Fixing What Wasn’t Broken: The Obamacare exchange is approaching insolvency in Hawaii, where insurance costs are likely to rise.

By Jillian Kay Melchior, National Review, March 14, 2014

In Hawaii, Obamacare has disrupted a health-coverage system that had seen 98 percent of the population insured before the recession. Now lawmakers are scrambling to fix the state’s health-insurance exchange, which is fast on its way to insolvency. But the financial fix is likely to result in even higher health-coverage costs for Hawaiians.

For 40 years, Hawaii has had an employer mandate in place, requiring businesses to provide health coverage for anyone who worked more than 19 hours a week. (Though this requirement doubtless strained businesses, Hawaii’s distance from the mainland U.S. made it harder for entrepreneurs to pack up and shift operations to more economically friendly states.) Meanwhile, private charities offered coverage for almost anyone who fell through the cracks. Even during the Great Recession, only one in ten Hawaiians were uninsured.

With health coverage already so widespread, it’s little wonder that the Hawaii Health Connector is struggling to recruit new enrollees. In mid February, only 4,300 had accessed coverage through the state exchange in Hawaii, fewer than in any other state.

And while Hawaii Health Connector is supposed to be financially self-sustaining by 2015, it is instead a fiscal “black hole,” in the words of Hawaii senate president Donna Mercado Kim. Tom Matsuda, the exchange’s interim executive director, recently told Hawaii legislators that the state’s “market dynamics are not right for an online marketplace of this type” and that there remains “little chance of the Connector becoming self-sustaining under its current revenue model.”

Hawaii Health Connector approaches this financial precipice despite significant federal largesse. The exchange received $204 million from the federal government, which is supposed to be spent within the year and will run dry unless Hawaii receives a special federal waiver to spend the grant money after 2014. To further financially support the health exchange after the grant money has expired, residents who enroll through Hawaii Health Connector pay a 2 percent fee on top of the cost of the plan they purchased, but that has generated very little revenue, certainly not enough to cover the health exchange’s operating expenses.

Meanwhile, the health exchange has been plagued by technological glitches. While they have been common in states that chose to run their own exchanges, Hawaii Health Connector is uniquely bad because it is largely unaccountable. Established as a not-for-profit, Hawaii Health Connector is specifically exempted from the sunshine laws that normally follow such big sums of taxpayer money.

New proposed legislation seeks to remedy some of the existing problems, most significantly by establishing a Connector Legislative Oversight Committee that could scrutinize health-exchange finances. But the bill also seeks to establish a “sustainability fee,” imposing charges on Hawaii’s health insurers that would be used to keep Hawaii Health Connector financially afloat.

That’s a mistake, and not just because Hawaii would be better off if its health exchange instead sank. The fees imposed on health insurers would inevitably be passed on to either businesses or consumers, resulting in higher health-care costs — and all that to sustain an entity whose sole purpose is to fix a problem that’s practically nonexistent, given Hawaii’s already high insured rate.

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— Jillian Kay Melchior writes for National Review as a Thomas L. Rhodes Fellow for the Franklin Center. She is also a senior fellow at the Independent Women’s Forum.

Related: Maui News, Star-Adv Agree: Obamacare Exchange Unnecessary Here