Insurance body might be transformed

The Hawaii Health Connector will be on the hot seat as it heads into the legislative session today without permanent leadership or an adequate funding source once federal grants expire at year’s end.

Lawmakers are considering turning the nonprofit they created in 2011 into a state agency three months after it fumbled the start of the online insurance marketplace created by President Barack Obama’s Affordable Care Act. The Hawaii Legislature opens its 60-day session today.

"We have spent more money than we should have for the results we’ve gotten," said Senate Health Committee Chairman Josh Green (D, Kona-Kau). "I share (lawmakers’) concerns about whether it’ll be sustainable or not."

The Connector was supposed to launch Oct. 1, but did not go live until Oct. 15 due to software problems that have stifled enrollment.

As of Saturday, 2,709 individuals had enrolled in health plans and 350 businesses had applied for policies through the marketplace designed to match low-income residents with subsidized coverage.

Becoming a state agency could give the Connector access to greater resources, reduce information technology costs, improve security of private health information and make it more transparent, lawmakers say.

"I definitely think that the structure of the Health Connector will come under scrutiny," as will board composition and sustainability, said House Health Committee chairwoman Della Au Belatti (D, Makiki-Tantalus-Papakolea). "We’ll see if there are now more apparent conflicts of interests that warrant the removal of certain board members."

The Connector came under fire early on for having health insurance company executives as board members helping to design the system. Only the Hawaii Medical Service Association and Kaiser Permanente Hawaii — which both have positions on the board — are selling medical plans on the Connector, contrary to the state’s intent to give consumers more choices in the marketplace.

"The Hawaii Health Connector will be providing the Legislature with information to help make informed decisions," Tom Matsuda, the Connector’s interim executive director, said in a statement. "We want to ensure that the health insurance marketplace can be a valuable community resource for Hawaii residents to access quality, affordable health-care coverage." Matsuda is filling in while the Connector searches for a permanent leader following the surprise resignation last month of its first executive director, Coral Andrews.

Rep. Angus McKelvey (D, West Maui-Maalaea-North Kihei), chairman of the House Committee on Consumer Protection and Commerce, is introducing the bill to deliberate whether the Connector should be a state agency or quasi-public entity with state oversight but the flexibility of a private entity.

He also is introducing a measure that would put in place a sustainability model that involves setting up a trust account that all health insurers would pay into to fund Connector operations. Connector spending would be regulated by the Insurance Commissioner, he said.

"Right now as it stands, you have a private nonprofit which shields the Legislature from any information, and they’re getting a stream of direct funding, so we just want to look at some types of oversight and accountability," McKelvey said. "We invested a lot of taxpayer dollars in what the feds have mandated, so it’s incumbent upon us to look at how we can make it the best it can be for Hawaii."

The Connector has been operating with $204.3 million in federal grants that expire at the end of 2014. Matsuda told lawmakers at a briefing last month that the Connector has spent $49.2 million and contracted to expend another $44.2 million. Roughly $110.9 million in unobligated funds must be used by the end of next year, or the grants will be forfeited.

Aside from charging participating insurance companies a 2 percent fee on premiums, the Connector has no other "substantial" form of revenue to sustain operations once federal funds dry up, Matsuda previously told the Hono­lulu Star-Advertiser.

He told lawmakers last month that the Connector needs to sign up 50,000 people — 10,000 individuals and 40,000 small-business workers — by June 30 to be financially sustainable after its grants run out. An additional 133,000 residents must enroll in fiscal 2015 — 39,000 individuals and 94,000 workers. Matsuda hasn’t provided revised projections.

After the grants end, the Connector projected operating expenses of more than $40 million in 2015 and in excess of $20 million in 2016, according to a budget report released earlier this year.