Hawaii’s largest insurance provider pulls small business plans from health exchange

by Malia Zimmerman, August 21, 2014, Watchdog.org

HONOLULU — Hawaii’s health-care exchange, the Hawaii Health Connector, has taken another blow.

Hawaii Medical Service Association, the state’s largest health insurer, won’t participate in the Connector’s Small Business Health Options Program, or SHOP, as of January.

The connector, already under fire for being the most costly exchange in the nation, is left with just one insurance company  for local small business owners to select — Kaiser Permanente.

The decision by HMSA came after it spent 8,000 hours dealing with the exchange’s technical problems, which drained finances and staffing resources.

Information on 133 patient accounts vanished as they were transferred from the connector to HMSA.

“HMSA supported the Hawaii Health Connector in its development stage and at its launch last October. But it soon became evident that the Hawaii Health Connector’s technical challenges were so great that they severely impacted the public’s ability to use the site,” said HMSA spokesman Floyd Takeuchi. “In addition, technical issues were not resolved and, in fact, the site still has issues that haven’t been fixed.

“We’ve had to reassign critical staffers to deal with ongoing problems caused by technical problems at the Hawaii Health Connector. In the process, it has impacted our ability to serve other members.”

According to financial reports, HMSA lost $30 million in the first-quarter. Company executives blamed the Affordable Care Act and made up some of the loss; it’s now $8.4 million in the red.

Besides technical problems, HMSA said few businesses are using the exchange, though a large number of businesses have chosen the same plans directly from HMSA. Takeuchi said that’s indicative of the small business market’s lack of support for the exchange.

“From a policy standpoint, our successful Hawaii Prepaid Healthcare Act negates the need for a Small Business Health Options Program exchange. Small businesses are already mandated, by a Hawaii law that has worked well for 40 years, to provide health coverage for most employees. We don’t need the small business exchange,” Takeuchi said.

HMSA will continue to ensure another 5,000 people enrolled through the individual subscriber portion of the connector.

“HMSA supports the intent of the Affordable Care Act, which is universal health coverage for Americans. This is where our need is in Hawaii — enrolling individuals who don’t have health plans, not signing up small business employees who already have health coverage as a result of the Hawaii Prepaid Healthcare Act. HMSA is also encouraged that some 30,000 Hawaii residents have been identified as possible candidates for Medicaid coverage through the Hawaii Health Connector,” Takeuchi said.

The connector has been plagued with technical and administrative problems since it opened in October and has been ranked the most costly exchange in the nation.

Gov. Neil Abercrombie predicted hundreds of thousands of people would register with the exchange, and  state officials initially estimated as many as 300,000 people would sign up for health insurance.

Hawaii’s uninsured rate is about 6 percent, down slightly from the 8 percent uninsured when the exchangelaunched in October.

So far, just 10,800 people have enrolled for health insurance through the exchange, despite a $204 million grant to set build a web portal and market the exchange in Hawaii.

That equates to about $18,888 dollars per enrollee spent by taxpayers.

A May study by Kaiser Health reported Hawaii’s exchange, which has just more than 8,500 people registered, had a tab of about $23,899 per person, but the exchange enrollment numbers have improved slightly, according to the state Legislature.

HMSA CEO Michael Gold and many others — including U.S. Rep. Colleen Hanabusa, D-Hawaii, state Senate President Donna Mercado Kim and Senate Minority Leader Sam Slom — believe the state should seek an exemption from the ACA.

The Hawaii Health Connector’s costs could be significantly reduced by simplifying it to serve as an information hub, providing information on benefits and premiums for participating plans, Takeuchi said.

Once someone chooses a plan the connector site could direct him to the participating insurer’s website to buy the plan. HMSA and Kaiser, the only insurers that offer health plans on the Hawaii Health Connector, are already set up to process orders for health plans, Takeuchi added.

Tom Matsuda, interim executive director of the Hawaii Health Connector, said,  “The decision will prevent many Hawaii small business owners from taking advantage of the small business tax credits that are only available within SHOP to reduce employee health insurance premium costs by up to 50 percent,” Matsuda said.

The state’s insurance commissioner, Gordon Ito, agreed.

“HMSA’s decision affects small businesses’ choices and their ability to receive small business tax credits next year by reducing to just one the number of health insurance plans offered through the Hawaii Health Connector beginning in 2015,” Ito said.

“In 2014 and 2015, per the federal Affordable Care Act, only qualified health plans purchased through the connector are eligible for small business tax credits. With HMSA’s withdrawal, small businesses that purchased an HMSA plan and obtained tax credits in 2014 will no longer be able to do so in 2015. This also precludes other small businesses that might have been interested in obtaining tax credits with an HMSA plan.”