Feds should help Hawaii fix Connector

The federal government is at least partly responsible for the current mess surrounding Hawaii’s health-insurance marketplace, and it shouldn’t leave the state in the lurch when a solution lies within reach.

That ought to be the conclusion of this saga, which began 40 years ago. Before enactment of the Patient Protection and Affordable Care Act — otherwise known as the ACA or "Obamacare" — Hawaii was a leader among states for the reach of its health coverage, provided through its 1974 Prepaid Health Care Act. The proportion of the state’s population that lacked health insurance was among the lowest in the country, and so were medical costs, compared to other states.

This is what made the sustainability of the Hawaii Health Connector such a difficult proposition, right from the get-go. The marketplace on which it planned to collect revenues in sales fees was a shallow pool.

And now, after struggling through technical problems with its "shop and compare" online exchange, and falling short of its targets for sales of insurance policies, the Connector is in fiscal trouble, which has landed it in hot water with the federal government.

The deficits are so egregious that the federal government could pull its share of Medicaid funds that cover health costs of the poor, an amount totaling around $1 billion. Imposing this penalty may be the worst-case scenario, but it’s still a real threat.

If this seems an unjust outcome for a state that has historically performed so well in the delivery of health coverage to its citizens, it is precisely that. And our congressional delegation should step up and bolster the governor’s current efforts to negotiate a solution. Hawaii’s elected leaders must persuade the federal government not to penalize the state so grievously, as it is now positioned to do.

Earlier this year, newly inaugurated Gov. David Ige learned that federal authorities had found Hawaii out of compliance with the ACA. At issue were three identified Connector shortcomings:

» It won’t be financially sustainable by this year’s deadline.

» There are ongoing technology issues to resolve.

» It is not yet integrated with the federal Medicaid system.

The governor will meet with officials of the U.S. Department of Health and Human Services this week to press Hawaii’s case, said Laurel Johnson, Ige’s deputy chief of staff.

Although details are still being worked out, Johnson said, Ige’s draft "corrective action plan" requests roughly $30 million in federal dollars to make the fixes the federal government requires.

At issue is HHS permission to draw this money from the approximately $70 million of Hawaii’s unspent federal grant funds. This money, left over from the $204 million originally granted to the state, otherwise is restricted to cover costs incurred with the initial development of the exchange.

The state can rightly argue that permission should be granted because the fixes are aimed at making the exchange’s technological system function as promised.

But it’s still going to take a massive push — from Hawaii’s contingent on Capitol Hill as well as those on the state Capitol’s fifth floor.

It’s at such times that the prevailing strength of the late U.S. Sen. Daniel Inouye, who knew how to pull the levers of government power on Hawaii’s behalf, is most sorely missed.

On Thursday, the Honolulu Star-Advertiser’s Kristen Consillio reported how much is at stake in these negotiations. In Hawaii, more than 300,000 people are on Medicaid, a $2 billion health coverage plan for low-income residents. The program costs are split 50-50 between the state and federal governments.

Johnson said the negotiations involve "how much money they’re willing to release, and in what increments."

The state of Hawaii would become the grantee of these funds, rather than the Connector, which is a private nonprofit over which government has limited control, she added.

It’s ironic that the Legislature, which in 2011 created the Connector as a private nonprofit, was unwilling to fund a rescue plan, appropriating less than half the $5.4 million the Connector requested to stay within compliance for the short term. The fact that the limited bailout was going to a private entity beyond the state’s control left many lawmakers uneasy.

Now, success of this week’s negotiations will mean the expenditure of some $30 million. When viewed through a simple budgetary lens, this seems to be the type of dysfunction at which government excels.

Still, what does make sense is that the funds come from federal coffers and that costs not be left to Hawaii taxpayers to bear alone.

The state’s Prepaid Health Care Act ought to prevail once the ACA allows exemptions from the law in 2017. But for the present, the federal government should work with Hawaii officials to make a rigid federal law work in a state that has a superior health program.

We should not be punished for it.