Gordon Ito, insurance commissioner for the state of Hawaii, has an inbox filled with all matters relating to regulating insurance in the islands, with the exception of paying workers’ compensation benefits. Earlier this week, the Insurance Division released rate guides for health, homeowner and car policies, posting them online (cca.hawaii.gov/ins).
"The division licenses insurance agents; we look at certificate of authority applications for insurers," said Ito, launching into a list of duties. "We monitor those insurers for financial solvency by doing a financial analysis and exams. We also do rate and form approval. We receive complaints from consumers. We even do fraud investigations."
But in recent months, it’s the implementation of the federal Affordable Care Act that has absorbed about 90 percent of his attention. The technical problems with the Hawaii Health Connector propelled the ACA into the headlines. More recently, the news dealt with rate increases announced by the state’s two principal insurers, the Hawaii Medical Service Association (HMSA) and Kaiser Permanente.
To escape the pressures of his job, when he can, Ito, 53, joins his wife on the ski slopes. Those opportunities come along more rarely now, he confessed.
Ito has worked for 20 years for the division, an agency of the Department of Commerce and Consumer Affairs, with a staff of 85. He’s been there to witness the aftermath of Hurricane Iniki and its disruption of the homeowner insurance market, and the greatest changes in the health marketplace. In the first few years since the state’s Prepaid Health Care Act was passed, monthly premiums under $12 were fairly common, he said, compared to the several hundred dollars many people contend with now.
There are substantial subsidies available now to whittle down that cost, however. Ito is encouraged by the acceler- ating enrollment and believes the ACA has great potential to improve the health-coverage landscape.
"It is a revolutionary change," he said. "Despite all the controversy, and everything that’s occurred, my main thing with people is to be patient with the thing working now."
QUESTION: The rise in rates recently announced by Kaiser and HMSA — not a surprise, right?
ANSWER: Yeah. The medical cost continues to go up, between 6 to 8 percent a year or so … just as a matter of course … That’s been one of my major concerns, because it’s not sustainable.
The last few years, actually, the (increase in) medical cost has slowed. I kind of joke, since I became commissioner, from 2010, that the medical costs actually have been brought down to maybe 3 to 4 percent.
Q: Why do you think that is?
A: Well, I think part of it is attributed to the economy. Part of it, I think, is really the discussion that’s occurring because of ACA, which I think is one of the good things. Because there’s been a lot of discussion in terms of the overall health care system — not only in insurance, but the delivery of health care.
Q: You mean not incentivizing excessive procedures?
A: Or duplicative — like, say, diagnostic testing, or excessive testing, or people seeking unnecessary medical treatment. …
Q: Is it your perception that the whole health care coverage conversation has changed?
A: Yes. And there’s other things … At all the hospitals, the federal government has created incentives to reduce, say, readmissions to hospitals. In fact, in the worst case, the hospitals are penalized now if there’s readmissions. …
Q: What are your observations about the Obamacare website rollout?
A: In our minds, the rollout started way back in 2010 when the law was passed. Because six months after the law was passed, there were some provisions that already went in play, like the “no preexisting condition exclusion for people 19 or younger.” …
What’s lost, unfortunately, is the focus is now on the Hawaii Health Connector and the problems they’ve been having with the IT (information technology) build …
The way I view the Connector is it’s really primarily a place where people can shop and compare on the website, and also, more importantly, get the subsidies and tax credits for individuals and small businesses. …
I think they have two primary problems. One is really making sure that the IT system is built correctly. There are some issues in terms of following the laws and the rules.
Like, for example, Prepaid (the state Prepaid Health Care Act passed in 1974). One of the primary reasons we had done the Hawaii Health Connector, chose to do a state-based exchange, was to try to preserve the Hawaii Prepaid Health Care law, which was different from what the ACA mandated.
Q: I know you are not the spokesperson for the Connector, but don’t you think the public considered the Oct. 1 site launch significant?
A: Yeah, Oct. 1 was the initial open-enrollment date, so that’s why there was a lot of emphasis. …
I think it was, in hindsight, unfortunate that there was so much emphasis on Oct. 1, because that was just the launch. And people can actually shop and compare, and they have all the way to March 31 to purchase a health plan … and avoid the penalty of the individual mandate …
In reality, you could actually enroll now on, say, March 20, and have coverage start May 1, and avoiding some of the penalty, if not all. … I think, really what people should focus on is if they’re uninsured, they should try to get insured. There are, under ACA, substantial subsidies that people could obtain if they’re within 250 percent of poverty level. They can get subsidies up to 400 percent of poverty.
Q: Can you project in general who are going to be the ACA winners and losers?
A: For 2014, actually, I don’t think there’s going to be any winners or losers … Because what happened on Nov. 14 was the president asked the states to consider asking each state’s insurers whether they’d consider continuing with their 2013 plan.
So 2014 is actually a win-win situation, I think, for everybody, because now individuals and small businesses have the choice of either staying with their 2014 plan or going with what I call the ACA 2014 plan. For some individuals, it’s going to be cheaper for them to stay with their 2013 plans.
But there’s also other individuals or small businesses that could actually go with the new ACA plan that has more benefits; the prescription drug is bundled in as one of the major benefits. It would actually be cheaper for some individuals to go with the 2014 plan.
Q: Because they have subsidies, primarily, right?
A: No, no, not even addressing subsidies. Those who are eligible for subsidies, it’s going to be even more of a win-win situation.
Q: How can that be?
A: It’s the way ACA is structured … In moving toward the ACA requirements, they have what they call “age rating.” What our health insurers did was they’d start with the base rate and, depending on your health and your loss experience, your rates could go up and down, off that base rate. …
If the 21-year-old-in-great-health insurance premium was, say, $200 per month, the max the companies would charge would be five times that amount. But ACA actually narrowed the band to 3-to-1. So the max between the 21-year-old and the 64-year-old is three times.
Q: So the spectrum of rates is narrower?
A: Right.
Q: What do you think of all the 11th-hour adjustments and extensions under ACA? Are they, as critics say, causing instabilities in the market?
A: When Nov. 14 came along and the president said, “Please consider asking your insurers to continue the 2013 plan,” now you split the market, which is what’s going to happen in 2014. … Now there are really two risk pools in each market.
Q: How do the insurers approach that?
A: So, the next day when we asked the health plans to consider it, it was really a voluntary basis. … But all five insurers said they would offer both choices. …
Q: How are insurers in other states choosing in the voluntary program?
A: I haven’t looked at it, but my guess is about a 50-50 split, maybe more siding with offering both.
Q: What’s in it for the insurer to offer both?
A: I think Hawaii is unusual because of Hawaii Prepaid. For our businesses, they’re really caught between a rock and a hard place. ACA, there’s no small-business purchase mandate …
But with Hawaii, because of Hawaii Prepaid, any employer that’s employing someone working 20 hours a week has to provide health care insurance. … And they’re also caught in the “10 essential benefits,” and the ACA’s age requirement.
When we considered all the factors, that’s when we asked the insurers to consider offering the 2013 plan, to allow our small businesses the choice. …
Q: How much of their decision, do you think, was just based on expedience? It’s a big adjustment to make, to all the new requirements.
A: That was part of the consideration. But again, like the individuals, for small businesses, there are some small businesses, by staying with the 2013 plan, their rates would be significantly less than 2014, and vice-versa.
Q: How do you think the law will play out beyond 2014? Do you think the mix in the risk pool will include enough young people?
A: I think the key is really going back to the age rating, and keeping the premiums cheaper for the young people. If it becomes too costly, especially this year and next year, they might stay out of the marketplace, because the penalty provisions are relatively low. But it ramps up.
Q: But are the rates low for younger people? Low enough?
A: It’s a matter of opinion, really. Health care insurance, as a whole, continues to rise. That’s really, I think, the bigger challenge that we all face …
Hawaii is different, too, because Prepaid has really served Hawaii well since 1974, and that’s why our uninsured population is always one of the lowest. We’re somewhere around 8 percent. That 8 percent translates to about 100,000 uninsured. … The focus, at least from our side, is to try to get the uninsured population reduced in half, at least.
