Hawaii to End State-Sponsored Health-Care Exchanges

By Michael Trimarchi

Hawaii plans to close its state-sponsored health-care exchange after a federal agency said that funds were unavailable to support long-term operations, Gov. David Ige said June 5.

Ige, in a statement, said the private nonprofit Hawaii Health Connector exchange was “unable to generate sufficient revenues to sustain operations. The Centers for Medicaid and Medicare Services told exchange officials that federal funds no longer were available to keep the program operating,” he said.

“The viability of state health insurance exchanges has been a challenge across the country, particularly in small states due to insufficient numbers of uninsured residents,” Ige said. “The state of Hawaii has a high rate of insured residents due to employer-based health-care coverage and Medicaid program expansions.”

The state would try to ensure a smooth transition for those seeking health-care insurance during the November 2015 open-enrollment period, Ige said. State officials would seek to “determine what functions can be transitioned to state oversight to ensure compliance with the Affordable Care Act” by November.

The CMS, which is part of the Department of Health and Human Services, works with state governments to administer Medicaid and other health insurance programs, including those under the ACA. The CMS agreed to provide Hawaii with limited transition funds so the state can maintain marketplace support for consumers, Ige said, adding that the amount of transition funds had not been determined.

Hawaii was among 10 states with the least competitive commercial health insurance markets, the American Medical Association said Oct. 9, 2104, in its annual study of competition in U.S. health insurance markets. The other states were Alabama, Alaska, Delaware, Illinois, Louisiana, Michigan, Nebraska, North Dakota and South Carolina.

Hawaii's decision comes as the Supreme Court prepares to rule on whether the regulations were faithful enough to the ACA despite the lack of clarity that the federal exchanges could act as a state exchange with regard to the subsidies (King v. Burwell, U.S., No. 14-114, cert. granted 11/7/14).

The challengers claim that Congress did not intend to make tax-free subsidies available to those who bought insurance through the federally facilitated exchanges operating in most states.

An additional argument is whether the regulations were construed in such a manner as to unconstitutionally coerce states into setting up their own exchanges so those getting health insurance could qualify for the subsidy.

To overturn the regulation would mean employers in at least 37 states likely would not be subject to penalty provisions under the ACA for failing to provide health insurance to full-time workers because employees must have bought insurance from the exchange and received a premium subsidy to trigger the employer penalty.

For more information, see Compensation and Benefit's “Health Care Exchanges” chapter.

To contact the reporter on this story: Michael Trimarchi in Washington at mtrimarchi@bna.com.

To contact the editor responsible for this story: Allison M. Gatrone at agatrone@bna.com.