Gov. Neil Abercrombie’s administration is proposing to downsize part of Hawaii’s health insurance exchange for small businesses, echoing a similar sentiment by the head of the state’s largest medical insurer.
Beth Giesting, the governor’s health care transformation coordinator, told Hawaii Health Connector board members at a meeting Friday that the state doesn’t need to fully build the small-business health options program, known as SHOP, since few employer groups and workers would benefit. Hawaii already has a long-standing Prepaid Health Care Act requiring employers to provide health insurance for full-time workers, a practice that is responsible for insuring the bulk of the population.
The state and Connector should seek flexibility from the federal government to enroll small businesses so that it doesn’t waste additional taxpayer dollars to build unnecessary components of the SHOP exchange, she said. One part of the exchange handles individual sign-ups, and the other part, small-business enrollment.
"We don’t really want American taxpayers or Hawaii taxpayers to be paying more for a system that doesn’t have a whole lot of functionality," she said. "We want to simplify it and not build things that don’t really add value or that are either going to cost a lot now or a lot in the long run."
Mike Gold, president of Hawaii Medical Service Association, riled lawmakers last week after urging the state to immediately dismantle the small-business exchange altogether.
As is, he said, the state is "setting up another level of process … that somebody is going to have to pay for going forward. That somebody is all of us. One way or the other, whether it’s fees or whether it’s taxes that come out of the general fund, you have to pay for something that’s not necessary."
Prior to the exchange, individuals and small businesses went directly to carriers to obtain insurance, a process that has been successful to date, he said.
Specifically, Giesting said there is no need for the Connector to spend additional money to build a component to consolidate billing for small groups because that function is currently being handled directly through insurers.
"That just seems like it may be a bit fancier than is necessary," she said. "If it was a good function and worked effectively and did support better employee choice, it might be worth building out. We just don’t think there will be that many small businesses seeking insurance through the exchange."
Tom Matsuda, the Connector’s interim executive director, who was out of town Friday, told lawmakers earlier this year that few companies would qualify for small-business tax credits that were supposed to give employers incentive to use the Connector.
Also stifling enrollment on the exchange is that the state is allowing individuals and small companies to remain in existing pre-ACA health plans through 2017 following a policy change by President Barack Obama late last year.
Jennifer Schember-Lang, the Connector’s acting executive director, said the organization would need to analyze options for the small-business exchange with the Governor’s Office. Connector officials did not respond to further questions from the Honolulu Star-Advertiser.
In response to Gold’s comments last week, Sherry Menor McNamara, chairwoman of the Connector’s board of directors, said the organization is engaged in "right-sizing" the exchange to make it as responsive and efficient as possible.
The state and Connector will seek a federal waiver in 2017 to modify ACA rules to fit Hawaii’s insurance market.
"We do think there are some benefits through the exchange that are not available if we just said, ‘Let’s get rid of the exchange altogether,’" Giesting said, adding that one benefit is that employees can compare health plans so they can choose the option that best fits their needs. "The thing that’s kind of troublesome is the Connector is the one that is the middleman doing the enrollment, collecting the money and doing all the stuff that is brand new and duplicative (with health insurers). It’s all about trying to negotiate something that works best for us in Hawaii."
She also said small businesses may be able to apply for tax credits directly with the Internal Revenue Service.
The Connector received $204.3 million in federal grants that expire at year’s end and has spent roughly half that to date. As of May 10 there were 631 employees and dependents enrolled on the exchange and 595 employers that applied, according to the Connector website.
Hawaii’s nonprofit health exchange, established by the Legislature in 2011, opened two weeks late Oct. 15 and continues to be plagued with technical problems, particularly in the small-business marketplace. Connector officials are trying to fix the problems before July 1, when the bulk of small groups renew medical policies.
"Hindsight is always 20/20," Giesting said. "The state was very enthusiastic about the insurance exchange. We felt that was the best solution to ensure Prepaid was protected. I don’t think we were necessarily wrong about that; we just didn’t have all the information. Now that we have more experience and understand how things work better, we do have an opportunity to try to make some corrective steps."
