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Hawaii lawmakers seek cash for health insurance exchange after bond plan fizzles

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HONOLULU — Hawaii lawmakers are looking for ways to prop up the state's financially struggling health exchange, and they're considering cash from the general fund.

All state-run insurance exchanges that are part of the Affordable Care Act must be financially sustainable this year. But the Hawaii Health Connector doesn't have enough money for its operations.

That leaves the exchange vulnerable to a partial federal takeover, a risk lawmakers say they're not willing to take because it could jeopardize the Prepaid Health Care Act, Hawaii's unique law that mandates employer-sponsored coverage.

"So long as Hawaii has a state-based exchange, we are in safe harbor, and everyone I know is fully committed to that," said Jeff Kissel, CEO of the Hawaii Health Connector.

Kissel had wanted to issue $28 million in state-backed bonds or loans, but that proposal fizzled after the Department of Budget and Finance expressed concerns about backing the exchange.

"It would have been the first time for a nonstate agency that we would guarantee whatever was issued, so there would be a lot of issues," said Wes Machida, director of finance. "We would prefer the general fund subsidy at this point."

Now lawmakers are considering a $5 million cash infusion from the state's general fund, said Rep. Angus McKelvey, co-chairman of the conference committee working out the details on SB 1028.

"There's no way that Budget and Finance could come up with a mechanism at this point in time, so we're better off to just go back to what we did last year, which is a general fund appropriation," McKelvey said.

The state approved $1.5 million in general funds to keep the exchange going last year.

"If they have an alternative, we're delighted to work with it," Kissel said.

The exchange could become profitable by 2022, but it would need up to $28 million for operations between now and then, Kissel has said. The path to sustainability relies on enrollment targets, which the exchange has exceeded this year. The Connector enrolled 37,172 people by Tuesday, far exceeding its goal of 27,260 by June 30.

The Connector's recent performance marked a dramatic turnaround from its first year, when it reached about 10,000 people instead of the 100,000 to 200,000 some public officials predicted. At this time last year it had collected only about $121,000 in revenues. It collects a 2 percent fee on insurance plans, and that rate is set to increase to 3.5 percent on July 1.

Another way lawmakers are looking to help the exchange raise money is by changing the definition of a small employer. Right now, employers with up to 50 workers can buy insurance plans for their employees on the exchange, but large employers won't be able do so until 2017.

Lawmakers are considering asking the state to change its definition of a small employer to those that have up to 100 employees, which would enable more to buy plans on the exchange.

That proposal, HB 1467, is opposed by the Hawaii Chamber of Commerce and others in the business community who fear it would lead to rate shock. That's because insurance plans sold on the exchange are age-banded, meaning the cost of the plans is affected by the age of the employees in the group.

"The concern is that people think that would be more expensive for some of them," said Sen. Rosalyn Baker, co-chairwoman of the conference committee. "I don't happen to agree."

The Connector has the ability to accommodate such a change, Kissel said.

Lawmakers discussed the bills in a conference committee Thursday and deferred further action until Monday morning.

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