The head of the state’s health insurance marketplace under President Barack Obama’s federal health care overhaul says it has to trim costs to remain sustainable.

Tom Matsuda, the interim executive director of the Hawaii Health Connector, told lawmakers at a Senate hearing Monday that the nonprofit is woefully behind its projections of individual enrollment, with only about 5,400 people fully through the process of buying coverage. While that number doesn’t count those still in "a backup in the system," Matsuda said, it’s far behind the projected pace of 50,000 enrollees through 2014 it would have needed to break even.

"It’s obvious we have to reduce our operating costs and reduce unnecessary services," Matsuda said.

Both Matsuda and Gordon Ito, the insurance commissioner with the Department of Commerce and Consumer Affairs, told lawmakers that insurance buyers can likely save money over their current plans by using the exchange.

But they also acknowledged that the tangle of tax subsidies and premiums the website must account for makes the process daunting to many buyers. They said that despite the Health Connector’s outreach efforts — Matsuda said representatives had scheduled 380 visits to grocery stores, community centers and other public place through March — people remain wary of the exchange.

"Sometimes I think people are bypassing the system because it’s easier (to keep existing coverage), or bad news related to rollout," Ito said. "I think some folks are missing an opportunity to get better coverage at a cheaper cost."

Sen. Sam Slom, a Republican representing Hawaii Kai and Kuliouou, told Matsuda small business owners in the state grouse about sloppy and slow service in the state’s Small Business Health Options Program, or SHOP.

Matsuda replied, "We completely acknowledge that."

In a separate committee hearing Monday, House members advanced a bill related to the Health Connector. Senate Bill 2470, which would shrink the body’s board to 12 members from 15 and move ahead with amendments, one of which will scrap a proposed sustainability fee and replace it with a general appropriation.

"This is still a work in progress," said Rep. Angus McKelvey (D-West Maui).