject to age-rating.

"What I’m afraid of is age-rating is going to lead to age discrimination in the marketplace," Niwao said. "Someone who knows they’re going to pay three times more might be inclined to hire a younger employee versus an older (worker)."

In addition, the small-business tax credits available to those purchasing on the exchange do not apply to owners or family members working for a company, excluding many of Hawaii’s mom-and-pop operations.

The complexity and paperwork required to apply for tax credits via the Connector is another hurdle for business owners, she added.

Not all employers are unhappy with the health exchange. Stephen Nii, owner of Nii Superette Inc. in Wai­pahu, appreciates the transparency it has created.

"The ACA is not about a website; it’s about comprehensive health care reform aimed at the insurance companies," he said. "They can’t operate the way they did, keeping numbers from customers."

Nii said prior to the start of the Connector, insurance companies would do their best to prevent customers from shopping around, delaying rate quotes until businesses had no time to change health plans even if they wanted to.

"No matter how early you call, they’d drag it out (until the end of open enrollment) so that you have to make a decision in a very short time frame," he said. "To find out (the rates) the old way, you’d have to read a 300-page contract."

The Connector has brought about transparency of prices between carriers, now allowing employers to easily see what coverage they’re paying for and get the best deal, he said.

Based on the changes the health care law initiated, Nii is paying substantially less overall for the Connector’s highest-level platinum option for his eight full-time workers.

Last year he paid Hawaii Medical Service Association a flat rate of $987 per month per person for the same benefit level plan, or a total of $81,000 per year, he said.

"On the Connector I’m paying about $52,600 per year in 2014. This is before I factor in tax savings," Nii said, adding that he qualifies for up to 45 percent in tax credits for four of his eight workers. "For two years, if it’s a possible $24,000 savings, where can you get a chance like that? Would I be crazy not to try? I admit it won’t work that way for everybody, but for a business like mine, it does work."

The tax credits — only available on the exchange — are generally available for small employers with fewer than 25 full-time employees earning average wages of less than $50,000. For 2014 and 2015 the maximum tax credit will increase to 50 percent of premiums paid for qualifying employees and 35 percent of premiums paid for employees of small tax-exempt employers, subject to limitations.

Amid concerns that premiums might go up for businesses using ACA plans, President Barack Obama and state officials allowed consumers and businesses to keep their existing health plans, known as transitional policies, until 2017 before having to switch to an ACA policy.

"It’s not one size fits all. It really depends; that’s why people should compare transitional versus ACA plans," said state Insurance Commissioner Gordon Ito. "The Connector has made significant improvements on their IT, so small businesses, especially those that may be eligible for tax credits, should give the Connector a chance and go online to see how well it’s working now."

A report by Families USA and Small Business Majority estimates that 61 percent of small businesses in Hawaii are eligible for tax credits through the exchange.

"With simplified administration, transparent plan comparison tools, and exclusive tax credits for qualifying small businesses, we believe employers owe it to their businesses to at least review the health insurance options available through the Connector, and see if they can save time and money," Kaili Honbo, the Connector’s business and producer relations manager, said in a press release.

But after spending hours going through the process, some business owners such as Wakeman won’t try again.

"I spent a few hours going through the process. When it didn’t result in anything and you think (to yourself), ‘They spent $210 million on that?’" he said, "they could’ve just bought a lot of health care for a lot of people."