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State health exchange faces federal pressure over finances

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State officials are scrambling to provide information to the federal government to satisfy concerns about financial problems at the state’s health exchange.

All state-run insurance exchanges that are part of President Barack Obama’s Affordable Care Act are supposed to be financially sustainable this year. But without an infusion of cash, the Hawaii Health Connector won’t have enough money for its operations. The Legislature hasn’t yet approved the organization’s request to issue $28 million in bonds or loans.

Without a solid path to sustainability in place, the federal government is telling the state it may have to eventually move some technology functions to a federal system, said Jeff Kissel, CEO of the Hawaii Health Connector.

“This is a contingency that is being imposed on any state-based exchange that doesn’t have a funded sustainability plan in play,” Kissel said. “I don’t know of any other exchanges that are having to do this because it seems to me that everyone else is funded.”

If the scenario comes to pass, the outcome could be a federally-supported state-based marketplace similar to those operating in Oregon, Nevada and New Mexico, where the state entity continues to do outreach and handle the call center, but some plans are sold using technology provided by the federal government. It would affect the individual plans sold on the marketplace, not the employer-provided plans, Kissel said.

State officials have long warned that a federal takeover could threaten the state’s strong health care law — the Prepaid Health Care Act — that requires employers to subsidize good health insurance plans for many employees. It’s unclear whether a limited technology transfer that doesn’t include the employer side of the exchange would still pose such a threat, but some lawmakers have that fear.

“I can’t quite figure out what the deal is because the federal exchange doesn’t really have an excellent track record. And if we were to migrate even pieces of our exchange to the feds, we put our Prepaid Health Care Act at risk,” said Sen. Rosalyn Baker, a Democrat from Maui. “I’m not willing to do that.”

Kissel’s request for approval to issue $28 million in bonds or loans was stripped out of a bill by a joint meeting of two House committees, but Consumer Protection and Commerce Committee Chairman Angus McKelvey said his intent was to work with state budget officials on concerns about the funding mechanism, not to deny the request altogether.

“The Legislature is totally committed. We are speaking with one voice,” McKelvey said. “To put us in the federal marketplace puts us in all forms of chaos.”

To make that clear, McKelvey drafted an email on the fly, with Kissel in his office, telling the Hawaii Health Connector that the Legislature will do what it takes to keep the exchange sustainable. Kissel then passed the letter along to Gov. David Ige’s administration for their conversations with the federal government, he said.

Ige wants to maintain a state-based marketplace and protect the Prepaid Health Care Act, and his administration is working with the federal government on a corrective action plan, said Laurel Johnston, Ige’s deputy chief of staff, in an emailed statement.

Tasha Bradley from the U.S. Centers for Medicare and Medicaid Services would not confirm what plans are under consideration for Hawaii, but she said in an email that federal officials are having “discussions with the state on the options and steps they need to take to best serve their state’s consumers.”

The Hawaii Health Connector will need about $28 million to maintain operations through 2022. At that point, it’s expected to break even and to begin paying off interest for a loan.

The deadline for submitting the funded sustainability plan to the federal government is May 11, a few days after the 2015 legislative session ends, Kissel said. But lawmakers had different impressions of the deadline.

“Everybody has a different version. It’s like a telephone game,” McKelvey said.

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