Gov. David Ige is hoping to keep Hawaii’s health insurance exchange under state control and is in discussions with the federal government to negotiate a "corrective action plan."
"The federal government has requested discussions with the governor and/or his representatives to address their concerns about the Hawaii Health Connector," said Laurel Johnston, Ige’s deputy chief of staff, in an email Friday. "We wish to maintain a state-based marketplace and we wish to protect the Prepaid Health Care Act."
The federal government is threatening to take over the state exchange within months and has restricted grant money to support operations of the Hawaii Health Connector created by the Affordable Care Act, also known as Obamacare.
Jeff Kissel, the Connector’s executive director, told lawmakers at a briefing Thursday that if the exchange created by the Affordable Care Act does not get additional state funding soon, the federal government might abolish Hawaii’s marketplace and run it directly. The Connector said it needs $9 million to $10 million in additional funding from the state in fiscal 2016, starting July 1, to continue operations.
One option Ige’s administration is considering is to turn the nonprofit exchange into a state agency attached to the Department of Commerce and Consumer Affairs, according to an email to state officials from Betsy Kim, special adviser to the governor. Another option would be to move the Connector to the federal marketplace if the first option fails, the email said.
State officials are worried that if the federal government assumes control of the exchange, Hawaii’s 1974 Prepaid Health Care Act, requiring employers to provide health insurance for employees working at least 20 hours per week, may be abolished, and more people will become uninsured.
The Connector was awarded $204.3 million in federal grants to build and operate the online marketplace designed to provide subsidized health coverage for those with incomes too high to qualify for Medicaid, the government health insurance program for low-income residents.
All but about $70 million of the federal grant money has been spent, and the federal government is restricting use of the remaining funds until the state provides a contingency plan to federal authorities, Kissel said.
The restriction is affecting the Connector’s ability to improve its technology, which has been a problem for users since its inception in October 2013.
"Our system works but it’s not 100 percent, and I believe that’s what the Feds want," said Sen. Roz Baker (D, West Maui-South Maui). "Sustainability is the other piece, but part of what will get us to that point is for the Feds to allow us to use some of the grant funds they are sitting on to do the tech pieces that need to be done."
Lawmakers appropriated $1.5 million for exchange operations through June 30.
The Legislature also is considering a bill that would allow the Connector to borrow as much as $28 million in bonds backed by the state over six years. The Connector projects it will need the $28 million to operate through 2022, when it anticipates becoming self-sustaining.
"If the Feds are going to deal with us fairly and openly, then there needs to be negotiations, not an ultimatum — that’s what it seems they’re trying to give us," Baker said. "The time frame doesn’t give us an opportunity to move everything inside (the state) to create a new arrangement with the Connector. I don’t believe at this point we should be bullied by the federal government. There is no reason for Hawaii’s Health Connector to go to the federal exchange because it puts Prepaid at risk (and) it opens us to lesser health care for our people."
