Hawaii Department of Human Services officials say that their plan to reduce funding for medical coverage for roughly 7,500 adult migrants from the Federated States of Micronesia, Palau and the Marshall Islands will save the state roughly $21.5 million while maintaining vital health care coverage.

Eighteen years after losing federal aid to pay health care for people living in Hawaii under a Compact of Free Association (COFA) with the United States, Hawaii will be able to tap into federal funding for a large share of health insurance premiums when these noncitizens enroll in a health plan under the Affordable Care Act, which became law in March 2010.

Under the DHS plan, the state will kick in $3.5 million for this group’s share of premiums, resulting in a net savings of $21.5 million, said Dr. Kenneth Fink, MedQuest Division administrator. The state had been spending $25 million annually on health care benefits for able-bodied noncitizen adults.

The beneficiaries will also see a reduction of their out-of-pocket expenses, such as deductibles and co-payments, which will be heavily subsidized by the federal government, said Hawaii’s Human Services Director Patricia Mc­Mana­man.

An added benefit to the switch to a commercial health plan is that health care providers will be reimbursed on a much higher rate than on a Medicaid rate.

"It churns the economy," Mc­Mana­man said.

A series of informational briefings about the state’s plan, as well as other DHS initiatives tied to its Medicaid program, will be held at 2 p.m. Wednesday at the state Capitol, Conference Room 325.

COFA migrants are allowed to travel in the U.S. without a visa or time constraints. They are designated as legally residing noncitizen nationals. Under the compact, the Pacific island citizens freely live and work in the U.S. in exchange for allowing the U.S. military to control strategic land and water areas in the region.

Prior to 1996 the migrants qualified for federal benefits such as Medicaid. The Welfare Reform Act stripped their eligibility.

When Congress reduced health care funding for the migrants from the Pacific island nations, Hawaii filled the gap with state funding for more than a decade.

In 2009, Gov. Linda Lingle’s administration sought to slash benefits with the Basic Health Hawaii (BHH) program, which would deny coverage for chemotherapy and dialysis treatments, limit doctor visits to 12 a year, and prescriptions to four a month.

The proposed BHH program alarmed COFA advocates, who pointed to a high rate of certain cancers afflicting the Marshallese, and a climbing diabetes rate in all three nations.

Floyd Takeuchi, an American journalist born and raised in the Marshall Islands, said there are few dialysis facilities in the nations, so "for those who are diabetic and require dialysis, Hawaii is their last hope."

Federal court injunctions in 2009 and 2010 blocked the BHH program’s implementation, with plaintiffs contending it would violate the Equal Protection Clause of the 14th Amendment because it extends less coverage than is offered to citizens and qualified immigrants eligible for federal reimbursements through Medicaid.

The state appealed the 2010 injunction to the 9th Circuit Court of Appeals, which ruled in April in favor of the state to vacate the injunction. Plaintiffs then appealed the ruling to the U.S. Supreme Court.

The Supreme Court decided Nov. 3 against hearing the appeal, thereby leaving the ruling to lift the injunction in place.

However, state Deputy Attorney General Lee-Ann Brewer said, "This administration did not want to go back to Basic Health Hawaii."

The state receives $10 million to $11 million in federal aid for COFA residents, which will be used primarily to fund the aged, blind and disabled program, DHS officials said.

The state put emergency rules in place to avoid potential gaps in coverage and a reduction in benefits.

McManaman added, "Gov. Abercrombie and DHS believed that the fundamental right everybody should have is quality health care." She continued, "Basic Health Hawaii is a very limited program of benefits, and we believed that under the emergency rules and the proposed rules, we would be affording everyone access to health care."

Initially, some critics questioned whether Hawaii’s COFA residents would be able to afford the proposed deductibles and co-payments. But Mc­Mana­man and Fink said the cost-share reduction amount will be subsidized on a sliding scale based on income levels.

COFA children and pregnant women remain covered by Medicaid, paid with state and federal funds.

The state intends to continue a state-funded program serving aged, disabled and blind COFA residents.

To continue receiving medical benefits and to avoid a gap in coverage, COFA residents must enroll by Feb. 15 by signing up with the Hawaii Health Connector. DHS will be sending out notices to affected people, who will be transferred to the Health Connector. Applications are available at mybenefits.hawaii.gov.

A public hearing on the draft proposed administrative rules will be held the first week of January, and the state’s current coverage program ends March 1.