Hawaii Connector transferring to federal exchange

[6/5/15]  The state is walking away from a $130 million investment in the Hawaii Health Connector and permanently moving the insurance exchange to the federal Obamacare program.

Gov. David Ige’s administration has decided to abandon the troubled Connector, which has struggled since its launch in October 2013 to meet enrollment targets, provide satisfactory service and raise enough money to be self-sustaining.

The Connector has burned through $130 million of $204 million in federal money granted to the state to build the exchange but not to fund ongoing operations.

Ige originally thought he could temporarily move Hawaii’s online marketplace to the federal exchange for one year while the state worked on getting the Connector into compliance with the Affordable Care Act, commonly referred to as Obamacare.

In recent weeks Ige has decided the best path is to permanently move Hawaii to the federal exchange.

Ige acknowledged last month that Hawaii is out of compliance with the ACA and is at risk of losing $1 billion in Medicaid funds if Washington does not accept the state’s plan to remedy the ailing Connector.

The administration’s revised “transition plan,” obtained by the Honolulu Star-Advertiser, states the Connector will shut down its Small Business Health Options Program, or SHOP, on June 15.

On July 1 individual and family enrollments will be moved to the federal healthcare.gov, and staff reductions will begin. The exchange has 32 employees, 29 temporary staff and 12 full-time contractors.

The Connector’s board of directors is scheduled to vote Friday to approve the plan to move the technological functions to the federal marketplace, while the state will run outreach, enrollment and customer support.

Transition to the federal exchange will be completed by Oct. 15. About a dozen Connector employees will work through January, providing limited support to the state. The Connector’s workforce will be completely eliminated by May 1, the document shows.

“The Connector is, and will remain, in noncompliance with the federal requirements until it shuts down its operations,” the plan said. “The objective of the following plan is to provide for an orderly transition of the essential functions of the (state-based marketplace) to the state and to terminate other functions.”

Connector Executive Director Jeff Kissel is expected to be dismissed after the bulk of operational and administrative activities end, the plan said.

Lawmakers appropriated $2 million for exchange operations starting on July 1 but failed to grant the full $5.4 million the Connector said it needed to be financially sustainable.

“It was a failed project. It was a boondoggle from the very beginning, and our residents deserve better than that,” said Sen. Sam Slom (R, Diamond Head-Kahala-Hawaii Kai). “The changes they said they were going to make were too little and too late. I’m glad my colleagues (in the Legislature) for whatever reasons decided not to do the funding. I’m from the school that says if you cannot succeed and you can’t keep your pledges on your economic projects, then it’s better to fail now than continue to waste additional money.”

Under the plan, roughly 40,000 enrolled on the exchange will have to sign up again on healthcare.gov. The state will spend an estimated $30 million on the transition to the federal marketplace, according to the proposal.

The revised plan comes the same week Hawaii Medical Service Association is proposing an average 49.1 percent rate hike — the highest it has ever requested — for 20,935 members in Obamacare plans purchased via the exchange for 2016.

[5/23/15] Hawaii Health Connector board members answered few questions at a public meeting Friday concerning the future of the troubled health insurance exchange.

It was the first Connector board meeting since Gov. David Ige acknowledged last week Hawaii is out of compliance with the federal Affordable Care Act and is at risk of losing $1 billion in Medicaid funds if Washington does not accept the state's plan to remedy the ailing state-based exchange.

Ige's administration confirmed Thursday that Hawaii is switching its Obamacare program to the federal exchange, meaning 37,000 Connector enrollees will have to re-enroll via the federal marketplace for coverage in 2016.

Board members were scheduled Friday to "discuss and approve" the administration's plan to switch to the federal exchange for at least one year, according to the meeting agenda. The board tabled the discussion until Tuesday.

When one reporter asked what went wrong that the exchange couldn't remain in state hands, Rachael Wong, director of the Department of Human Services and a Connector board member, said: "It is in state hands. That's why I'm puzzled with your question. We're in continued conversations with the federal agencies that oversee the Connector. Nothing's a done deal."

Under the governor's plan, the federal government and state would spend a combined $30 million to switch from the Connector to the federal exchange at healthcare.gov for one year.

That would buy the state time to bring the Connector into compliance with federal law, which requires the Connector be financially sustainable, resolve ongoing technology issues and be integrated with the Medicaid system.

When asked where the state is going to get the money to make the switch to the federal exchange, Wong said, "We're in continued conversations with the federal agencies."

The state is negotiating with the federal government to release some of $70 million in grants originally targeted for use by the Connector, which was awarded $204.3 million in federal startup funds years ago. It has used about $130 million of those funds.

Jeff Kissel, the Connector's executive director, said the organization will run out of cash by June 30 if the federal funds remain frozen. Federal officials want to see that the Connector has enough money to remain viable on its own before releasing more federal funds, Kissel said.

Use of the federal money is limited to information technology and outreach, Kissel said. Other operating funds must come from within the state.

A lack of funds is the main barrier to bringing the Connector into compliance with the ACA. After its launch in October 2013, the Connector was to fund its operations with a fee collected on each health insurance policy. To sustain operations, the Connector needed to enroll 70,000 members, but it has only 37,000 members.

Kissel asked the Legislature to help make up the shortfall by appropriating $5.4 million, but lawmakers granted the exchange just $2 million.

The governor's plan to switch to the federal marketplace for one year has a high price tag.

It would require the state Department of Human Services spend $20 million to link its Medicaid eligibility system to healthcare.gov. Most of that would come from the federal dollars Medicaid receives. The state would need to put up another $10 million to $11 million to connect to the federal marketplace.

When asked how the state can justify spending an estimated $30 million of taxpayer money to connect to the federal exchange when lawmakers couldn't even appropriate the full $5.4 million requested, Connector board chairman Clifford Alakai said: "We have no response at this time."

Alakai said the board also has not determined whether it will execute a separate contingency plan to shut down operations by Sept. 30 if the federal government doesn't accept the state's temporary fix.

"We're still trying to figure it out," he said. "It's not that easy."

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[5/22/15] Hawaii is switching its Obamacare program to the federal exchange, meaning 37,000 residents insured through the Hawaii Health Connector will have to re-enroll via the federal marketplace for coverage in 2016, Gov. David Ige's administration confirmed Thursday.

Ige acknowledged last week that Hawaii is out of compliance with the federal Affordable Care Act and is at risk of losing $1 billion in Medicaid funds if Washington does not accept the state's plan to remedy the ailing Hawaii Health Connector.

"We have agreed that we're going to proceed (to the federal marketplace)," Laurel Johnston, Ige's deputy chief of staff, said Thursday. "We've taken steps to go ahead and make plans to do that (for fall 2015 open enrollment)."

The state is negotiating with the federal government to release grant money to avoid closure of the Connector, which was awarded $204.3 million in federal startup funds over the years, but was unable to become financially sustainable by the beginning of this year, as required by the ACA. As a result, the feds restricted roughly $70 million in remaining grants, putting pressure on the state to move to the federal marketplace, healthcare.gov.

"The federal government has a huge interest in making sure this thing stays alive and so do we," Johnston said.

"They've made a huge investment in it. I don't know why they'd let it tank at this point. We're pressing the feds pretty hard to release funding because we felt we kept our end of the arrangement. We're hoping the federal government is going to pay for it."

The administration put forth a plan to spend $30 million to temporarily use healthcare.gov for one year to enroll residents in coverage under the ACA, commonly referred to as Obamacare.

That would buy the state time to bring the state-based exchange into compliance with the federal law, which requires the Connector be financially sustainable, resolve ongoing technology issues and be integrated with the Medicaid system that determines eligibility for subsidies and tax credits obtained through the online marketplace.

"We would have until fall 2016 to do the integration and fix some of these issues," she said. "That's all something they (the feds) should technically be paying for."

This "corrective action" plan would require the state Department of Human Services spend $20 million to link its Medicaid eligibility system to healthcare.gov. Most of that would come from the federal dollars Medicaid receives, Johnston said. However, the Connector estimates it would need another $10 million to $11 million to connect to the federal marketplace, but does not have the money to do so.

Under the plan, the federal government would take over the technology functions of the exchange, while the state continues outreach, enrollment and customer support. The Connector estimates the outreach, enrollment and customer support functions alone would cost between $5 million and $8 million a year. It is unclear who would pay for that, Johnston said.

A move to the federal Obamacare technology means all 37,000 members insured via the Connector will have to go through the enrollment process again using healthcare.gov.

A lack of funds is the main barrier to bringing the Connector into compliance with the ACA. After its launch in October 2013, the Connector was to fund its operations with a fee collected on each health insurance policy. To sustain operations, the Connector needed to enroll 70,000 members.

Jeff Kissel, the Connector's executive director, asked the state Legislature to help make up the shortfall by appropriating $5.4 million, but lawmakers granted the exchange just $2 million.

The Connector, a nonprofit created by the Legislature in 2011, has prepared a second option, known as its "contingency plan," to shut down operations by Sept. 30 if the federal government doesn't accept the state's temporary fix.

The ACA requires Americans to obtain coverage or face tax penalties. The theory is that if everyone has health insurance, they are more likely to get medical care and detect illness before developing high-cost chronic diseases.

The exchanges offer subsidized health plans for those with incomes too high to qualify for Medicaid, the government health insurance program for the poor.

Moving to the federal marketplace puts Hawaii residents in a precarious situation.

The U.S. Supreme Court is currently deliberating whether to invalidate insurance subsidies worth billions of dollars for people using healthcare.gov. Without financial assistance with their premiums, officials fear millions of those consumers would drop coverage.

"As long as we have the state-based marketplace, we're in full compliance," Kissel said. "I have no idea what the Supreme Court's going to decide."

[shucks]