The board of Hawaii's financially troubled health insurance exchange has approved a plan to shut down the small business side of the exchange and transition individual users to the federal marketplace.
The board unanimously approved the plan in a vote on Friday.
There are 37,952 people enrolled in healthcare through the exchange, which is part of President Barack Obama's Affordable Care Act.
Under the new plan, businesses offering their employees coverage through the exchange would buy policies directly from insurers instead, said Jeff Kissel, CEO of the Hawaii Health Connector. Individual users will have to re-enroll using the website HealthCare.gov. Those changes would happen during the next enrollment period in the fall.
“Some may agree that it's the right plan, some may think there are better ways to do it,” Kissel said. “But in my opinion … driving consensus, building agreement and putting together an effort that will assure access to Hawaii's healthcare and wellness systems for the next generation at least is a very important goal.”
Hawaii's health exchange will transition to become a federally supported state-based marketplace, Kissel said. The state will join Nevada, New Mexico and Oregon, which have similar setups.
The Affordable Care Act required all state-based marketplaces, such as Hawaii, to be financially sustainable by the beginning of 2015. The Connector had a plan to reach sustainability within several years. But the plan relied on continuous state support, and the Legislature granted less funding than what the exchange had requested to be sustainable this year.
“We just don't have enough uninsured people, thank goodness, to make this financially feasible. That is the bottom line,” said Laurel Johnston, deputy chief of staff for Gov. David Ige, at the board meeting. “This is not a failure. This was maybe an experiment that for Hawaii didn't quite pan out.”
The federal government has been withholding about $70 million in grant money, but that will likely be released thanks to the board's vote, which will enable the exchange to continue doing outreach, Kissel said.
Beginning June 15, the exchange will stop accepting new enrollments to the small business side, and it will have limited capacity to adjust plans for changes in life circumstances, according to the transition plan. Staff reductions will begin on July 1, and Kissel is expected to leave the exchange after most of the administrative and operational activities end.
It will cost an estimated $25 million to $30 million to complete the transition, Kissel said.
The planned closure of the employer side of the exchange has some concerned about erosion of the Prepaid Health Care Act, Hawaii's unique law that requires most employers to provide health insurance to workers who log at least 20 hours per week.
Without the employer side of the exchange, “we don't have as easy a check on folks to make sure that people are buying Prepaid-compliant plans, or that they're trying to get away with not providing plans at all,” said state Sen. Rosalyn Baker, a Maui Democrat who was deeply involved with the creation of the state exchange.
Some employers are already violating the Prepaid Health Care Act, Kissel said.
“I saw small businesses telling employees to buy tax-subsidized insurance plans instead of employer-provided plans,” Kissel said. “I put up the warning on our website that this is illegal the very first month I was here, because I saw this was happening.”