Hawaii’s small insurance carriers have distanced themselves from the state’s troubled health insurance exchange after determining it has added no value to the market and instead resulted in higher costs.
Hawaii Medical Assurance Association, UHA (University Health Alliance) and Family Health Hawaii have decided against participating in the online marketplace, known as the Hawaii Health Connector, created by the federal Affordable Care Act.
The state’s two largest insurers — Kaiser Permanente Hawaii and Hawaii Medical Service Association — are participating in the Connector, and they control about 98 percent of the market. The large insurers have said the new law, commonly known as Obamacare, is increasing their costs, a sentiment that is echoed by the smaller companies.
"So far it’s been the Unaffordable Care Act," said Bill McCorriston, a lawyer and president of HMAA. "It’s added to our expenses, even not being a member of the Health Connector."
"The passage of the first year has done nothing to encourage us to participate in the future," McCorriston said. "In fact, all reasonable-thinking people would see that Hawaii really isn’t being benefited by a Health Connector."
The Connector, 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. With only two companies offering plans in Hawaii, it’s difficult to say it accomplished that goal.
HMSA, the state’s largest insurer with more than 70 percent of the market, said in April, when it applied for a 12.8 percent rate hike for some of its plans, that 60 percent of the increase was due to added costs related to Obamacare.
"It is an additional administrative expense as well as fees and other costs to get on the Connector for no real benefit," said former state Insurance Commissioner J.P. Schmidt, who is heading Hawaii’s newest insurer, Family Health Hawaii, which enrolled about 4,000 members since launching Oct. 1. "There’s no incentive for other carriers to join because it’s the same as the regular market."
McCorriston said, "The experience of the two largest carriers, HMSA and Kaiser, proved a point. They went all in on the Health Connector, and I think they suffered economically because of it. Quite frankly it’s a mystery why HMSA and Kaiser went all in."
Hawaii’s small health insurance companies typically focus on selling coverage to businesses, and few businesses have purchased health insurance through the exchange or applied for tax credits touted by the Connector as an incentive for businesses to join.
As of June 14, 637 employers applied through the exchange, and 861 employees and their dependents were enrolled, according to the Connector’s website.
The Connector’s interim executive director, Tom Matsuda, told lawmakers earlier this year that he didn’t anticipate many businesses purchasing coverage on the exchange.
In addition to the low number of businesses using the Connector, the smaller insurers have opted not to join because the Connector allows small-business insurers to sell only the highest-level benefit, the Platinum and Gold plans. Those are the only plans that meet the minimum requirements of Hawaii’s 1974 Prepaid Health Care Act, the law that mandates employers provide coverage for full-time workers.
"Since they don’t allow (lower-level) Silver and Bronze plans, there’s no difference between the Connector and the traditional market," Schmidt said. "It seems to me that the only way to really rescue the Connector and have it provide a significant benefit in Hawaii is to allow Silver and Bronze plans on the Connector … at which point all the insurers would join and a lot more businesses would participate on the Connector because they would offer more choices and would offer the first break that small businesses in Hawaii would have had in 40 years."
For UHA, Connector-related taxes and fees have added between 2.3 percent to 4 percent to its rates, which rose about 7 percent this year for its 52,500 members.
"Taxes alone are impacting the rates, and that’s before the medical trend," said Howard Lee, UHA president and chief executive officer. "The cost of the ACA has to be passed on (to) the rest of the insurers. In hindsight, it’s easy to say from the (small business) side the enrollment is so low that they should probably look at some other alternatives. … It would probably be better to allow employers to go directly to the carriers; it’s probably cheaper that way. In Hawaii it’s not as relevant because people that are working are covered by their employer."
McCorriston said the state would be better off using the federal exchange rather than the state-based exchange. "That way we could avoid the expense and unnecessary fees that everyone is incurring as a result of the Connector."
Thirty-six states opted to join the federal health insurance exchange rather than set up their own. The Hawaii Connector received $204.3 million in federal grants to build its exchange but now has to charge fees or tap the state’s general fund to continue operations.
"This whole Health Connector business was a step backwards," McCorriston said. "It does have some elements that are very good. It’s just that unfortunately, the nice little stones came with a boulder. The little bit of good came with a lot of bad, so we just got to figure our way through it. Hopefully there will be more reasoned judgments rather than political judgments as to what do to so we can have a system that really works well."
