hawaii health connector 2014 annual report

2014 Annual Report

A Path to Sustainability

Submitted December 31, 2014

2014 Annual Report ii

Letter from the Executive Director

The Hawaiʻi Health Connector, together with the Prepaid Health Care Act of 1974, expanded health

insurance coverage and increased access to affordable health care, wellness, and medicine to all of the

residents of our Islands. Moreover, the federal tax benefits available under the Patient Protection and

Affordable Care Act have the potential to add more than $500 million to our economy over the next

decade.

Over the past three years, the leadership in our government and the staff at the Connector conceived of

and built infrastructure that will provide new access to health coverage and protect the benefits we

enjoyed for four decades under the Hawaiʻi Prepaid Health Care Act. While there were many challenges

along the way, and many more remain in the future, the Connector has the potential to not only

become self-sustaining, but also to reduce the overall cost to the state of delivering medical services to

its citizens, by many millions each year.

This is not an idle claim; consider the following:

Increased reimbursed medical costs will reduce both state and federal contributions toward

uncompensated health care costs.

The Connector offers more than medical insurance; access to dental, drug, and vision coverage

brings more reimbursed costs to these providers, improving both utilization and the overall

state of health for our citizens.

The Connector can transfer nearly all of the cost from the state to the federal government to

provide medical services for lawfully present residents, including migrants from the Pacific

Islands.

The Connector provides jobs in Hawaiʻi for our residents and provides an opportunity for the

state to implement health reform in a way that fits our unique health care landscape.

An analysis of the potential value of each of the aforementioned benefits to the Hawaiʻi economy will be

presented later in this report. It is important to know that these benefits, like many others, do not come

without cost. They are part of the return on investment that can and should be taken into consideration

when evaluating the long-term viability of the Connector as an integral part of Hawaiʻi’s diversified

economy and infrastructure.

While it is possible to forecast the cost of operations, enrollment and associated revenue are less

predictable. Nevertheless, this is an independent business enterprise and its owners, the people of the

State of Hawaiʻi, are entitled to know the costs and benefits associated with the Connector. Therefore,

this report will present three economic models. The Connector developed a base case model that

reflects the Connector’s enrollment and revenue projections. The Connector engaged a market research

firm (SMS) for independent projections for low and high enrollment cases. The base case, along with

2014 Annual Report iii

model assumptions, utilizes the enrollment estimates developed for the Hawaiʻi State Department of

Commerce and Consumer Affairs (DCCA) and is detailed in the body of this report.

Note that all cases are generally consistent with DCCA available market assumptions. The low case

assumes a less favorable market penetration and slower uptake of the services. The high case

incorporates greater market penetration. It also takes into account more accessible markets based upon

our actual experience to date. By way of example, there are two additional classes of customers not

previously identified as prospective customers. They are:

Individuals with dependents utilizing COBRA who can both reduce their out of pocket costs and

become eligible for premium assistance by purchasing their coverage on the Connector.

According to the Department of Labor and Industrial Relations, approximately 27,000 civilians

were unemployed in October 2014.

Students who are not covered by family insurance. This includes students who are lawfully

present from other countries on visas, and students who have families who are on government-

sponsored insurance, such as Medicare.

The net surplus or deficit, by year for each of the three cases, is summarized in the following tables:

Low Case

Base Case

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Participants 20,232 26,309 34,893 41,954 47,209 57,493 65,587 71,386 76,474 80,036

Service Fees $660,517 $2,845,819 $4,027,379 $5,423,057 $6,719,500 $8,416,311 $10,553,874 $12,498,294 $14,329,793 $16,100,914

Other Revenue $56,586,113 $3,174,742 $0 $0 $0 $0 $0 $0 $0 $0

Net Operating

Expenses$58,220,556 $16,174,742 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000

Surplus/(Deficit) ($973,926) ($10,154,181) ($8,972,621) ($7,576,943) ($6,280,500) ($4,583,689) ($2,446,126) ($501,706) $1,329,793 $3,100,914

Cumulative S/(D) ($851,987) ($11,006,168) ($19,978,789) ($27,555,731) ($33,836,231) ($38,419,921) ($40,866,046) ($41,367,753) ($40,037,960) ($36,937,046)


Participants 27,280 33,156 44,934 51,056 62,947 67,877 72,838 80,765 88,415 97,261

Service Fees $984,443 $4,063,797 $5,608,564 $7,360,136 $9,311,991 $11,307,098 $12,827,795 $14,768,624 $17,163,818 $19,880,104

Other Revenue $56,586,113 $3,174,742 $0 $0 $0 $0 $0 $0 $0 $0

Net Operating

Expenses$58,220,556 $16,174,742 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000

Surplus/(Deficit) ($650,000) ($8,936,203) ($7,391,436) ($5,639,864) ($3,688,009) ($1,692,902) ($172,205) $1,768,624 $4,163,818 $6,880,104

Cumulative S/(D) ($528,061) ($9,464,264) ($16,855,701) ($22,495,565) ($26,183,573) ($27,876,475) ($28,048,680) ($26,280,056) ($22,116,237) ($15,236,133)

2014 Annual Report iv

High Case

This report will present a detailed breakdown of the costs to build and operate the Connector, an

analysis of the market potential, and the economic return to the community. In summary, the

technology and the business support systems cost about $150 million to construct and operate for the

first two years. The base case model predicts that it will cost an additional $28 million to support the

operations until they become self-sustaining in 2022. More importantly, this report will also present a

detailed market analysis supporting the revenue and expected enrollment assumptions.

The Connector is also a generator of outside capital and jobs for Hawaiʻi. The following table shows the

tax credits to individuals, businesses, and the estimated cost savings to the state from the transfer of the

lawfully present residents from the state to the Connector.

Base Case

The Connector is a start-up in one of the most unique economic environments in the United States. The

activities at the Connector have the potential to complement and enhance the access to health care

provided by Hawaiʻi’s Prepaid Health Care Act and various federal programs.

This report will present the results of operations, short- and long-term budgets, and describe the system

capabilities, architecture, and business processes. It will examine our economy in the context of the

integration of the Affordable Care Act, and the decisions that resulted in both the creation of the

Connector and the integration of the Hawaiʻi Prepaid Health Care Act. Finally, it will set out a path to

sustainability documented with cost data and show the economic return on the investment necessary to

achieve a stable and sustainable business serving this state as our economy continues to grow and

prosper.

Jeffrey Kissel

Executive Director

Hawaiʻi Health Connector


Participants 24,804 43,722 60,747 76,785 83,564 92,261 97,332 102,337 107,812 111,894

Service Fees $808,557 $4,324,142 $7,231,430 $10,261,616 $12,759,581 $14,764,717 $16,768,023 $18,638,590 $20,771,127 $23,026,536

Other Revenue $56,586,113 $3,174,742 $0 $0 $0 $0 $0 $0 $0 $0

Net Operating

Expenses$58,220,556 $16,174,742 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000

Surplus/(Deficit) ($825,886) ($8,675,858) ($5,768,570) ($2,738,384) ($240,419) $1,764,717 $3,768,023 $5,638,590 $7,771,127 $10,026,536

Cumulative S/(D) ($703,947) ($9,379,804) ($15,148,374) ($17,886,759) ($18,127,178) ($16,362,461) ($12,594,439) ($6,955,849) $815,278 $10,841,815


Individual Credits $8,374,056 $18,158,741 $20,916,070 $24,796,305 $29,069,463 $33,766,484 $39,697,095 $46,206,040 $52,467,457 $61,167,890

Business Credits $4,817,834 $11,766,684 $5,390,884 $6,646,936 $7,129,356 $5,173,570 $305,477 $325,749 $347,365 $370,417

Migrant Credits $3,471,930 $9,189,596 $11,679,822 $12,380,611 $13,123,448 $13,910,855 $14,745,506 $15,630,237 $16,568,051 $17,562,134

Total $16,663,820 $39,115,021 $37,986,776 $43,823,852 $49,322,267 $52,850,909 $54,748,079 $62,162,026 $69,382,873 $79,100,441

Cumulative Credit $16,663,820 $55,778,841 $93,765,617 $137,589,470 $186,911,736 $239,762,645 $294,510,723 $356,672,749 $426,055,622 $505,156,063

2014 Annual Report v

Executive Summary

The 2014 Annual Report highlights a year of tremendous change and progress at the Hawaiʻi Health

Connector. The October 2013 launch surfaced issues that persisted throughout 2014 Open Enrollment.

Enrollment did not meet expectations and resolution of operational challenges defined the focus of

2014’s primary activities. Despite these challenges, the Connector persisted and has delivered significant

process and technology improvement, has preserved the Prepaid Health Care Act of 1974 (PHCA) with

its Affordable Cart Act (ACA)-compliant exchange, and has successfully navigated changes to its

leadership.

As the Connector enters 2015, it does so with a more stable solution, a path to sustainability, and a

leadership team committed to meeting the critical needs of the Connector’s customers and

stakeholders.

Achieving Sustainability and a Return on Investment

The Connector is on the path to financial self-sustainability. Base case projections indicate the

Connector can be cash flow positive in FY2022, after which the Connector will have sufficient revenue to

offer a return on investment made by the state. In the interim, the Connector estimates a capital

investment of approximately $28 million will be required over seven fiscal years to support the

Connector’s operations until they are financially self-sustaining. With the support of the community, the

opportunity exists to achieve the high case projection, which would accelerate the break-even point to

achieve financial sustainability in FY2020.

To estimate long-term sustainability, the Connector developed a base case enrollment projection and

engaged a market research company to independently develop two enrollment projections. All three

scenarios illustrate that financial sustainability is achievable. The scenarios differ in market penetration

estimates by market segment and differ on the timing of the Connector’s break-even point, but all three

projections indicate that the Connector’s total revenue can exceed total expenses in the long-term. As

the Connector works to achieve financial sustainability, it will continue to fulfill its mission of providing

affordable health insurance to the greatest possible number of individuals.

Building on the Current State

The estimates and projections in this report are based on current state operations. The sustainability

model, enrollment, revenue, and cost projections reflect an accessible market and business operations

that look similar to today. As the Connector transforms from start-up to stable business, there are real

and achievable opportunities to do much more.

The Connector is analyzing and developing plans to:

Enhance Revenue from Added Market and Services

2014 Annual Report vi

o Offering potential cost-saving alternatives to COBRA;

o Providing affordable health insurance options for Hawaiʻi’s college student population that

may be uninsured and under-served by student health services options;

o Partnering with the Hawaiʻi Employer-Union Health Benefits Trust Fund (EUTF) to offer

enhanced services and choice; and

o Engaging health insurance captives including both corporations and public entities such as

the University of Hawaiʻi system.

Extend Services That Support Cost Avoidance

o Performing Modified Adjusted Gross Income (MAGI) Medicaid eligibility determination;

o Providing integrated eligibility determination, application, and enrollment support across

state-provided social services; and

o Enabling a 360-degree view of the customer to support enhanced analytics and decision-

making.

Reduce Operating Costs

o Working to align operating costs, such as marketing costs per enrolled life, with industry

benchmarks;

o Assessing the IT bill of materials and eliminating items that are not required to ensure a

successful operation; and

o Simplifying the technical architecture and infrastructure to reduce medium- and long-term

maintenance costs.

Collectively, the Connector believes that these activities have the potential to result in net revenue gains

and cost avoidance totaling millions of dollars each year, and have the potential to reduce certain

segments of operating cost by as much as 40 percent per year.

Adding Value to the State Economy

The Connector supports the capture of benefits associated with the Advanced Premium Tax Credit

(APTC) and Small Business Health Insurance Tax Credit. The combined value of these benefits through

2024 is estimated at $505 million. These financial benefits – which come entirely from federal funds –

provide direct financial stimulus to the state. The APTC is estimated to return $463 million to those

customers with financial need who may otherwise lack the resources to purchase insurance without this

assistance. The Small Business Tax Credit is estimated to return $42 million to small business owners.

2014 Annual Report vii

In addition to the direct financial stimulus they provide, these tax credits facilitate the expansion of

health insurance. This expansion will help promote a healthier and more productive population, reduce

uncompensated health care costs associated with caring for the uninsured, and transfer risk away from

the state and providers to the issuers.

The Connector plays a critical role in unlocking this value.

Addressing Business and Technology Challenges

The Connector is fully focused on addressing the business and technology challenges that its customers

and stakeholders have faced since the October 2013 launch. 2014’s efforts resulted in significant

improvement to the customer experience, addressed numerous capability deficiencies, and stabilized

solution performance. The challenge for 2015 is to advance in three key areas:

Customer Perception of the Connector Solution

o Continuing to enhance usability of online self-service function;

o Offering outstanding support through the Contact Center, Kōkua, and other forms of direct

assistance; and

o Building trust in the Connector brand through outreach and demonstration of a solution

that meets customer and stakeholder needs.

Process and Technology Alignment

o Stabilizing and simplifying technology to enable improved process and efficiency;

o Implementing permanent solutions to workarounds that have contributed to sub-optimal

processes; and

o Ensuring that the customers have easy access to the support that works for them.

Issuer Engagement and Participation

o Increasing number of issuers participating in the exchange;

o Creating a richer marketplace with expanded consumer choice; and

o Spurring competition and innovation in the issuer community.

Advancing in each of these three areas is a critical success factor in the effort to grow enrollment and

achieve self-sustainability as quickly as possible.

Leveraging the Connector’s Strengths

The Connector enters 2015 as a much stronger organization.

2014 Annual Report viii

The Connector has new executive leadership, a new leadership profile, and a refined

business model focused on delivering the best possible experience to customers and

stakeholders.

The online self-service solution has been substantially improved to enhance usability and

deliver new and improved capabilities.

Contact Center responsiveness has improved by every measure in 2015 Open Enrollment

when compared to 2014 Open Enrollment.

System availability, web page response time, and transaction response time are consistently

better than observed during 2014 Open Enrollment.

There are fewer open defects, and fewer new defects being identified in the system.

Quality processes and controls continue to be improved and are resulting in better decision

support, better management, and better outcomes.

These strengths provide the foundation for the Connector’s continuous improvement, growth, and

sustainability. They are critical success factors in enabling the delivery of the service and results that the

Connector’s customers, stakeholders, and residents of Hawaiʻi should expect of it.

2014 Annual Report ix

Table of Contents

Letter from the Executive Director ............................................................................................................ ii

Executive Summary .................................................................................................................................... v

Table of Contents ...................................................................................................................................... ix

1. Hawaiʻi Health Connector Overview ................................................................................................. 1

1.1. Connector Formation and Milestones .......................................................................................... 1

1.2. Governance and Organization ...................................................................................................... 2

1.2.1. Board of Directors ................................................................................................................. 3

1.2.2. Leadership ............................................................................................................................. 4

1.2.3. Staff ....................................................................................................................................... 4

1.2.4. Organizational Issues and Risks ............................................................................................ 5

1.3. Compliance with Federal Law ....................................................................................................... 5

1.4. Impact of State Policies on the Connector.................................................................................... 8

1.4.1. Legislation: Act 233 (SHL 2014) ............................................................................................. 8

1.4.2. State Policy Decision: Composite Premiums & Small Businesses ......................................... 8

1.4.3. State Policy Decision: Transitional Policies ........................................................................... 9

2. The Prepaid Health Care Act and the Affordable Care Act ............................................................. 11

2.1. The Hawaiʻi Prepaid Health Care Act of 1974 ............................................................................. 11

2.2. Uniting the Prepaid Health Care Act and the Affordable Care Act ............................................. 12

2.2.1. Federal Market Reform Through the Affordable Care Act ................................................. 12

2.2.2. Standardizing Rating Categories ......................................................................................... 13

2.2.3. Establishing Essential Health Benefits ................................................................................ 14

2.2.4. Eliminating Annual and Lifetime Limits............................................................................... 14

2.3. One SHOP for PHCA and ACA Compliance .................................................................................. 15

2.4. The Benefits of Uniting the PHCA and the ACA .......................................................................... 16

2.4.1. Small Business Tax Credits for Employers ........................................................................... 16

2.4.2. Mandating Coverage for Businesses with Fewer than 50 Employees ................................ 21

2.4.3. Extending Coverage to Part-Time Employees ..................................................................... 22

2014 Annual Report x

2.4.4. Higher Quality Insurance Plans for Employees ................................................................... 22

2.4.5. Educating Small Business Employers .................................................................................. 23

2.4.6. Payment Simplification for Employers ................................................................................ 24

2.4.7. Employer and Employee Choice ......................................................................................... 24

2.4.8. Digitizing the PHCA ............................................................................................................. 25

2.5. The Challenges of Implementing the PHCA and the ACA ........................................................... 25

2.5.1. The Transitional Relief Policy .............................................................................................. 25

2.5.2. Legal Concerns .................................................................................................................... 26

2.5.3. Enhancing the Usability of the Connector .......................................................................... 26

2.5.4. Employer and Employee Learning Curves........................................................................... 27

2.6. Conclusion ................................................................................................................................... 27

3. Hawaiʻi in Relation to the Federally Facilitated and State-Based Marketplaces ............................ 29

3.1. Definition of Exchange Types ...................................................................................................... 29

3.2. Summary of State Participation and Enrollment ........................................................................ 30

3.2.1. Changes to State Marketplaces During 2014 ...................................................................... 34

3.2.2. Anticipated Changes to State Marketplaces During 2015 .................................................. 35

3.2.3. 2015 Supreme Court Case: King vs. Burwell ....................................................................... 35

3.3. SHOP ........................................................................................................................................... 37

3.4. Issuer Participation ..................................................................................................................... 39

3.5. Financial Comparison .................................................................................................................. 43

3.6. Funding Models........................................................................................................................... 49

3.6.1. Funding Models for Financial Sustainability ....................................................................... 50

4. Improvements and Sustainability ................................................................................................... 55

4.1. Achieving Financial Sustainability in the Hawaiʻi Market ........................................................... 55

4.2. Market Projections ...................................................................................................................... 57

4.3. Cases and Assumptions ............................................................................................................... 59

4.3.1. Cases ................................................................................................................................... 59

4.3.2. Assumptions ........................................................................................................................ 59

4.4. Base Case Projection ................................................................................................................... 61

2014 Annual Report xi

4.4.1. Market Penetration ............................................................................................................. 61

4.4.2. Enrollment ........................................................................................................................... 61

4.4.3. Enrollment Growth Sources ................................................................................................ 63

4.4.4. Revenue .............................................................................................................................. 64

4.5. The Economic Impact of Tax Credits on the Community ............................................................ 67

4.5.1. Advanced Premium Tax Credit (APTC) ................................................................................ 67

4.5.2. Small Business Health Care Tax Credit ................................................................................ 69

4.6. The Path to Sustainability ........................................................................................................... 70

4.6.1. Opportunities to Enhance Revenue from Added Market and Services .............................. 71

4.6.2. Extend Services that Support Cost Avoidance .................................................................... 71

4.6.3. Opportunities to Reduce Operating Costs .......................................................................... 72

5. Connector Financial Summary ........................................................................................................ 74

5.1. Introduction ................................................................................................................................ 74

5.2. Financial Summaries ................................................................................................................... 74

5.2.1. Summarized Statement of Activities ................................................................................... 74

5.2.2. Summarized Statements of Financial Position .................................................................... 75

5.2.3. Summarized Schedule of Grant Funding from Inception through June 30, 2014 .............. 75

5.3. Fiscal Year 2014 Financial Activity Management Discussion and Analysis ................................. 75

5.3.1. Composition of and Changes in Statements of Activities ................................................... 75

5.3.2. Changes in Statements of Financial Position as of June 30, 2014 versus 2013 .................. 76

5.3.3. Overview of Grant Awards, Expenditures, Obligated Funding, and Remaining Balances .. 77

5.4. Grant Funding Activity ................................................................................................................ 77

5.4.1. Schedule of Grant Funding Activity from Inception through June 30, 2014 ...................... 77

5.4.2. Management Discussion and Analysis ................................................................................ 77

5.5. Fiscal Year 2015 Operating Activity to Date................................................................................ 78

5.5.1. Summarized Operating Budget versus Actual (July 1, 2014 to September 30, 2014) ........ 78

5.5.2. Management Discussion and Analysis ................................................................................ 79

5.6. 10-Year Financial Forecast .......................................................................................................... 79

5.6.1. Cash Flow Financial Forecast for Fiscal Years Ended June 30, 2015 to June 30, 2024 ....... 79

2014 Annual Report xii

5.6.2. Monthly Cash Flow Forecast for Fiscal Year Ended June 30, 2015 ..................................... 80

5.7. Financial Statements and Independent Auditors’ Reports (see Appendix E) ............................. 80

6. The Connector in the Community ................................................................................................... 81

6.1. In-Person Assistance – The Role of the Kōkua ............................................................................ 83

6.1.1. The Connector’s Hi’i Ola Program ....................................................................................... 83

6.1.2. Training for Kōkua ............................................................................................................... 84

6.1.3. Successes of the Hi’i Ola Program ....................................................................................... 84

6.2. In-Person Assistance: Agent Partnership Program ..................................................................... 85

6.2.1. Launching the APP .............................................................................................................. 85

6.2.2. Challenges and Solutions .................................................................................................... 86

6.2.3. Successes of the APP ........................................................................................................... 87

6.3. Partnering with Insurers ............................................................................................................. 87

6.4. Future Outreach and Education .................................................................................................. 88

6.4.1. Increasing Awareness ......................................................................................................... 88

6.4.2. The ACA’s Navigator Requirement ..................................................................................... 89

7. Connector Solution Update ............................................................................................................ 90

7.1. Customer Experience Update ..................................................................................................... 90

7.1.1. Online Improvements ......................................................................................................... 90

7.1.2. Contact Center Improvements ........................................................................................... 94

7.1.3. Contact Center Performance .............................................................................................. 96

7.1.4. Key Metrics ......................................................................................................................... 97

7.1.5. Service-Oriented Improvements ....................................................................................... 101

7.1.6. The Customer Experience 2014 Summary ........................................................................ 104

7.1.7. Customer Experience 2015 Outlook ................................................................................. 106

7.2. Technology Solution Stabilization Update ................................................................................ 108

7.2.1. Performance Against Established Service Level Agreements ........................................... 109

7.2.2. System Availability ............................................................................................................ 113

7.2.3. Web Page Response Time ................................................................................................. 114

7.2.4. Transaction Response Time .............................................................................................. 115

2014 Annual Report xiii

7.2.5. Mean Time to Resolve Severity 1 and 2 Incidents ............................................................ 116

7.2.6. Ongoing Performance Risk and Active Mitigation ............................................................ 118

7.2.7. Defect Identification and Resolution Summary ................................................................ 119

7.3. Technology Solution Advancement Update ............................................................................. 122

7.3.1. New and Improved Capabilities for 2014 ......................................................................... 124

7.3.2. Remaining Capability Gaps and Opportunities ................................................................. 128

8. Recommendations and Conclusions ............................................................................................. 132

8.1. Purpose ..................................................................................................................................... 132

8.2. Enrollment................................................................................................................................. 132

8.3. Technology ................................................................................................................................ 133

8.4. Operational Readiness .............................................................................................................. 134

8.5. Financial Condition and Prospects ............................................................................................ 135

8.6. The Connector and the Insurance Industry .............................................................................. 136

8.7. Opportunities for Additional Revenue ...................................................................................... 137

8.8. Conclusion ................................................................................................................................. 138

9. Appendices .................................................................................................................................... 140

9.1. Appendix A: Cost Information Sources by State ....................................................................... 141

9.2. Appendix B: Low and High Case Metrics ................................................................................... 144

9.3. Appendix C: Schedule of Significant Contracts ......................................................................... 145

9.4. Appendix D: Community Organizations .................................................................................... 146

9.4.1. Certified Application Counselor Organizations (CACOs) ................................................... 146

9.4.2. Marketplace Assister Organizations (MAOs) and MAO/CACO-blend organizations ........ 146

9.4.3. Certified Agents/Brokers ................................................................................................... 147

9.5. Appendix E: Financial Statements and Independent Auditors’ Reports ................................... 147

2014 Annual Report 1

1. Hawaiʻi Health Connector Overview

The Patient Protection and Affordable Care Act of 2010 (ACA) presented a choice to the State of Hawaiʻi:

join the federal health insurance exchange, or establish a state-based exchange capable of providing

Hawaiʻi with an increased level of control and enabling Hawaiʻi to tailor the design and operation of the

exchange to meet the needs of Hawaiʻi’s residents and preserve the successes of Hawaiʻi’s health care

system. These successes have resulted in higher levels of health coverage, better health coverage, and a

healthier population when compared to other states and the national averages.

The legislature and governor made the decision that “the people of Hawaiʻi would be best served by a

health insurance exchange that is operated locally in Hawaiʻi.” That decision led to the establishment of

the Hawaiʻi Health Connector (Connector).

This annual report is required by both the Connector’s enabling statute, the Hawaiʻi Health Insurance

Exchange Act (Act 205, SLH 2011), and subsequent state law (Act 233, SLH 2014). The report provides a

broad representation of the Connector’s 2014 operations, and includes significant detail on the

Connector’s sustainability plan as required in Section 435H-C (Act 233, SLH 2014).

1.1. Connector Formation and Milestones

The Connector was established by Act 205 and signed into state law by the governor in July 2011. Act

205 created the Connector as a private nonprofit corporation to be organized and governed pursuant to

Chapter 414D of the Hawaiʻi Nonprofit Corporations Act. The Connector is not an agency of the state

and is not subject to laws or rules regulating rulemaking, public employment, or public procurement.

However, the Connector’s status as a nonprofit corporation does not diminish its obligation to the

people of Hawaiʻi to deliver the best possible service as efficiently and responsibly as possible.1

Act 205 stipulates that the Connector conform to the requirements of the ACA and be responsive to the

unique needs and circumstances of the state. This specifically includes the preservation of the existing

benefits provided by the Hawaiʻi Prepaid Health Care Act (PHCA) of 1974 (Hawaiʻi Revised Statutes

Chapter 393), which is deemed by the state to be a critical success factor in enabling Hawaiʻi to achieve

1 Ten other states and the District of Columbia developed their exchanges as quasi-governmental entities, an

independent public agency with a governing board or, as in Colorado and New Mexico, a public nonprofit. The

exchanges in Kentucky, New York, Rhode Island, Utah and Vermont sit within state agencies and do not have

governing boards with decision-making authority; many of these marketplaces instead consult with advisory

boards. Most, but not all, marketplaces can write regulations to govern their operations. However, even those

marketplaces with rulemaking authority have had to wait for their state’s legislatures to develop or approve

certain design decisions, such as the marketplace’s long-term financing mechanisms.

Dash, Lucia, Keith, and Monahan. Implementing the Affordable Care Act: Key Design Decisions for State-Based

Exchanges. July 2013.


a generally healthier population, lower uninsured rates, and lower premium costs when compared to

national averages and the majority of mainland states.

Act 233, signed into law in July 2014, reaffirmed the intent of Act 205, expanded and strengthened

specific provisions for legislative oversight, board oversight and reorganization, annual reporting, and

addressed various other topics including funding and a state appropriation.

The following timeline illustrates major milestones in the formation and development of the Connector.

Figure 1.1: Connector Milestones

1.2. Governance and Organization

At the close of 2014, the Connector is well positioned with strong leadership, an effective resource

profile, and robust business processes to move the organization into 2015. The organization’s profile has

stabilized after a year of transition: a permanent executive director is now in place, department

leadership has been streamlined, and membership of the Board of Directors now reflects recent changes

to state law. The count of internal Connector team members has changed, as well. These transition

points have led to a more stable, effective organizational profile that will allow the Connector to be a

more efficient and effective manager of the Hawaiʻi health insurance marketplace.

Jan-10 Dec-12Jan-11 Jan-12

Jan-13 Dec-14Jan-14

December 2013

First Executive Director resigns;

Tom Matsuda namedInterim Executive Director

January 2013

DHS signswith KPMGfor KOLEA

Implementationproject

July 2014

Act 233 signed;addresses funding

and new Boardcomposition process

November 2014

Second openenrollment period

begins

December 2012

Connector signswith CGI

for exchangeImplementation

October 2014

Jeffrey Kisselnamed new

Executive Director

October 2013

First openEnrollment

Period begins First website goes live

July 2013

Act 848establishes networkadequacy and smallbusiness definition

July 2012

Terms beginfor permanent

Board of Directors RFP for exchangeimplementation project

December 2011

Connector namesfirst Executive Director

October 2012

RFP forIndependent

verification project

November 2011

Level 1 grant awarded to Department of Commerce

and Consumer Affairs, State of Hawaiʻi

May 2012

Connector acquiresoffice spaceand begins

hiring personnel

September 2012

RFP forCommunications

project

July 2011

Act 205 signed into law Hawaiʻi Health Connector established

Prepaid sunset law repealed

June 2010

Patient Protection andAffordable Care Act signed:

reforms to PHCA begin

April 2013

Level 2 grantawarded to Connector


1.2.1. Board of Directors

Act 205 established the Connector, but also the purpose, composition, and accountability of the

Connector’s Board of Directors (Board). The Board is accountable for managing the Connector’s budget

and representing the diverse interests of Hawaiʻi consumers, employers, insurers, and benefit providers.

The 2011 law established the conditions for Board membership. The Connector’s Board was to be

composed of 15 positions appointed by the governor with the advice and consent of the Senate. The law

named four state positions that were to be ex-officio voting members of the Board, each of whom can

appoint a designee if inclined. These positions are the Director of Commerce and Consumer Affairs, the

Director of Health, the Director of Human Services, and the Director of Labor and Industrial Relations.

Hawaiʻi state law SB 2470 Act 233 (2014) provided additional conditions that govern Board membership

of the Connector in order to mitigate potential conflicts of interest. The Board is now comprised of 14

positions – nine voting members and five ex-officio (one appointed voting, four non-voting) members.

The 2014 law specifies that insurers or dental providers cannot be Board members and established nine

areas from which members must have education, training, or professional experience. For each vacant

position, the president of the Senate, the speaker of the House of Representatives, and the Board must

each submit two nominations to the governor for appointment. One ex-officio designee will serve as the

state’s formal representative on the Board and will have voting authority.

As a result, the membership of the Board of Directors has changed, and now complies with the new law.

Figure 1.2: Hawaiʻi Health Connector Board of Directors (as of 12/31/14, listed alphabetically by last

name)

Name Affiliation Board Title Appointed to Board as:

Cliff Alakai Maui Medical Group Chair Health care provider

Clementia Ceria-Ulep Faith Action for Community Equity

Member Health care consumer

Beth Giesting Governor’s Office Member Labor management representative

Mike Gleason The Arc of Hilo Vice Chair; Chair of Community Outreach Committee

Health care consumer

Keone Kali Office of Information Management and Technology

Treasurer; Chair of Finance Committee

Ex-officio (voting)

Keali’i Lopez State of Hawaiʻi Department of Consumer and Commerce Affairs

Member Ex-officio

Rachael Wong State of Hawaiʻi Department of Human Services

Member Ex-officio

Sherry Menor-McNamara The Chamber of Commerce of Hawaiʻi

Chair of Human Resources Committee

Small business representative

David Sakamoto State of Hawaiʻi Department of Health

Member Ex-officio


Name Affiliation Board Title Appointed to Board as:

Christine Sakuda Hawaiʻi Health Information Exchange

Chair of Governance Committee

Health information exchange representative

Dwight Takamine State of Hawaiʻi Department of Labor and Industrial Relations

Member Ex-officio

JoAnn Tsark Papa Ola Lokahi Secretary Native Hawaiʻian Health Organization representative

Open position - - Pending appointment

Open position - - Pending appointment

1.2.2. Leadership

Jeffrey Kissel was named executive director of the Connector in October 2014. Thomas Matsuda, former

ACA implementation manager for Hawaiʻi, led the Connector on an interim basis for 11 months during

the search for a permanent replacement following the two-year tenure of the first executive director.

The Connector’s leadership positions were re-organized to more appropriately address the needs of the

organization. While the deputy executive director, finance, and legal leaders remained consistent

throughout much of the past year, the Connector consolidated five other leadership positions into

three. The organization expanded the operations role to include accountability for consumer

engagement and unified the marketing and business development functions under one lead.

Figure 1.3: Connector Organizational Structure

1.2.3. Staff

In line with legislative requirements to streamline operations and reduce costs, the Connector plans to

end calendar year 2014 with 27 full-time employees and several external partners. The 27 internal staff

support and advance the activities in the areas of finance, legal, policy, consumer engagement,

operations, and executive leadership.

The Connector works with several external partners to support the organization’s business processes

and health exchange solution. The organization continues to look for opportunities to leverage external

expertise to reach organizational goals. External partners support the Connector’s mission in areas of

information technology, call center management (Maximus), health exchange solution management

Jeffrey Kissel

Executive Director

Diane Reich

Chief Financial Officer

TBD

Legal Counsel

Eric Alborg

Deputy Executive Director/Chief Policy and

Administration Officer

Robin Weldon-Cope

Chief Consumer Engagement and

Operations Officer

John Lacy

Information Technology Project Management

Office


(CGI, Exeter Group), and independent verification and validation. The Connector is currently reviewing

external partnerships and will make adjustments to ensure that external teams are positioned to

provide the greatest value.

1.2.4. Organizational Issues and Risks

The Connector is well positioned to continue providing Hawaiʻi with a high-quality health care

marketplace for both returning enrollees and first-time health insurance applicants. There are several

items the organization is addressing and monitoring to ensure the Connector remains a strong and

viable resource for the people of Hawaiʻi.

The organization is planning for knowledge transfer from the IT contractors to Connector staff. There is

an intensive effort under way to complete the design, development, and implementation of the

Connector solution, and establish sustainable maintenance and operating practices. To date, this effort

has concentrated and been centered on the effort of external partners. In multiple technical and

business process areas, the knowledge is embedded with these external team members. The Connector

is developing a plan to transfer critical knowledge from external partners to internal team members.

The Connector is also working to ensure that it has the appropriate level of technical and support

resources internally. The organization will continue to collaborate with its external partners to apply

system updates and manage support, but the Connector will ensure it has an increasing level of internal

command and control of all parts of the business.

Since its founding in 2011, the organization has experienced considerable growth and transition

resulting in a high degree of turnover at both the leadership and staff levels. The deadlines to prepare

for Open Enrollment in October 2013 and the effort to prepare for the second year of enrollment this

November kept staff focused on the task at hand – customer support – but in some cases this focus has

hindered internal employee cross-training and growth. A key objective of 2015 is to review areas where

formalized cross-training can be accomplished to help facilitate employee growth, and to enhance the

focus on business process monitoring and improvement to ensure that the entire team is prepared to

handle the work that will accompany a surge of enrollment.

1.3. Compliance with Federal Law

To evaluate the Connector’s compliance with federal requirements, the Connector contracted with

Manatt Health Solutions (Manatt) to evaluate the Connector’s implementation of federally mandated

marketplace functions. Manatt’s evaluation consisted of a “gap analysis” – comparing federal regulatory

requirements for marketplace functions with policies and operational practices of the Connector. The

outcome of the evaluation was delivered in a report presented to the Connector on November 10, 2014.

The report identified areas where Connector policies and/or operations are at risk of falling short of

federal requirements and provided recommendations for improvement.

The evaluation focused on the functions and policies related to the following areas:


Appeals

Individual mandate exemptions

Governance

Financing

Plan management

Eligibility and enrollment processes

Interaction with the Med-QUEST agency

Consumer assistance

This evaluation focused only on processes for enrollment of individuals and families; it did not include

the Small Business Health Options Program (SHOP), which may require a more complex analysis due to

the relationship between the SHOP and the PHCA.

The following table summarizes the recommended actions associated with the outcomes of the

evaluation and identification of gaps associated with each specified federal requirement.

Figure 1.4: Recommendations from Gap Analysis Conducted by Manatt Health Solutions

Federal Requirement Recommended Action

Governance Principles Develop governance principles and policies related to ethics, accountability and transparency standards, and disclosures of financial interest.

Finalize conflict of interest policy.

Stakeholder Consultation Establish a strategy for consultation with stakeholder groups including: QHP enrollees Individuals and entities with enrollment experience Advocates for the hard-to-reach Small businesses and self-employed individuals State Med-QUEST and CHIP agencies Federally recognized tribes Public health experts Health care providers Large employers Health insurance issuers Agents and brokers.

Financial Sustainability Plan Establish a formal and comprehensive financial sustainability plan.

Oversight and Financial Integrity Develop written oversight and financial integrity requirement policies and procedures in compliance with federal requirements.

Review procurement practices for contracts under $100,000 and for sole source contracts with the Board and if confirmed, amend written procurement policies to reflect this practice.


Federal Requirement Recommended Action

Navigators and Certified Application Counselors

Develop oversight policies and procedures for the existing Consumer Assistance Program.

Develop a navigator program that will be implemented once establishment funding for consumer assistance comes to an end, following the 2015 Open Enrollment period.

Eligibility Determinations Ensure eligibility determinations are made in a timely manner.

Conduct Medicaid assessments before sending all applications to the Department of Human Services (DHS).

Eligibility Redetermination During a Benefit Year

Establish a more streamlined mid-year eligibility redetermination process across insurance affordability programs.

Enrollment of Qualified Individuals into QHPs

Implement and test a system to transmit 834 transactions to CMS and work to ensure it can transmit 834 transactions by January 2015 (note: it is possible CMS will further delay this requirement).

Special Enrollment Periods Update special enrollment policies and procedures to track the federal requirements.

Clarify the regular and special effective dates and whether or not the Connector is using the flexibility the federal regulations afford it with respect to effective dates.

Stand-Alone Dental Plans Produce guidance indicating which QHP certification standards apply to dental plans.

Decertification of QHPs Establish a protocol for routine compliance reviews of QHP issuers.

Establish clear lines of responsibility between the Connector and the insurance department for receiving and investigating complaints.

Establish a process for notifying the QHP issuer, enrollees, HHS, and the insurance department when a decertification decision is made.

Prohibition on Discrimination

Determine what activities the Connector and the insurance department are currently undertaking with respect to evaluating plans for nondiscrimination and ensuring ongoing compliance with the nondiscrimination rules.

To the extent necessary, establish protocols for enforcement.

Termination of Coverage and Grace Periods

Evaluate the treatment of individuals who are in a grace period, particularly during the last quarter of the year.

Appeals Establish a formal appeals process and develop internal appeals policies and procedures, including appropriate noticing.

Individual Mandate Exemption Take steps to implement an exemption determination process prior to 2016 Open Enrollment.

The Connector is in the process of developing plans to remedy identified gaps and implement a broader

oversight plan as is federally required. Some of the gaps identified, such as the financial sustainability

plan and expanding the Connector’s reach into the community, are addressed in this report.

Eligibility determination is a specific compliance risk that the Manatt report has highlighted. It indicated

that the current eligibility determination process may be out of compliance with two requirements

under federal regulation: first, that eligibility determination is made promptly and without undue delay,

and second, that marketplaces either determine or assess eligibility for Medicaid/Children’s Health

Insurance Plan (CHIP) coverage. Section 7.1.7 of this annual report addresses the current eligibility

process in greater detail. The Connector and Department of Human Services (DHS) have an opportunity

to work together in 2015 to not only ensure compliance, but also to provide a better experience for

their customers.


1.4. Impact of State Policies on the Connector

Over the course of the year, the state government has made decisions that have significantly impacted

the progress of the Connector’s development both positively and negatively.

1.4.1. Legislation: Act 233 (SHL 2014)

Act 233 modified and improved the Connector’s enabling legislation:

Established the Connector Legislative Oversight Committee

o The Connector is required to submit a detailed sustainability plan to this Committee at

the end of the fiscal year. The legislation addresses sustainability by reaffirming the

ACA’s requirement that the Connector achieve sustainability by January 1, 2015 and

allows the Connector to charge issuer fees, which it already does, or generate non-

issuer-based revenue to fund operations.

Requires the Committee to annually review a report and sustainability plan prepared and

submitted by the Connector

Permits Connector-certified insurance agents to enroll individuals and employers in Qualified

Health Plans (QHPs) through the Connector

Clarifies that the Connector must submit the results of its annual A-133 audit to the legislature

Provides the Connector with the means to generate non-insurer based revenue through state

funding

Repeals requirement for DHS to determine Med-QUEST eligibility for purposes of purchasing

plans from the Connector

Appropriated $1.5 million in funding for the operations of the Connector

Act 233 provided a few strong opportunities for the Connector’s growth and path to sustainability, while

also protecting its position as an autonomous, independent entity.

1.4.2. State Policy Decision: Composite Premiums & Small Businesses

In response to requests from issuers, the Department of Commerce and Consumer Affairs (DCCA)

developed a composite premium methodology for issuers in the small employer group market in

Hawaiʻi. The general consensus was to implement a three-tiered rating structure as follows:

Employee Only (Single)

Employee + Spouse or Child (Two-Party)

Employee + Spouse + Child(ren) (Family)


This tiered-composite premium methodology is an alternative method issuers may use to display small

employer premium rates for ACA plans for the 2015 plan year. It does not impact the underlying

methodology for how premiums are calculated, but rather adjusts how those premiums are distributed

in the small group.

The Connector will not be able to offer composite premiums in plan year 2015 and it is unclear whether

composite premium rating can be technically implemented within the Connector solution (e.g.,

Employee Choice).

If an issuer does offer composite premiums, it must make this approach available for each small

employer in the market unless there is Employee Choice. Employer and Employee Choice are offered

through the Connector with PHCA and ACA-compliant plans that give employers and employees greater

control and more ownership over their health care decisions. In the case of Employee Choice, which

would occur when more than one issuer’s products are offered by a small employer, composite

premiums will not be an option. This decision may further limit enrollment through the Connector in

2015.

1.4.3. State Policy Decision: Transitional Policies

On November 14, 2013, the federal government announced that states could decide whether or not to

allow small group and individual health insurance policies existing on October 1, 2013 to be renewed for

a policy year starting between January 1, 2014 and October 1, 2014. To give consumers the most

options, the State of Hawaiʻi allowed Hawaiʻi health insurers to offer a renewal option, which limited

enrollment in the Connector.

Hawaiʻi consumers have the following choices:

“Grandfathered” 2010 health plans sold outside the Connector: Plans that existed in March

2010, which cannot be sold on the Connector as they do not meet the requirements to be

certified as QHPs.

“Transitional renewal plans” or “Grandmothered” health plans: Plans in existence on October

1, 2013 and renewed prior to October 1, 2014. These plans:

o May include some but not all ACA features;

o Cannot be sold on the Connector;

o Are subject to updated premium rates; and

o Cannot be issued as new policies; consumers can only apply for a renewal policy.

“Fully compliant new 2014 ACA” plans: Must include all ACA features including the 10 Essential

Health Benefits. These plans will be sold on and off the Connector.


While it is unclear to what extent the continued availability of “Grandfathered” and “Grandmothered”

plans will impact consumers, the decision has impacted the Connector’s short-term enrollment

opportunity. However, “Grandmothered” or “Transitional renewal plans,” will not be renewed past

2016, which presents an opportunity for the Connector to enroll new consumers into qualified,

affordable ACA-compliant plans.


2. The Prepaid Health Care Act and the Affordable

Care Act

2.1. The Hawaiʻi Prepaid Health Care Act of 1974

The Hawaiʻi Prepaid Health Care Act (PHCA) of 1974 (Hawaiʻi Revised Statutes Chapter 393) was the first

state act in the nation to create minimum standards of health care coverage for employees. The PHCA

mandated that Hawaiʻi employers with one or more employees offer insurance to employees who work

a minimum of 20 hours per week, have been employed for at least four consecutive weeks, and earn a

monthly wage of at least 86.67 times the Hawaiʻi minimum hourly wage.

In 1974, three months after the enactment of the PHCA, a federal law called The Employee Retirement

Income Security Act of 1974 (ERISA), was enacted. ERISA established minimum standards for pension

plans in private industry in addition to providing extensive rules on the federal income tax effects of

transactions associated with employee benefit plans. ERISA superseded all state laws related to

employee benefits. However, ERISA includes a waiver for the PHCA to allow for its continued

implementation. The waiver freezes the law in its original 1974 form, meaning that any substantive

changes may risk the PHCA’s continued existence.

The PHCA has had a significant impact on lowering the number of uninsured in Hawaiʻi relative to the

rest of the nation.

Hawaiʻi’s low uninsured rate, which in 2010, prior to the implementation of the ACA, stood at 7.6

percent and was eight points lower than the national average, is due in large part to the high rate of

employer-sponsored coverage, which in 2010 was 12 points higher than the national average.2 Figure

2.1 illustrates the comparison between employer-sponsored coverage and uninsured rates in Hawaiʻi

relative to the nation.

2 Employer-sponsored coverage includes employer (non-Medicare and Medicare) and military (active and

retired) coverage.


Figure 2.1: Comparison of Employer-Sponsored Coverage (Nation vs. Hawaiʻi)3

Employer-Sponsored Coverage Uninsured

Hawaiʻi 66.5% 7.6%

Nation 54.4% 15.6%

2.2. Uniting the Prepaid Health Care Act and the Affordable Care Act

2.2.1. Federal Market Reform Through the Affordable Care Act

The Patient Protection and Affordable Care Act of 2010 (ACA) is a federal statute that seeks to reform

health care on a national level by eliminating barriers to access and providing important tax subsidies to

low-income residents and small businesses.

While the PHCA aimed to provide quality insurance by requiring certain plan benefits and requiring

employers to provide coverage to employees in Hawaiʻi, the ACA mandated additional market and

health insurance reforms beyond the workforce to improve transparency and tie payments to health

outcomes. For example, the ACA extends dependent coverage to 26, abolishes lifetime caps, and offers

tax incentives to small businesses that provide health insurance. Some of the primary ways in which the

ACA expands coverage relative to the PHCA are described below.

3 Sober, Josh and Tammy Tomczyk. Current Status of Insurance Coverage in the State of Hawaiʻi: Hawaiʻi

Department of Commerce and Consumer Affairs, Insurance Division. Oliver Wyman. June 2013.

0%

10%

20%

30%

40%

50%

60%

70%

Employer-Sponsored Coverage Uninsured

Hawai'i Nation


2.2.2. Standardizing Rating Categories

The ACA put an end to discriminatory rating practices by mandating that all health insurance be rated

based on four rating categories: age, family, tobacco, and geographic location (“network”). Since Hawaiʻi

has only one network, Hawaiʻi rates are determined based on age, family, and tobacco usage.

Age-based rating sets the maximum band of 3:1, meaning that no individual can pay more than

three times the amount someone else pays for any given health insurance plan at a given

actuarial value level.

Aside from age-rating, health premiums rates are calculated on only two other features: tobacco

use and family size. Tobacco use can increase an individual’s rating by no more than 1.5 times

the premium (1.5:1).

Figure 2.2 illustrates the comparison among small group health coverage plan options in Hawaiʻi.

Figure 2.2: The Department of Consumer and Commerce Affairs (DCCA) Plan Rate Comparisons

Insurer Small Group Plan Name DLIR Level Metal Level Under Age 21 Age 35 Age 60 Kaiser KP Silver – $30 N/A Silver $122.78 $236.27 $524.74 Kaiser KP Silver – Be Fit – $30 N/A Silver $123.99 $238.62 $529.95 HMAA Option Plus Silver N/A Silver $129.44 $249.09 $553.22 HMSA Small Business Silver PPO (1) N/A Silver $138.94 $267.37 $593.83 Kaiser KP Gold - $20 7b Gold $140.13 $269.67 $598.92 Kaiser KP Gold - Be Fit - $20 7b Gold $141.35 $272.02 $604.13 Kaiser KP Gold - $12 7b Gold $141.73 $272.75 $605.76 Kaiser KP Gold - Be Fit- $12 7b Gold $142.95 $275.10 $610.97 Kaiser KP Gold - Plus - $15 7a Gold $146.31 $281.55 $625.31 Kaiser KP Gold - Be Fit/Plus - $15 7a Gold $147.52 $283.90 $630.52 HMAA HMAA PPO Plan (7B) 7b Gold $158.71 $305.43 $678.33 HMAA Executive Plan Option 7b Gold $159.24 $306.44 $680.60 Kaiser KP Platinum - Plus - $20 7a Platinum $159.79 $307.50 $682.94 HMSA Small Business Preferred Provider Plan B 7b Gold $160.35 $308.58 $685.34 Kaiser KP Platinum - Be Fit/Plus - $20 7a Platinum $162.01 $309.84 $688.15 HMSA Small Business Preferred Provider Plan B (1) 7b Gold $162.01 $311.78 $692.45 Kaiser KP Platinum I - $15 7a Platinum $163.34 $314.33 $698.11 Kaiser KP Platinum I - Be Fit - $15 7a Platinum $164.56 $316.67 $703.32 HMSA Small Business CompMED B 7b Gold $171.53 $330.10 $733.12 HMSA Small Business CompMED B (1) 7b Gold $173.19 $333.30 $740.26 UHA UHA 3000 - P (3) 7a Platinum $173.42 $328.87 $724.00 UHA UHA 3000 - R (3) 7a Platinum $173.96 $329.91 $726.30 UHA UHA 3000 - Q (3) 7a Platinum $174.24 $330.46 $727.52 HMAA Comprehensive Basic – Enhanced Rx 7a Platinum $174.42 $335.63 $745.41 Kaiser KP Platinum - Plus/Dental - $20 (2) 7a Platinum $175.03 $336.83 $748.08 HMSA Small Business Preferred Provider Plan A 7a Platinum $175.12 $337.00 $748.47 HMAA HMAA 90/10 PPO - Base Rx 7a Platinum $175.64 $338.00 $750.69 Family Health Hawaiʻi HI Select SB 7a Platinum $175.77 $338.25 $751.23 Family Health Hawaiʻi HI Preferred SB 7a Platinum $175.86 $338.43 $751.64 Kaiser KP Platinum - Be Fit/Plus/Dental - $20 (2) 7a Platinum $176.25 $339.17 $753.29 HMAA Option Plus Two - Base Rx 7a Platinum $176.35 $339.36 $753.70 HMAA Comprehensive Plus - Enhanced Rx 7a Platinum $176.70 $340.04 $755.21 HMSA Small Business Preferred Provider Plan A (1) 7a Platinum $176.79 $340.21 $755.58 UHA UHA 600 – P (3) 7a Platinum $176.88 $335.54 $738.82 UHA UHA 600 – R (3) 7a Platinum $177.39 $336.53 $741.02 HMAA HMAA 90/10 PPO with CAN Rider - Base Rx 7a Platinum $177.40 $341.40 $758.23 UHA UHA 600 - Q (3) 7a Platinum $177.71 $337.13 $742.34 HMAA HMAA 90/10 PPO - Enhanced Rx 7a Platinum $178.81 $344.11 $764.26 HMAA Option Plus Two - Enhanced Rx 7a Platinum $179.34 $345.13 $766.52 Family Health Hawaiʻi HI Select SB Plus 7a Platinum $179.38 $345.21 $766.69 Family Health Hawaiʻi HI Preferred SB Plus 7a Platinum $179.48 $345.39 $767.09 HMAA HMAA 90/10 PPO with CAN Rider - Enhanced Rx 7a Platinum $180.40 $347.17 $771.04 HMAA Option Plus One - Base Rx 7a Platinum $182.87 $351.92 $781.59 HMSA Small Business CompMED A 7a Platinum $184.09 $354.26 $786.78 HMSA Small Business CompMED A (1) 7a Platinum $185.76 $357.46 $793.90 HMSA Small Business Health Plan Hawaiʻi B 7b Platinum $194.10 $373.53 $829.58 HMSA Small Business Health Plan Hawaiʻi A 7a Platinum $195.13 $375.51 $833.98 HMSA Small Business Health Plan Hawaiʻi B (1) 7b Platinum $195.79 $376.78 $836.80 HMSA Small Business Health Plan Hawaiʻi A (1) 7a Platinum $196.83 $378.76 $841.21


2.2.3. Establishing Essential Health Benefits

The ACA also requires that health insurance be standardized in most of the health insurance markets.4

Such health insurance plans are required to offer 10 Essential Health Benefits (EHB) as part of a

Qualified Health Plan (QHP) to ensure that individuals, families, and small businesses receive health

coverage that is comprehensive and does not exclude important benefits, such as prenatal care and

rehabilitative services. The ACA’s essential health benefits include:

Outpatient care;

Trips to the emergency room;

Treatment in the hospital for inpatient care;

Care before and after pregnancy;

Mental health and substance abuse services: behavioral health treatment, counseling, and

psychotherapy;

Prescription drugs;

Services and devices to help recover from injury, disability or chronic condition: physical and

occupational therapy, speech-language pathology, psychiatric rehabilitation;

Lab tests;

Preventive services including counseling, screenings, and vaccines; and

Pediatric services: dental care and vision care for children.

For example, in Hawaiʻi prior to the implementation of the ACA, prescription drug coverage was often

sold as an “add on,” or rider, to a health insurance policy. One of the benefits of the ACA is that it

requires that prescription drug benefits be included or “embedded” as part of every ACA-compliant

QHP.

2.2.4. Eliminating Annual and Lifetime Limits

More than half of personal bankruptcy filings nationwide in 2007 were due to unpaid medical bills that

individuals could not afford.5 In an effort to counteract this problem, the ACA eliminated annual and

lifetime limits on care. These reforms allow every person with health coverage the peace of mind that

they are not one health event away from bankruptcy.

4 Self-insured, Student Health Insurance Plans, Grandfathered and Transitional plans are not required to provide

consumers the 10 Essential Health Benefits. (see CCIIO Essential Health Benefits Bulletin) 5 Kaiser Family Foundation. Medical Debt Among People With Health Insurance. January 2014.

http://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf


2.3. One SHOP for PHCA and ACA Compliance

The Connector includes a unified Small Business Health Options Program (SHOP) solution that complies

with the PHCA and the ACA using a dual rules engine that is available nowhere else in the nation. In

addition to allowing employees covered by the PHCA to apply for health insurance coverage, employees

who are not covered by the PHCA, but who are subject to the regulations of the ACA (part-time

employees, commission-based employees, and agricultural workers), may apply for ACA-compliant plans

through the Connector. The following figure illustrates how employers are managed in the SHOP

depending on whether or not they are subject to the PHCA.

Figure 2.3: PHCA and ACA Eligible Employers and the SHOP

Figure 2.4 illustrates at a high level the process by which employers and employees apply for coverage,

and how the Connector separates PHCA plans from ACA plans.

Subject to

PHCANot Subject to

PHCA

Employers will be prevented from viewing or purchasing

QHPs that are not PHCA compliant

Subject employers have employees that work 20

hours a week for four consecutive weeks and at

least 20 hours a week thereafter

PHCA governs the rules engine

Employers can view and purchase plans that are not

compliant with PHCA

Includes, but not limited to, commission based

employees, agricultural workers, and part-time

employees

Employers in this umbrella will be protected by the ACA where PHCA does not apply to them; ACA governs the

rules engine


Figure 2.4: High Level Employer and Employee Plan Selection

2.4. The Benefits of Uniting the PHCA and the ACA

By retaining SHOP functionality to harmonize the PHCA and the ACA, the Connector offers a unified

solution to Hawaiʻi employees and employers that no other state or federal marketplace provides.

Complying with both the PHCA and the ACA offers several benefits to the employers and employees of

Hawaiʻi that go beyond the benefits provided by either law individually.

2.4.1. Small Business Tax Credits for Employers

One of the unique and under-utilized benefits to employers in Hawaiʻi is the Small Business Tax Credits

that are available to employers. The Connector extends a new small business tax credit to eligible

employers as part of the ACA, which has been available to employers since 2010. For businesses with

fewer than 25 employees that purchase plans through SHOP, employers may be eligible to obtain tax

credits through the SHOP in 2014 that would offset up to 50 percent of their premium costs and 35

percent of their premium costs for nonprofits. This is an important opportunity for small businesses. 52

percent of Hawaiʻi employers are “micro employers” who have between one and four employees, while

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Search for Plans Available Within

Defined Employee Group

Plan Selection

Finalization, Payment, and

Enrollment

Mandatory Employees (over 20 hours per week / PHCA eligible) receive only PHCA plan selection

options

PHCA-exempt Employees receive only ACA plan selection options

Create AccountEmployer

Application and Enrollment

For each Employee on the Employee Roster the Employer specifies PHCA

Mandatory / Optional status defined by over / under 20 hrs per week

For Employees that are exempt from PHCA (paid commission, agricultural workers, etc.) Employer is instructed

to enter under 20 hrs per week

Employer defines Employee Groups and then defines Plan Contributions

and Plan Selection options for each group

Eligible? Appeals ProcessNo


86 percent of Hawaiʻi businesses have fewer than 20 paid employees.6 Without the ACA, employers

would not be able to receive these benefits.

These tax credits are important. In all other states, employers with fewer than 50 employees are not

required to provide health insurance to employees and are not subject to any potential tax penalties.

However, the PHCA imposes significant penalties on any employer who does not comply by providing

employees coverage.7 Tax credits provide an important cost-containment and cost-sharing mechanism

to small business employers who are significantly burdened by high health insurance costs.

Beginning with tax year 2010, small employers that provide health insurance to their employees were

eligible for tax credits provided as part of the ACA to offset their premium costs. Between 2010 and

2013, the legislation provided tax credits for up to 35 percent of the employer premium contribution for

employers with fewer than 25 employees and average annual wages per full-time employee below

$50,000. The full 35 percent tax credit was available to employers with 10 or fewer full-time employees

and average annual wages per full-time employee of $25,000 or less and phases out for larger firms.

Beginning in 2014, the legislation provides tax credits for up to 50 percent of employers’ premium

contribution for up to two years. This credit will be available to small businesses with fewer than 25

employees and average annual wages per full-time employee below $50,000. To be eligible for the

credits, small business employers must offer their employees health plan options through the

Connector. The full 50 percent credit, like the 2010–2013 credit, will be available to firms with 10 or

fewer workers and with average annual wages per full-time employee of $25,000 or less, and will phase

out for larger firms. Tax-exempt organizations of the same size are eligible for the small business

premium credit as well, though they receive somewhat lower credits. 8

Figures 2.5 and 2.6 illustrate the percent of employer contribution to premiums covered by small

business tax credits from 2010 to present for for-profit businesses, and from 2014 onward for nonprofit

businesses (equivalent to the coverage from 2010 to 2013 of employer contribution for for-profit

businesses).

6 This excludes most government employees, railroad employees, and self-employed; U.S. Census Bureau /

American Fact Finder, “Geography Area Series: County Business Patterns by Employment Size Class 2012

Business Patterns,”

http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=BP_2012_00A3&prodType=t

able (accessed December 1, 2014). 7 HRS §393-31 - §393-34

8 26 U.S. Code § 45R


Figure 2.5: Small Business Tax Credit as a Percent (Maximum of 35 Percent) of Employer Contribution

to Premiums, for For-Profit Businesses (2010-2013) and Nonprofit Businesses (2014+)9

9 Sara R. Collins, Karen Davis, Jennifer L. Nicholson, and Kristof Stremikis. Realizing Health Reform’s Potential:

Small Businesses and the Affordable Care Act of 2010. The Commonwealth Fund. September 2010.

Average Wage

Firm Size Up to $25,000 $30,000 $35,000 $40,000 $45,000

Up to 10 35% 28% 21% 14% 7%

11 33% 26% 19% 12% 5%

12 30% 23% 16% 9% 2%

13 28% 21% 14% 7% 0%

14 26% 19% 12% 5% 0%

15 23% 16% 9% 2% 0%

16 21% 14% 7% 0% 0%

17 19% 12% 5% 0% 0%

18 16% 9% 2% 0% 0%

19 14% 7% 0% 0% 0%

20 12% 5% 0% 0% 0%

21 9% 2% 0% 0% 0%

22 7% 0% 0% 0% 0%

23 5% 0% 0% 0% 0%

24 2% 0% 0% 0% 0%

25 0% 0% 0% 0% 0%

Source: C. L. Peterson and H. Chaikind, Summary of Small Business Health Insurance Tax Credit Under the Patient Protection and Affordable Care Act (PPACA), Congressional Research Service, April 20, 2010.


Figure 2.6: Small Business Tax Credit as a Percent (Maximum of 50 Percent) of Employer Contribution to Premiums, For-Profit Firms (2014+)10

For example, a company with 10 full-time employees and average annual wages per full-time employee

of $25,000 is eligible for the maximum small business tax credit of 50 percent in 2014. Assuming that the

business has a per-worker family premium of $9,435 and that the employer contributes 50 percent of

the premium ($4,717), the employer is eligible to receive tax credits equivalent to 50 percent of its

premium contribution ($2,359). This credit leaves savings for the employer of $2,359 per employee.

With 10 employees, the employer will save a total of $23,590.

A nonprofit with the same number of full-time employees (10) and average annual wages per full-time

employee ($25,000) is eligible for a slightly lower credit. Tax credits cover 35 percent of the premium

contribution, which is the maximum credit available to nonprofit businesses. As a result, nonprofit

businesses with this profile are eligible to receive tax credits of $1,651 per full-time employee.

Figure 2.7 illustrates the estimated small business tax credits and net employer and employee

contributions associated with a $9,435 projected family premium.

10

Collins, Davis, Nicholson, and Stremikis. Realizing Health Reform’s Potential: Small Businesses and the

Affordable Care Act of 2010.

Average Wage

Firm Size Up to $25,000 $30,000 $35,000 $40,000 $45,000

Up to 10 50% 40% 30% 20% 10%

11 47% 37% 27% 17% 7%

12 43% 33% 23% 13% 3%

13 40% 30% 20% 10% 0%

14 37% 27% 17% 7% 0%

15 33% 23% 13% 3% 0%

16 30% 20% 10% 0% 0%

17 27% 17% 7% 0% 0%

18 23% 13% 3% 0% 0%

19 20% 10% 0% 0% 0%

20 17% 7% 0% 0% 0%

21 13% 3% 0% 0% 0%

22 10% 0% 0% 0% 0%

23 7% 0% 0% 0% 0%

24 3% 0% 0% 0% 0%

25 0% 0% 0% 0% 0%

Source: C. L. Peterson and H. Chaikind, Summary of Small Business Health Insurance Tax Credit Under the Patient Protection and Affordable Care Act (PPACA), Congressional Research Service, April 20, 2010.


Figure 2.7: Small Business Tax Credits Under Affordable Care Act for Family Premiums11

Stephen Nii, owner of a supermarket (Nii Superette) in Waipahu, provides a real-life example of the

potential benefits that these tax credits can lead to for small businesses. As a result of the savings and

tax credits for which he was determined eligible through the SHOP, Nii was able to increase his number

of full-time positions with fully paid health insurance, provide three additional part-time jobs, and

extend full-time hours and fully paid benefits to the business stockperson.12 Figure 2.8 illustrates Mr.

Nii’s calculations of his savings as a result of receiving small business tax credits through the SHOP.

11

Collins, Davis, Nicholson, and Stremikis. Realizing Health Reform’s Potential: Small Businesses and the

Affordable Care Act of 2010. 12

Nii, Stephen. "Small-business Owner Takes Issue with HMSA." Pacific Business News, August 29, 2014.

50% employer contribution

$4,718*

$9,435 – projected family premium

* To be eligible for tax credits, firms must contribute 50% of premiums. For-profit firms receive 35% and later 50% of their contributions in tax credits.Note: Projected premium for a family of four in a medium-cost area in 2009 (age 40). Premium estimates are based on actuarial value = 0.70.Actuarial value is the average percent of medical costs covered be a health plan.

Source: Commonwealth Fund analysis of Affordable Care Act (Public Law 111-148 and 111-152). Premium estimates are from Kaiser Family Foundation Health Reform Subsidy Calculator, http://healthreform.kff.org/Subsidycalculator.aspx.


Figure 2.8: Nii Superette Estimated Cost Savings from Small Business Tax Credits13

Pre-ACA Post-ACA

Premium Cost Per Month

$6,712.00 Premium Cost Per Month

$4,276.47

Premium Cost Per Year $80,544.00 Premium Cost Per Year $51,317.64

Average Premium Cost Per Month Per Insured

$839.00 Average Premium Cost Per Month Per Insured

$356.37

Impact

Monthly Savings $2,435.53

Annual Savings $29,299.36

Average Monthly Savings Per Insured $482.63

Projected Monthly Tax Credit Savings $1,109.55

Projected Annual Tax Credit Savings $13,314.69

Projected Monthly Savings $3,545.08

Projected Annual Savings

$42,540.96

2.4.2. Mandating Coverage for Businesses with Fewer than 50 Employees

While the ACA extends coverage to a wider portion of the population, the PHCA enables greater

coverage options for the employees of Hawaiʻi. The ACA includes mandates only for companies with 50

or more employees. The PHCA, however, applies to employers with one or more employees.

By implementing a solution that complies with the PHCA in addition to the ACA, the Connector

preserves the intention of the PHCA, which was to establish affordable health coverage as a necessity

rather than a luxury for the Hawaiʻi workforce.14 Without the PHCA, employees in Hawaiʻi working in

businesses with fewer than 50 employees may have been forced to buy their own insurance in the

marketplace, which would have meant losing employer cost-sharing and other benefits. Preserving this

aspect of the PHCA is important because of the number of small businesses in Hawaiʻi. As of 2012,

approximately 30,000 Hawaiʻi businesses have between one and 49 employees, which represents

13

Stephen Nii. Testimony in Hawaiʻi State Innovation Waiver hearing. October 9, 2014.

(http://governor.Hawaii.gov/wp-content/uploads/2014/12/State-Innovation-Waiver-Testimony_10.09.14.pdf) 14

Beh, Hazel. "Hawaiʻi’s Brighter Future? The Affordable Care Act and the Prepaid Health Care Act." Lecture,

Hawaiʻi Medical Association Symposium, May 11, 2013.


approximately 94 percent of all businesses in Hawaiʻi.15 Without the coverage mandated for these

businesses by the PHCA, the standard for health coverage for the employees of small businesses with

between one and 50 employees would be reduced. As a result, the employees of these small businesses

would be at risk for loss of coverage and higher costs for health coverage.

Figure 2.9: Comparison of Hawaiʻi Small Business Sizes and Hawaiʻi Businesses Overall16

Number of Employees

Number of Establishments

Percent of All State Establishments

Number of Paid Employees in State

Percent of All Paid Employees in State

<10 Employees 22,758 72.3% 72,729 14.8%

10 to 19 4,249 13.5% 57,138 11.6%

20 to 49 2,751 8.7% 82,947 16.9%

50 to 99 1,048 3.3% 72,177 14.7%

100 to 999 662 2.1% 152,477 31.0%

1,000 or more 28 0.1% 54,621 11.1%

2.4.3. Extending Coverage to Part-Time Employees

Under the PHCA, employers who hire employees who work fewer than 20 hours per week need only to

comply with the ACA, extending access to employees for all the metal level plans (Platinum, Gold, Silver,

and Bronze) offered through the ACA. These are the same plans available through any other state-based

or federally facilitated marketplaces.

2.4.4. Higher Quality Insurance Plans for Employees

Together, the PHCA and ACA provide higher quality health insurance coverage than other states.

The affordability standard for the ACA requires that the employer provide a plan that covers at least 60

percent of the medical costs (i.e., minimal essential coverage), and, similar to an individual plan, that

employee total annual premium costs not exceed 9.5 percent of the employee’s household income.

However, the PHCA requires that Hawaiʻi employee premium costs not exceed 1.5 percent of the

employee’s gross wages and that employers contribute at least half of premium costs.

The DCCA and the Department of Labor and Industrial Relations (DLIR) work closely to approve both

PHCA and ACA plans. The DLIR first approves 7a and 7b plans, which are the only plans allowable under

the PHCA. 7a and 7b plans are plans that are equal to the largest subscriber plans, while 7b plans are

15

U.S. Census Bureau / American Fact Finder, “Geography Area Series: County Business Patterns by Employment

Size Class 2012 Business Patterns,”


able (accessed December 1, 2014). 16

U.S. Census Bureau / American Fact Finder, “Geography Area Series: County Business Patterns by Employment

Size Class 2012 Business Patterns,”


able (accessed December 1, 2014).


approved separately but must provide certain benefits via the Hawaiʻi Revised Statutes 393-11. If 7b

plans are more limited than 7a plans, then the employer is required to contribute half the cost of

employee dependent coverage as well.

After the PHCA reference and compliant plans are selected, those plans are forwarded to the DCCA.

Figure 2.10 illustrates at a high level the process followed by DCCA and DLIR to approve PHCA and ACA

plans.

Figure 2.10: The Prepaid Health Care Act Plan Review Process

While the ACA requires that plans be offered by different metal levels, PHCA-compliant plans only

include Gold (80+percent Actuarial Level) and Platinum (90+percent Actuarial Level) plans. PHCA-

compliant 7a and 7b plans fall within the parameters of Platinum and Gold level plans as offered by the

ACA, but provide stricter requirements related to coverage. These two plan levels offer the lowest out-

of-pocket plans for the employee. By offering plans in compliance only with the PHCA to eligible

employees, in addition to complying with the PHCA requirement that employee premium costs not

exceed 1.5 percent of the employee’s gross wages, employees receive comparatively better plans at

lower prices than under the ACA.

2.4.5. Educating Small Business Employers

The Connector has sought to increase awareness about both the PHCA and the ACA. The Connector

incorporates educational materials and links to external informational resources to help provide

employers and employees with a greater understanding of their options. Educating employers about the

requirements of the PHCA and the ACA allows them to take greater ownership and responsibility over

the health care decisions for their businesses. Consumer education is one of the objectives of the ACA

and is stated in the enabling legislation as an objective of the Connector.

Prior to the ACA, many employers complied with the PHCA without having a full understanding of their

options for contribution levels and plan offerings. Some employers paid 100 percent of an employee’s

premium when they did not need to do so. The Connector not only offers employers easy access to a

number of plan options, but also provides a calculator that can automatically calculate the amount that

SHO

PIn

div

idu

als

an

d

Fam

ilie

s

Connector

Certify Qualified Health Plans (QHPs)

Certify Stand-Alone Dental Plans Offered Outside the Exchange

Certify Qualified Health Plans (QHPs)

Certify Stand-Alone Dental Plans Offered Outside the Exchange

DLIR

Approve Reference Plan Approve PHCA Compliant

Plans (7a and 7b)

DCCA

Approve Benchmark ACA Plan

Qualify Connector Plans Approve ACA Plans Offered

Outside the Exchange

Approve Benchmark ACA Plan

Qualify Connector Plans Approve ACA Plans Offered

Outside the Exchange

No Approval Necessary


the employer needs to contribute in order to be in compliance with the PHCA and ACA, which may assist

employers and employees in fairly sharing the cost of health coverage.

2.4.6. Payment Simplification for Employers

The ACA is designed to make it easier for employers to pay for employee health coverage. The ACA

mandates that all health exchanges must include “premium aggregation” as part of the SHOP. Premium

aggregation means that employers will receive one aggregated bill for their employees’ health coverage,

regardless of the plans the employees select. This system makes it easier for employers to pay for the

health coverage that they provide their employees, and simplifies the payment process for employers,

so that employers do not have to pay individual bills for each employee directly to the carrier. The

Hawaiʻi SHOP currently provides premium aggregation to small business employers.

2.4.7. Employer and Employee Choice

Employer Choice requires that the SHOP allow a qualified employer to select a level of coverage as

described in section 1302(d)(1) of the ACA, in which all QHPs within that level are made available to the

qualified employees of the employer. Prior to the ACA, employers generally received one recommended

plan option from their insurance agent, and the only choice made by the employee was whether or not

to enroll.

This requirement means that employers have the ability to give employees more ownership of their

health insurance decisions, while still retaining control of costs by identifying a single reference plan that

sets the employer contribution limit. As part of Employee Choice, employees are allowed to select a plan

that costs more than the reference plan selected by the employer, but the employee must cover the

difference in cost. Figure 2.11 illustrates the high-level plan selection process associated with Employer

Choice.

Figure 2.11: Employer Choice in the Connector

These federal rules apply only to plan selection for those eligible for the ACA. On May 17, 2013 the

Connector’s Board of Directors voted to extend Employer and Employee Choice to PHCA health

coverage as well. This decision means that Hawaiʻi employees who are eligible for health care through

Employer creates Employee Groups and defines whether each

Employee Group is PHCA (20 hrs or more)

or ACA eligible (less than 20 hours or other

PHCA exemption)

Employer selects the Contribution Amount

for each Employee Group

Employer selects a Reference Plan for

each Employer Group, which sets the

Employer’s contribution limit

Employer completes enrollment process

AC

A E

ligib

le E

mp

loye

e G

rou

ps

PH

CA

Eli

gib

le E

mp

loy

ee G

rou

ps

Employer selects to offer 7a or 7b Plan

Templates (groups of plans) to each PHCA

eligible Employee Group

Employer selects PHCA plan options by Issuer (required to offer all

plans from the selected Issuer) for

each PHCA eligible

Employee Group

Employer selects the Contribution Type (% of a Reference Plan or

dollar amount) for each ACA eligible Employee Group

Employer selects ACA plan options for

each ACA eligible Employee Group


their employers under either the ACA or the PHCA will have more choices in the health coverage that

they receive, and will select plans in the same way regardless of whether they are eligible for PHCA or

ACA plan types. Figure 2.12 illustrates the high-level plan selection process associated with Employee

Choice.

Figure 2.12: Employee Choice in the Connector

2.4.8. Digitizing the PHCA

One of the benefits of the Connector is that it digitizes the PHCA application process, which was

previously primarily paper-based. The Connector collects information that allows the DLIR, which

administers the PHCA, to more easily collect and manage data related to the businesses that apply for

health coverage through the SHOP.

2.5. The Challenges of Implementing the PHCA and the ACA

While there are many benefits that arise from uniting the PHCA and the ACA, this unique combination

also presents several challenges.

2.5.1. The Transitional Relief Policy

The Insurance Division of the DCCA’s transitional relief policy that allowed for pre-ACA rates to continue

through 2016 renewals has created limitations for the Connector. As a result of this policy, small

employers are able to keep the coverage they provided under the PHCA prior to the implementation of

the ACA. This policy has created a disincentive for employers to explore alternative options until their

existing plans become non-compliant. According to a survey conducted by the Connector, 64 percent of

residents surveyed who had accessed the exchange did not enroll because they already had insurance.

80 percent of those surveyed had received insurance through their place of employment.17

Small business employers who provide PHCA-compliant coverage to their employees outside of the

Connector are foregoing small business tax credits for which they may be eligible, in addition to other

benefits of the exchange, such as premium aggregation.

17

Hawaiʻi Health Connector. SMS Resident Consumer Research presentation. October 2014.

Connector directs

Employee to ACA or PHCA Platform

Employee picks plan from Employer’s

choices and limitations

Employee has the option to pick a plan

that costs more than the reference plan

If Employee picks a plan that costs more than the reference

plan, Employee pays costs in excess of cost of the reference plan


2.5.2. Legal Concerns

The PHCA defines a full-time employee as an employee who works approximately 20 or more hours per

week, and mandates coverage for those employees. The PHCA excludes such groups as federal, state,

and county workers, part-time employees who work fewer than 20 hours per week, seasonal workers,

individuals paid solely based on commission, and dependents.

When it was originally enacted, the PHCA included a termination clause that enabled the PHCA to sunset

if a federal law was enacted that established mandatory or voluntary pre-paid health care that is “at

least as favorable” as the benefits enacted in the PHCA.18 While no federal law has provided employees

with prepaid health care benefits “as favorable” as the PHCA, the ACA does provide individuals

significant tax credits and other market-based reforms that are more favorable than those found in the

PHCA or other state laws.19

In 2011, the state legislature repealed a provision of the PHCA to eliminate the sunset provision.20 It is

unclear whether the repeal of the PHCA’s termination clause could jeopardize the law under the terms

of the ERISA waiver.21

2.5.3. Enhancing the Usability of the Connector

Compliance with both the ACA and the PHCA required developing a solution that includes more complex

rules than would be required for compliance with the ACA alone. The concerted effort by multiple

stakeholders to ensure that the Connector solution conformed to both state and federal law – often

using text taken verbatim from applicable statutes – had the unintended side effect of using language

and terms that were unfamiliar to industry practitioners and small business owners. As a result, industry

practitioners and small business owners were often confused, and had to make multiple calls to the

Connector Contact Center to complete the end-to-end process.

The Connector has addressed this challenge by incorporating additional help text, educational material,

and links to outside informational resources, in addition to expanding the Kōkua and Agent Partnership

Program (APP) that provide in-person assistance. Beginning in January 2014, the Connector engaged in

an intense and comprehensive user experience improvement process that included a series of focus

18

See 2011 Haw. Sess. Laws Act 228, § 1 (discussing the history of the PHCA sunset provision). 19

The ACA includes a provision that states, “Nothing in this title … shall be construed to modify or limit the

application of the exemption for Hawaiʻi’s Prepaid Health Care Act… under … Employee Retirement Income

Security Act” (Haw. Rev. Stat. 393-1 et seq.) While this provision states that the ACA does not modify or limit the

application of the ERISA waiver, it does not exempt Hawai’i from complying with the ACA, nor does it obligate

the federal government to coordinate or alter ACA requirements. The provision does not give the PHCA

superiority over the provisions of the ACA in cases of conflict between these acts. 20

2011 Haw. Sess. Laws Act 228, § 3 (repeals Hawaiʻi Revised Statutes Chapter 393, Part V). 21

The ERISA waiver freezes the PHCA in its original 1974 form, meaning that any substantive changes may risk

the PHCA’s continued viability. See 29 U.S.C § 1144(b)(5).


group sessions with SHOP end users. The Connector has continuously identified and implemented

improvements to both the Connector homepage and the ConnectHawaiʻi portal in order to make the

application process as simple as possible for employers, and will continue to implement changes to

increase usability during 2015.

2.5.4. Employer and Employee Learning Curves

Prior to the ACA, employers generally did not have to choose between multiple plans, but instead

received one recommended plan option from their insurance broker. While the Connector provides

additional opportunities to make transparent health insurance choices, the Connector needs to continue

to work with small business employers to arm them with the information and understanding that they

need in order to complete the end-to-end application process and to understand which health coverage

option works best for them.

When using SHOP as mandated by the ACA, which includes Employer and Employee Choice, employers

must interact directly with all of the options available to them in order to select a reference plan that

sets the contribution limit for employees. The fact that employers using SHOP have to differentiate

between the benefits provided by different health coverage plans rather than receiving a

recommendation from an agent presents a learning curve to small business employers. Employee

Choice also presents a learning curve to employees who are not accustomed to having to choose among

plan and contribution options. The Connector will continue to help employers and employees overcome

this learning curve through education, such as online resources, in addition to offering in-person

assistance.

2.6. Conclusion

The PHCA established affordable health coverage as a right rather than a luxury for the residents of

Hawaiʻi. Hawaiʻi’s low uninsured rate, which in 2010 was eight points lower than the national average,

was due in large part to the employer-sponsored coverage mandated by the PHCA. While the PHCA

aimed to provide quality insurance by requiring certain plan benefits and requiring employers to provide

coverage to employees in Hawaiʻi, the ACA mandated additional market and health insurance reforms

beyond the workforce to improve transparency and tie payments to health outcomes.

By implementing a solution that complies with both the PHCA and the ACA, Hawaiʻi is able to leverage

the benefits of both of these laws to provide greater health coverage options to the people of Hawaiʻi.

These benefits include small business tax credits, mandating coverage for businesses with fewer than 50

employees, extending coverage to part-time employees, higher quality insurance plans for employees,

educating small business employers, payment simplification for employers, Employer/Employee Choice,

and digitizing the PHCA.

While there are many benefits that arise from implementing a solution that unifies the PHCA and the

ACA, this unique combination also presents several challenges, including limitations presented by the


transitional relief policy, legal concerns, enhancing the usability of the Connector, and employer and

employee learning curves.


3. Hawaiʻi in Relation to the Federally Facilitated and

State-Based Marketplaces

3.1. Definition of Exchange Types

The Patient Protection and Affordable Care Act (ACA) mandates that each state and the District of

Columbia operate a health insurance marketplace, but provides states with several options for how to

meet this requirement. Each state has the option to develop its own exchange, partner with the federal

government to run the exchange, or to decline, which means participating in the federally facilitated

marketplace. The following figure defines the four broad categories of health insurance marketplace

types, which characterize whether the state, the federal government, or a combination of both entities

operates the marketplace in a given state. These health insurance marketplaces opened for the first

time in October 2013, and offered health insurance coverage that began in January 2014.

Figure 3.1: Marketplace Type Definitions22

Health Insurance Marketplace Type Definition

State-Based Marketplace (SBM) States running a state-based marketplace are responsible for

performing all marketplace functions. Consumers in these states apply

for and enroll in coverage through marketplace websites established

and maintained by the states.

Federally Facilitated Marketplace (FFM) In a federally facilitated marketplace, HHS performs all marketplace

functions. Consumers in states with a federally facilitated marketplace

apply for and enroll in coverage through healthcare.gov.

Variants on Federally Facilitated Marketplaces

Federally Supported State-Based Marketplace (FS-

SBM)

States with this type of marketplace are considered to have a state-

based marketplace, and are responsible for performing all marketplace

functions, except that the state relies on the federally facilitated

marketplace IT platform. Consumers in these states apply for and enroll

in coverage through healthcare.gov.

State Partnership Marketplace (SPM) States entering into a state partnership marketplace may administer in-

person consumer assistance functions and HHS performs the remaining

marketplace functions. Consumers in states with a partnership

marketplace apply for and enroll in coverage through healthcare.gov.

22

"State Health Insurance Marketplace Types, 2015." The Henry J. Kaiser Family Foundation. Accessed December

7, 2014. http://kff.org/health-reform/state-indicator/state-health-insurance-marketplace-types/.


3.2. Summary of State Participation and Enrollment

Of the 50 states and the District of Columbia, 14 operate state-based marketplaces, 25 participate in the

federally facilitated marketplace, and 12 operate variants of the federally facilitated marketplace.23

Figures 3.2 and 3.3 rank the 50 states and the District of Columbia according to the percent of the

population enrolled through the Individuals and Families health insurance marketplace. These figures

illustrate how Hawaiʻi compares to both state-based marketplaces and to those states that operate the

federally facilitated marketplace or one of its variants. Figure 3.4 illustrates which of these states are

implementing the Medicaid expansion.

Figure 3.2: Percent of Population Enrolled in States Operating State-Based Marketplaces (High to

Low)24

State Number of Individuals Who Have Selected a

Marketplace Plan State Population

25

% of Population Insured Prior to October 201326

% of Population Enrolled Through Marketplace

Vermont 38,048 620,896 93.54% 6.13%

Idaho27

76,061 1,592,172 83.83% 4.78%

California 1,405,102 37,831,553 82.12% 3.71%

Rhode Island 28,485 1,036,046 88.90% 2.75%

Colorado 125,402 5,173,272 85.25% 2.42%

Washington 163,207 6,864,149 86.09% 2.38%

Connecticut 79,192 3,541,409 90.89% 2.24%

Kentucky 82,747 4,312,100 86.13% 1.92%

New York 370,451 19,400,069 89.11% 1.91%

District of Columbia 10,714 635,833 94.07% 1.69%

Maryland 67,757 5,834,039 89.68% 1.16%

Minnesota 48,495 5,362,681 92.02% 0.90%

Hawaiʻi 8,592 1,345,168 93.12% 0.64%

Massachusetts 31,695 6,613,654 96.13% 0.48%

23

This includes Mississippi and Utah, which run the federally facilitated marketplace, but the state operates its

own SHOP exchange. 24

Enrollment data are as of April 19, 2014. "Marketplace Enrollment as a Share of the Potential Marketplace

Population." The Henry J. Kaiser Family Foundation. Accessed December 8, 2014. http://kff.org/health-

reform/state-indicator/marketplace-enrollment-as-a-share-of-the-potential-marketplace-population/. 25

"Uninsured Estimates of the Total Population, American Community Survey (ACS)." The Henry J. Kaiser Family

Foundation. January 1, 2013. Accessed December 2, 2014. http://kff.org/uninsured/state-indicator/total-

population-2/#. 26


Foundation. January 1, 2013. Accessed December 2, 2014. 27

During 2014 Open Enrollment, Idaho operated a federally supported state-based marketplace, and has since

transitioned to a state-based marketplace.


Figure 3.3: Percent of Population Enrolled in All State Health Insurance Marketplaces (High to Low)28

State Marketplace

Type29

Number of Individuals Who Have Selected a

Marketplace Plan

State Population

30

Percent of Population Insured

Prior to October 201331

Percent of Population

Enrolled Through Marketplace

Vermont SBM 38,048 620,896 93.54% 6.13%

Florida FFM 983,775 19,245,127 79.93% 5.11%

Idaho26

SBM 76,061 1,592,172 83.83% 4.78%

California SBM 1,405,102 37,831,553 82.12% 3.71%

North Carolina FFM 357,584 9,645,320 83.44% 3.71%

Montana32

FFM 36,584 999,390 81.98% 3.66%

Maine32

FFM 44,258 1,314,191 89.76% 3.37%

Georgia FFM 316,543 9,800,887 81.56% 3.23%

New Hampshire SPM 40,262 1,308,658 89.37% 3.08%

Utah33

FFM 84,601 2,874,213 85.54% 2.94%

Texas FFM 733,757 25,976,562 77.48% 2.82%

Michigan SPM 272,539 9,784,451 88.60% 2.79%

Rhode Island SBM 28,485 1,036,046 88.90% 2.75%

Virginia32

FFM 216,356 8,054,191 87.46% 2.69%

Missouri FFM 152,335 5,930,677 86.44% 2.57%

Pennsylvania FFM 318,077 12,569,375 90.25% 2.53%

South Carolina FFM 118,324 4,678,122 83.17% 2.53%

Wisconsin FFM 139,815 5,669,266 91.05% 2.47%

Colorado SBM 125,402 5,173,272 85.25% 2.42%

Washington SBM 163,207 6,864,149 86.09% 2.38%

28

Enrollment data are as of April 19, 2014. "Marketplace Enrollment as a Share of the Potential Marketplace

Population." The Henry J. Kaiser Family Foundation. Accessed December 8, 2014. http://kff.org/health-

reform/state-indicator/marketplace-enrollment-as-a-share-of-the-potential-marketplace-population/. 29

“State Health Insurance Marketplace Types, 2015.” The Henry J. Kaiser Family Foundation. Accessed December

8, 2014. http://kff.org/health-reform/state-indicator/state-health-insurance-marketplace-types/ 30





Kansas, Maine, Montana, Nebraska, Ohio, South Dakota, and Virginia have received approval from HHS to

conduct plan management activities to support certification of qualified health plans in the federally facilitated

marketplace. 33

Utah and Mississippi run the federal exchange but operate state-run SHOP exchanges.


State Marketplace

Type29

Number of Individuals Who Have Selected a

Marketplace Plan

State Population

30

Percent of Population Insured

Prior to October 201331

Percent of Population

Enrolled Through Marketplace

Tennessee FFM 151,352 6,394,644 86.12% 2.37%

Nebraska32

FFM 42,975 1,840,659 88.75% 2.33%

Louisiana FFM 101,778 4,522,910 83.12% 2.25%

Connecticut SBM 79,192 3,541,409 90.89% 2.24%

Mississippi33

FFM 61,494 2,925,211 82.95% 2.10%

Wyoming FFM 11,970 573,210 84.64% 2.09%

Alabama FFM 97,870 4,755,381 86.66% 2.06%

Indiana FFM 132,423 6,471,551 85.71% 2.05%

Kansas32

FFM 57,013 2,836,733 87.42% 2.01%

Kentucky SBM 82,747 4,312,100 86.13% 1.92%

New York SBM 370,451 19,400,069 89.11% 1.91%

Arizona FFM 120,071 6,521,226 82.45% 1.84%

New Jersey FFM 161,775 8,791,652 87.29% 1.84%

Oklahoma FFM 69,221 3,770,254 81.65% 1.84%

Alaska FFM 12,890 712,248 79.51% 1.81%

Oregon FS-SBM 68,308 3,893,092 85.08% 1.75%

Illinois SPM 217,492 12,704,616 87.22% 1.71%

District of Columbia SBM 10,714 635,833 94.07% 1.69%

Nevada FS-SBM 45,390 2,757,207 77.85% 1.65%

South Dakota32

FFM 13,104 827,039 88.47% 1.58%

New Mexico34

FS-SBM 32,062 2,051,900 81.58% 1.56%

Delaware SPM 14,087 911,502 91.15% 1.55%

North Dakota FFM 10,597 708,181 89.99% 1.50%

Arkansas SPM 43,446 2,907,014 83.55% 1.49%

Ohio32

FFM 154,668 11,398,298 88.53% 1.36%

Maryland SBM 67,757 5,834,039 89.68% 1.16%

West Virginia SPM 19,856 1,824,821 85.56% 1.09%

Iowa SPM 29,163 3,045,284 91.60% 0.96%

Minnesota SBM 48,495 5,362,681 92.02% 0.90%

Hawaiʻi SBM 8,592 1,345,168 93.12% 0.64%

Massachusetts SBM 31,695 6,613,654 96.13% 0.48%

34

New Mexico operates a federally supported state based marketplace for the Individuals and Families

marketplace, but operates its own SHOP exchange.


Figure 3.4: Medicaid Expansion Status by State (Including the District of Columbia)35

State Medicaid Expansion

Status State

Medicaid Expansion Status

State Medicaid Expansion

Status

Alabama X Kentucky North Dakota

Alaska Under Discussion Louisiana X Ohio

Arizona Maine X Oklahoma X

Arkansas36

Maryland Oregon

California Massachusetts Pennsylvania36

Colorado Michigan36

Rhode Island

Connecticut Minnesota South Carolina X

Delaware Mississippi X South Dakota X

District of Columbia Missouri X Tennessee37

Under Discussion

Florida X Montana38

Under Discussion Texas X

Georgia X Nebraska X Utah Under Discussion

Hawaiʻi Nevada Vermont

Idaho X New Hampshire Virginia Under Discussion

Illinois New Jersey Washington

Indiana39

Under Discussion New Mexico West Virginia

Iowa36

New York Wisconsin40

X

Kansas X North Carolina X Wyoming41

Under Discussion

As a percent of the total state population enrolled through the marketplace, Hawaiʻi ranks 13 out of 14

among state-based marketplaces, and ranks second to last out of all states and the District of Columbia.

35

"Status of State Action on the Medicaid Expansion Decision." The Henry J. Kaiser Family Foundation. December

17, 2014. Accessed December 23, 2014. http://kff.org/health-reform/state-indicator/state-activity-around-

expanding-medicaid-under-the-affordable-care-act/#note-9. 36

Arkansas, Iowa, Michigan, and Pennsylvania have approved Section 1115 waivers for the Medicaid expansion.

In Pennsylvania, coverage will begin in January 2015. 37

Tennessee's Governor Bill Haslam published an alternative Medicaid expansion proposal in December 2014

called the Insure Tennessee plan. 38

Montana's Governor Steve Bullock has included the Medicaid expansion as part of his FY2016 executive budget

proposal. 39

Indiana has a pending waiver for an alternative Medicaid expansion plan. 40

Wisconsin amended its Medicaid state plan and existing Section 1115 waiver to cover adults up to 100% FPL in

Medicaid, but did not adopt the Medicaid expansion under the ACA. 41

The Wyoming Department of Health published its recommendation for an alternative Medicaid expansion

plan, called the SHARE plan, in November 2014.


3.2.1. Changes to State Marketplaces During 2014

State strategies and plans for how to implement ACA-mandated health insurance marketplaces have

continued to evolve since the passing of the ACA. The following states went live in October 2013 with an

initial marketplace solution, and either transitioned to a different marketplace type, continued to

operate the same marketplace type but overhauled their solution, or added Small Business Health

Options Program (SHOP) functionality during 2014:

Idaho: transitioned to a state-based marketplace for 2015 Open Enrollment. The state originally

went live as a federally supported state-based marketplace because it did not have sufficient

time to develop its own exchange.

Maryland: overhauled its solution to leverage the Connecticut exchange technology, but

continues to operate a state-based marketplace. During 2014 Open Enrollment, Maryland ran a

marketplace developed by Curam, which the state chose to abandon due to persistent issues.42

Massachusetts: overhauled its solution by switching to a new vendor, hCentive, due to

persistent issues with the original solution developed by CGI, but continues to operate a state-

based marketplace.43

Mississippi: opened a SHOP marketplace in mid-2014. Mississippi previously did not have a

SHOP marketplace.

Nevada: transitioned from a state-based marketplace to a federally supported state-based

marketplace due to persistent issues with the solution that Xerox developed for 2014 Open

Enrollment.44

Oregon: transitioned from a state-based marketplace to a federally supported state-based

marketplace. Oregon chose to abandon the Oracle solution developed for 2014 Open

Enrollment due to persistent issues and legal battles between Oracle and the state.45

42

Gantz, Sarah. "Maryland Health Exchange Overhaul Is on Track despite Recent Glitch in Connecticut Model,

Officials Say." Baltimore Business Journal, July 15, 2014. 43

Dumcius, Gintautus. "Massachusetts Connector Board OKs $121 Million Plan to Fix Website." State House

News Service. May 8, 2014. Accessed December 8, 2014.

http://www.masslive.com/news/index.ssf/2014/05/massachusetts_connector_board.html. 44

Wilson, Reid. "Nevada Will Join Federal HealthCare.gov Exchange." The Washington Post, May 21, 2014,

Accessed December 8, 2014. http://www.washingtonpost.com/blogs/govbeat/wp/2014/05/21/nevada-will-join-

federal-healthcare-gov-exchange/ 45

Stegon, David. "Oregon Abandons Bid to Salvage Oracle Health Exchange - See More At:

Http://statescoop.com/oregon-longer-trying-salvage-oracle-exchange/#sthash.0V8XeMxA.dpuf." StateScoop.


3.2.2. Anticipated Changes to State Marketplaces During 2015

States will continue to modify their marketplaces to address state needs and to provide additional

functionality to their customers. The following states are planning for major changes to their

marketplaces during 2015:

Arkansas: issued a Request for Proposal (RFP) on November 10, 2014 to implement a SHOP

marketplace. Arkansas plans to launch a state-based marketplace for individuals in 2017.46

Massachusetts: issued a Request for Proposal (RFP) on November 21, 2014 to implement a

SHOP marketplace in 2015.

New Mexico: plans to move to a state-based marketplace for 2016 Open Enrollment.47 New

Mexico is currently a federally supported state-based marketplace that operates its own SHOP

marketplace.

In early 2014, Illinois declared its intention to transition from a state partnership marketplace to a state-

based marketplace during 2015, but the bill to enact this change did not pass the Illinois House.

3.2.3. 2015 Supreme Court Case: King vs. Burwell

In addition to upcoming planned changes to state solutions, a Supreme Court case that is scheduled for

mid-2015, King vs. Burwell, may have a significant impact on the success of health care marketplaces

across the United States. This Supreme Court case will decide whether the Internal Revenue Service may

offer tax credits only to those who sign up for health insurance coverage through state-based

marketplaces. Currently, tax credits are available through all marketplace types, but this may be

inconsistent with language in the ACA, which states that the purpose of tax credits is to offset the cost of

premium plans available “through an Exchange established by the state.”

This Supreme Court case has the potential to significantly impact the ability of Americans to afford

health coverage in those states that operate federally facilitated marketplaces. While this case would

not directly impact Hawai’i, which already operates a state-based marketplace, the loss of these

subsidies would make insurance unaffordable for many of the recently insured Americans who have

already signed up for insurance through federally facilitated marketplaces and received tax credits to

afford coverage. The Kaiser Family Foundation estimates that approximately 13 million Americans could

October 23, 2014. Accessed December 8, 2014. http://statescoop.com/oregon-longer-trying-salvage-oracle-

exchange/. 46

Cauchi, Richard. "State Actions to Address Health Insurance Exchanges." National Conference of State

Legislatures. November 26, 2014. Accessed December 8, 2014. http://www.ncsl.org/research/health/state-

actions-to-implement-the-health-benefit.aspx. 47

Demko, Paul. "Under Pressure to Run Insurance Exchanges, States Wary of Glitches." Modern Healthcare. July

28, 2014. Accessed December 8, 2014. http://www.modernhealthcare.com/article/20140728/NEWS/307289939.


lose subsidies in 2016 if the Supreme Court sides with the plaintiffs in King vs. Burwell.48 The RAND

Corporation has estimated that the loss of federal subsidies would also increase individual premiums by

43 percent due to low-risk individuals backing out of coverage.49 The loss of coverage for uninsured

individuals, in addition to a significant increase in premiums, would undermine the success of the ACA in

reducing the size of the uninsured population and providing affordable health coverage to Americans.

A ruling in favor of the plaintiffs in this case would also render the individual and employer mandates of

the ACA meaningless in those states with federally facilitated marketplaces. The individual mandate

applies only when Americans can find affordable insurance, defined as plans with premiums that cost

less than 8 percent of an individual’s income, which would not be possible for most low- and lower-

middle-income Americans without subsidies. Penalties for employers who do not offer insurance to

their employees are only applicable when employees receive federal subsidies through a marketplace,

which would no longer be the case in affected states.50 As a result, employers in affected states would

no longer be penalized for not providing coverage to their employees.

Most states are currently in a “wait-and-see” posture, but as a result of this upcoming case, states

operating on federally facilitated marketplaces may choose to establish minimal state-based

marketplaces in 2015 to minimize the potential impact of the Supreme Court case in their states.

However, the ACA mandates that state-based marketplaces be “self-sustaining beginning on January 1,

2015,” and federal grants will no longer support marketplace development or operations. The five states

with the most individuals likely to lose coverage are Florida, Texas, North Carolina, Georgia, and

Pennsylvania, and with the exception of Pennsylvania, all are Republican-led states that are unlikely to

make this change.51 The Connector continues to monitor the progress of other marketplaces, as well as

remain aware of legislative and judicial cases that may impact the success of the Connector or the

efforts of the ACA to provide affordable insurance to Americans.

48

Altman, Drew. "How 13 Million Americans Could Lose Insurance Subsidies." The Wall Street Journal, November

19, 2014. Accessed December 8, 2014. http://blogs.wsj.com/washwire/2014/11/19/how-13-million-americans-

could-lose-insurance-subsidies/?utm_campaign=KFF: Drew's

Columns&utm_source=hs_email&utm_medium=email&_hsenc=p2ANqtz-

_k0mWgmlC5oMT58AxMHATxdg5SdsSnGSEsvOOIjrM4Ydbg455anznQNah9jW3brg6QMgD6Lbczj9lB0ABSzShheQ

hCyw&_hsmi=14963184. 49

Blumenthal, David, and Sara Collins. "The Supreme Court Decides to Hear King v. Burwell: What Are the

Implications?" The Commonwealth Fund. November 7, 2014. Accessed December 8, 2014.

http://www.commonwealthfund.org/publications/blog/2014/nov/the-supreme-court-decides-to-hear-king. 50

Blumenthal, David, and Sara Collins. "The Supreme Court Decides to Hear King v. Burwell: What Are the

Implications?" The Commonwealth Fund. November 7, 2014. Accessed December 8, 2014. 51

Altman, Drew. "How 13 Million Americans Could Lose Insurance Subsidies." The Wall Street Journal, November

19, 2014. Accessed December 8, 2014.


3.3. SHOP

The United States Government Accountability Office (GAO) delivered a November 2014 report entitled

“Small Business Health Insurance Exchanges: Low Initial Enrollment Likely due to Multiple, Evolving

Factors.”52 The GAO report summarizes SHOP employer participation and enrollment levels, and

outlines potential factors that have contributed, and may still be contributing to, low enrollment levels.

Figures 3.5 and 3.6 illustrate the SHOP enrollment by employer and by participants in the employer-

sponsored coverage across 17 states and the District of Columbia. Data submission dates vary by state.53

Figure 3.5: SHOP Employer Enrollment Summary

52

GAO-15-58: Small Business Health Insurance Exchanges – Low Initial Enrollment Likely due to Multiple Evolving

Factors (http://www.gao.gov/assets/670/666873.pdf) 53

Data submission dates range from May 22 to September 15, 2014.

3,964

3,580

1,360

729

478 398258 229 211 159 129 92 58 57 16 15 8 1

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Tota

l Em

plo

yer

Enro

llme

nt

Emp

loye

r En

rollm

en

t b

y St

ate

SHOP Employer Enrollment Summary

Emloyer Enrollment by State

Total Employer Enrollment


Figure 3.6: SHOP Enrollment Summary – Lives Covered

The characterization of SHOP differs across states. For example, Vermont offers a SHOP by way of

requiring all small group plans to participate in SHOP and work directly through the issuers to establish

coverage; there is no online self-service presence. California supported online enrollment for SHOP only

for a limited time during 2014 Open Enrollment, and transitioned to direct enrollment. Other states,

such as Utah and Massachusetts, had already experimented with or implemented small business

marketplaces prior to the enactment of the ACA. Other states started from scratch and delivered online

SHOP marketplaces with varying degrees of capability.

Hawaiʻi’s SHOP enrollment capability was launched on October 15, 2014, and was among the most

complete and full-featured SHOP marketplaces. Hawaiʻi ranked sixth of 17 in employer enrollment, and

eighth of 17 in plan enrollment.

However, enrollment was uniformly poor. Vermont’s observable success is due to policy decisions, not

to technology, operations, or outreach; it is not reflective of the broader market.

The GAO report offers the following potential contributing factors to low enrollment:

Varying effectiveness of the Small Business Tax Credit as a motivator for participation;

Delays in key SHOP features;

Limited awareness of and misconceptions about SHOP availability;

Ability to renew existing, non-compliant plans; and

33,696

10,90010,023 9,563

3,3242,135 1,489 1,178 851 714 602 548 442 329 76 43 42 1

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Tota

l En

rollm

en

t (L

ive

s)

Enro

llme

nt

by

Stat

e (

Live

s)

SHOP Enrollment Summary (Lives Covered)

Enrollment by State (Lives)

Total Enrollment (Lives)


Technical challenges and administrative burden.

In parallel, the GAO report identified the following potential factors that may impact SHOP growth

moving forward:

Improved coordination with agents and brokers;

Availability of Employee Choice;

Increased marketing to employers;

Robust issuer participation;

Expansion of SHOP to include larger employers;

Financial sustainability or SHOP;

Loss of the tax credit benefit;

Competitiveness and comparability of SHOP plan prices;

Competition with private exchanges; and

Potential for adverse selection.

The GAO report offers a roadmap for improvement for the exchanges, and for Hawaiʻi in particular.

Hawaiʻi offers its customers and stakeholders a relatively complete and full-featured SHOP marketplace.

It has made significant improvements to the SHOP user experience, and continues to address technical

and administrative challenges that have affected the Connector’s issuer partners and its customers.

3.4. Issuer Participation

One of the ways in which the ACA strives to make health insurance coverage more affordable is by

encouraging competition among issuers who offer plans through state health insurance marketplaces.54

Research conducted by the Department of Health and Human Services Office of the Assistant Secretary

for Planning and Evaluation (ASPE) indicates that in general individual state health insurance

marketplaces have increased issuer participation, promoted enhanced competition, increased consumer

54

Miskell, Sean, Kevin Lucia, and Justin Giovannelli. "State-Based Marketplaces Offer More Health Plan Choices

for 2015 Coverage." The Commonwealth Fund Blog. December 1, 2014. Accessed December 2, 2014.

http://www.commonwealthfund.org/publications/blog/2014/nov/state-based-marketplaces-offer-more-health-

plan-choices-for-2015-coverage.


choice, and increased affordability for 2015.55 Figures 3.7 and 3.8 illustrate issuer participation in the

Individual and Small Group markets during 2015 Open Enrollment. Data are sorted from highest to

lowest issuer participation, first by the Individual market, and then by the Small Group market.

Figure 3.7: Issuer Participation in State-Based Marketplaces (High to Low)56 2015 Carriers

State Marketplace

Type Individual Market Small Group Market

New York53

SBM 16 9

Washington SBM 11 2

Massachusetts SBM 10 11

California SBM 10 6

Colorado SBM 10 4

Maryland SBM 6 9

Kentucky SBM 5 5

Connecticut SBM 5 3

Idaho SBM 5 3

Minnesota SBM 5 3

Rhode Island SBM 3 4

District of Columbia SBM 3 1

Vermont SBM 2 2

Hawaiʻi SBM 2 1

55

Data rely on Marketplace QHP landscape individual market medical files, which are publicly available at

healthcare.gov and includes the 35 states which were included in the 2014 and 2015 marketplace landscape files.

This data does not include Hawaiʻi. Analysis excludes standalone dental plans, child-only plans, morbid obesity

plans, and small group plans.

ASPE Research Brief: Health Plan Choice And Premiums In The 2015 Health Insurance Marketplace. December 4,

2014. Accessed December 9, 2014.

http://www.aspe.hhs.gov/health/reports/2015/premiumReport/healthPremium2015.pdf. 56

Issuer participation numbers are based on analysis from NCSL data for state-based marketplaces because this

was the most recent available data, and ASPE data for all other individual marketplaces, unless otherwise noted.

All small group data are from NCSL. Data between these two sources differ in certain cases. NCSL:

http://www.ncsl.org/Portals/1/Documents/Health/Health_Insurance_Exchanges_State_Profiles.pdf; ASPE:

http://www.aspe.hhs.gov/health/reports/2015/premiumReport/healthPremium2015.pdf


Figure 3.8: Issuer Participation in All State Health Insurance Marketplaces (High to Low)52

2015 Carriers

State Marketplace


Arizona FFM 13 3

Michigan SPM 16 9

New York57

SBM 16 9

Ohio FFM 16 9

Wisconsin FFM 15 9

Pennsylvania FFM 15 7

Texas FFM 15 2

Florida FFM 14 4

Washington SBM 11 2

Oregon58

FS-SBM 11 0

Massachusetts SBM 10 11

California SBM 10 6

Colorado SBM 10 4

Illinois SPM 10 3

Virginia FFM 9 4

Georgia FFM 9 3

Indiana FFM 9 3

Missouri FFM 7 2

Maryland SBM 6 9

Louisiana FFM 6 3

New Jersey FFM 6 3

Utah FFM 6 3

Kentucky SBM 5 5

New Hampshire SPM 5 5

New Mexico FS-SBM 5 4

57

Data from New York differ based on source. Relied on data from:

Dorsey, Jennifer. "2015 Health Insurance Rates for New York State of Health." Healthcare.com Blog. November 7,

2014. Accessed December 9, 2014. http://blog.healthcare.com/health-insurance/2015-health-insurance-rates-

for-new-york-state-of-health/. 58

The source for issuer participation data for Oregon is NCSL. Issuer participation data for Oregon was not

available through ASPE. Oregon does not have SHOP functionality for 2015 Open Enrollment.


2015 Carriers

State Marketplace


Tennessee FFM 5 4

Connecticut SBM 5 3

Idaho SBM 5 3

Minnesota SBM 5 3

South Carolina FFM 5 3

Kansas FFM 5 1

Nevada59

FS-SBM 5 1

Iowa SPM 4 Unknown

Montana FFM 4 4

Oklahoma FFM 4 3

Nebraska FFM 4 2

Arkansas SPM 4 1

Rhode Island SBM 3 4

Maine FFM 3 3

North Dakota FFM 3 3

South Dakota FFM 3 3

Alabama FFM 3 1

Delaware SPM 3 1

District of Columbia SBM 3 1

Mississippi FFM 3 1

North Carolina FFM 3 1

Alaska FFM 2 2

Vermont SBM 2 2

Wyoming FFM 2 2

Hawaiʻi SBM 2 1

West Virginia SPM 1 1

Hawaiʻi has the lowest issuer participation of the 14 state-based marketplaces, and has the second

lowest issuer participation of marketplaces in all states and the District of Columbia.

59

The source for issuer participation data for Nevada is NCSL. Issuer participation data for Nevada was not

available through ASPE.


ASPE findings indicate that over 25 percent more issuers are participating in individual state health

insurance marketplaces for 2015, and that 91 percent of consumers will be able to choose from three or

more issuers, up from 74 percent in 2014.60 While issuer participation increased in 25 of the 35

individual marketplaces analyzed by ASPE since 2014, issuer participation in Hawaiʻi has not changed

since 2014 for either the Individual or Small Group market. This is due to multiple factors, including the

transitional relief policy, which is discussed in greater detail in Section 1 of this report. This policy allows

Hawaiʻi issuers to continue to offer the coverage options that do not comply with the ACA protections

put in place in 2014 until October 1, 2016.61 This policy creates a disincentive for issuers to provide ACA-

compliant plans through the Connector.

While there is insufficient data on issuer participation as a percent of market share, internal analysis

indicates that Kaiser Permanente and Hawaiʻi Medical Service Association (HMSA) – two of the issuers

offering plans through the Individual marketplace – represent 81.6 percent of the total market share in

the Individual marketplace, which is comparable to the marketplace penetration of health insurance

marketplaces in other states.62 However, for the Small Group marketplace, the Connector offers plans

through only one issuer, Kaiser Permanente, which represents approximately 20 percent of the market

share. As a result, the Connector’s market share penetration for the Small Group marketplace is low

relative to other states.63

3.5. Financial Comparison

A review of publicly-available financial information on the 13 states and District of Columbia operating

state based exchanges illustrates the level of financial investment required to plan, build, implement,

and maintain a state-based exchange. Analysis of total estimated cost from exchange inception through

June 30, 2014 (FY2014) enables a comparison across states on cost per capita and cost per uninsured

life. Each state has different methods of reporting and communicating total estimated cost; therefore,

the information presented in this section is not perfectly aligned across each state. Sources used to

compile this information are listed in Appendix A.

60

Data rely on Marketplace QHP landscape individual market medical files, which are publicly available at

healthcare.gov and includes the 35 states which were included in the 2014 and 2015 marketplace landscape files.

This data does not include Hawaiʻi. Analysis excludes standalone dental plans, child-only plans, morbid obesity

plans, and small group plans.

ASPE Research Brief: Health Plan Choice And Premiums In The 2015 Health Insurance Marketplace. December 4,

2014. Accessed December 9, 2014.

http://www.aspe.hhs.gov/health/reports/2015/premiumReport/healthPremium2015.pdf. 61

Lucia, Kevin, Sabrina Corlette, and Ashley Williams. "The Extended "Fix" for Canceled Health Insurance Policies:

Latest State Action." The Commonwealth Fund Blog. November 21, 2014. Accessed December 9, 2014.

http://www.commonwealthfund.org/publications/blog/2014/jun/adoption-of-the-presidents-extended-fix. 62

Excludes issuers who offer only dental plans. 63

Department of Commerce and Consumer Affairs 2013 report.


Many of these states, including Hawaiʻi, will have cost obligations to complete and stabilize their

technology solution that are not reflected in the total estimated cost through FY2014. Costs may have

been deferred or delayed due to an elongation of implementation and stabilization efforts, and as a

result may not appear in estimated cost through FY2014. In some states, such as Massachusetts, the

total impact of obligated, deferred, and delayed costs to complete technology solutions will be

substantial.

The total estimated cost figures used for this analysis do not represent measures of success, and do not

necessarily represent value for dollars. For example, Massachusetts has an estimated total cost of more

than $150 million from exchange inception, but lacks a functioning exchange. Other states have

continued to apply for and receive design, development, and implementation (DDI) funds from CMS to

pursue solution extensions. As a result, it is not possible to define what it means for each state to have a

complete solution.

Figure 3.9 summarizes each state’s total estimated cost from exchange inception through FY2014, total

population, and uninsured population.64 In this table, the total estimated cost is compared to the

uninsured population to calculate the cost per uninsured life in each state.

64


Foundation. January 1, 2013. Accessed December 21, 2014. http://kff.org/uninsured/state-indicator/total-

population-2/.


Figure 3.9: Comparison of Total Estimated Cost Through FY2014, Total Population, and Uninsured

Population

State Total Est. Cost

through FY2014 ($K)

Population (K)

Uninsured Population

(K)

Est. Cost Per Capita

Est. Cost Per Uninsured

Life

District of Columbia $133,574 636 42 $210.08 $3,158.15

Vermont $72,000 621 45 $115.96 $1,603.42

Hawaiʻi $104,528 1,345 91 $77.71 $1,151.75

Massachusetts65

$154,400 6,614 247 $23.35 $625.95

Connecticut $156,300 3,541 333 $44.13 $470.07

Maryland $230,765 5,834 593 $39.55 $389.03

Rhode Island66

$46,000 1,036 120 $44.40 $381.87

Minnesota $107,000 5,363 440 $19.95 $243.30

Washington $177,389 6,864 960 $25.84 $184.78

Idaho67

$37,200 1,592 257 $23.36 $144.48

Colorado $100,784 5,173 729 $19.48 $138.21

New York $285,374 19,400 2,070 $14.71 $137.89

Kentucky $79,500 4,312 616 $18.44 $128.96

California $702,213 37,832 6,500 $18.56 $108.03

An alternative cost analysis is to compare the total estimated cost through FY2014 assuming each state

shared Hawaiʻi’s uninsured population of 90,755 lives. This analysis compares each state’s total

estimated cost against a fixed uninsured population.

65

Massachusetts has a limited-function technology solution. 66

Total estimated cost for Rhode Island is considerably lower than other states and the general expected cost to

design, develop, and implement an exchange. Sources are unclear if total cost exceeded $46 million by the close

of FY2014. 67

Total estimated cost for Idaho is considerably lower than other states and the general expected cost to design,

develop, and implement an exchange. A below-average figure is expected since the state recently transitioned

from the federal marketplace to its own state-based exchange for 2015 Open Enrollment.


Figure 3.10: Comparison of Total Estimated Cost Through FY2014 – Based on Hawaiʻi Uninsured

Population


through FY2014 ($K)

Population (K)

Uninsured Population - Based on HI

(K)



Life

California $702,213 37,832 91 $18.56 $7,737.46

New York $285,374 19,400 91 $14.71 $3,144.45

Maryland $230,765 5,834 91 $39.55 $2,542.72

Washington $177,389 6,864 91 $25.84 $1,954.59

Connecticut $156,300 3,541 91 $44.13 $1,722.22

Massachusetts $154,400 6,614 91 $23.35 $1,701.28


Minnesota $107,000 5,363 91 $19.95 $1,179.00

Hawaiʻi $104,528 1,345 91 $77.71 $1,151.75

Colorado $100,784 5,173 91 $19.48 $1,110.51

Kentucky $79,500 4,312 91 $18.44 $875.98

Vermont $72,000 621 91 $115.96 $793.34

Rhode Island $46,000 1,036 91 $44.40 $506.86

Idaho $37,200 1,592 91 $23.36 $409.89

An additional alternative cost analysis is to compare the total estimated cost through FY2014 against a

proportional uninsured population. This analysis applies the estimated uninsured rate for Hawaiʻi, 6.75

percent, across each of the 13 other states and DC operating a state-based exchange.

Figure 3.11: Comparison of Total Estimated Cost Through FY2014 – Based on Hawaiʻi Uninsured Rate


through FY2014 ($K)

Population (K)


Rate (K)



Life


Vermont $72,000 621 42 $115.96 $1,718.79

Hawaiʻi $104,528 1,345 91 $77.71 $1,151.75

Rhode Island $46,000 1,036 70 $44.40 $658.09

Connecticut $156,300 3,541 239 $44.13 $654.17

Maryland $230,765 5,834 394 $39.55 $586.28

Washington $177,389 6,864 463 $25.84 $383.04



through FY2014 ($K)

Population (K)


Rate (K)



Life

Idaho $37,200 1,592 107 $23.36 $346.31

Massachusetts $154,400 6,614 446 $23.35 $346.03

Minnesota $107,000 5,363 362 $19.95 $295.74

Colorado $100,784 5,173 349 $19.48 $288.76

California $702,213 37,832 2,552 $18.56 $275.12

Kentucky $79,500 4,312 291 $18.44 $273.27

New York $285,374 19,400 1,309 $14.71 $218.03

Figure 3.12: Total Estimated Cost Summary

State Total Estimated Cost Summary68

California The California exchange, Covered California, has a total estimated cost of $702 million from

exchange inception through April 2014. This figure is the largest total estimated cost of the

thirteen states and District of Columbia that operate state based exchanges. The California

exchange received a total grant award of $1,065 million, of which $363 million had not been

expended as of April 2014. The exchange’s estimated annual budget is approximately $325

million based on an estimate for FY2016.

Colorado The Colorado exchange, Connect for Health Colorado, has a total estimated cost of $101 million

from exchange inception through FY2014. Colorado received a total award grant of $179 million.

The exchange estimates total annual cost at $66.4 million for FY2015.

Connecticut The Connecticut exchange, Access Health CT, has a total estimated cost of $156.3 million from

exchange inception to the point the solution is operational, an end date that is not clarified in the

source. The Connecticut exchange has received approximately $164 million in total grant awards

and had a FY2014 budget of approximately $64 million. The estimate for annual ongoing

operations is $35 million.

68

Total grant award figures are sourced from the Congressional Research Service.

Mach, Annie L., and C. Stephen Redhead. "Federal Funding for Health Insurance Exchanges." Congressional

Research Service. October 29, 2014. Accessed December 27, 2014. http://www.fas.org/sgp/crs/misc/R43066.pdf.



District of Columbia The total estimated cost from inception through FY2014 for the District of Columbia exchange,

DC Health Link, is inconclusive. The total estimated cost figure used for this analysis $133.5

million, which is the total grant award for the DC exchange. The exchange has an estimated

budget of $28 million for 2015 and has implemented a market-wide 1% assessment fee to meet

revenue objectives.

Hawaiʻi The Hawaiʻi Health Connector has a total estimated cost of $104 million from Connector

inception through FY2014. Grant awards for Hawaiʻi total $205 million. The estimated annual

budget is $58 million in FY2015, $16 million in FY2016, and $13 million in FY2017.

Idaho The Idaho exchange, Your Health Idaho, has a total estimated cost of $37.2 million from

exchange inception in 2013 to November 2014. The Idaho exchange has received $69.4 million in

total grant award, of which $32.2 million remains. The Idaho exchange relied on the federally

facilitated marketplace for 2014 Open Enrollment until it launched its own technology platform

in November 2014 for 2015 Open Enrollment. The remaining $32.2 million in grant funding can

be used until January 1, 2016, as the Idaho exchange has an additional year to become financially

self-sufficient.

Kentucky The Kentucky exchange, Kynect, has a total estimated cost of $79.5 million from exchange

inception in 2012 through June 2014. The total estimated cost for FY2013 and FY2014 is not

clearly stated, but is estimated at $39.5 million and $40 million, respectively. Kentucky received a

total grant award of $253.7 million. The estimated cost for annual ongoing and self-sustained

operations is $27 million.

Maryland The Maryland exchange, the Maryland Health Benefit Exchange, has a total estimated cost of

approximately $231 million from exchange inception through FY2014. This amount exceeds the

total grant award for Maryland of $171 million. The estimated cost for ongoing and self-

sustaining operations is $72 million for FY2015.

Massachusetts The Massachusetts exchange has a total estimated cost of $154.4 million from inception through

FY2014, although this figure may be lower than actual total costs. An October 2014 report

quoted Governor Patrick as stating that the revised cost of the exchange has increased to $254

million (up from the original $174 million estimate), of which the state is contributing $42 million

(up from the original $16 million estimate). The $154.4 million estimated through FY2014 is

calculated from an estimated cost of $254 million to complete the design, development, and

implementation of the solution in 2015 less $97.6 million in total estimated costs for FY2015. The

exchange has a high FY2015 budget compared to other states, as Massachusetts has not yet

completed solution development or transitioned to run and maintain operations. Total grant

awards total $184 million. Media reports have also cited a September 2014 report by the Pioneer

Institute which has estimated the cost of implementing the exchange at $600 million. In this

case, the definition of “implemented” is unclear, and the $600 million figure has been rejected by

Governor Patrick’s administration.



Minnesota The Minnesota exchange, MNsure, has a total estimated cost of $107 million from exchange

inception through the development period, an end date that is not clarified in the source. The

total estimated cost from inception through April 2013 was $58 million. Minnesota received $155

million in total grant awards and has an estimate annual budget of $55 million and $59 million in

2015 and 2016, respectively.

New York The New York exchange, New York State of Health, was founded in 2011 and has a total

estimated cost of $285 million from exchange inception through 2014. The New York exchange

has received approximately $511 million in total grant awards and is estimated to spend more

than $450 million by the end of 2016. This grant award amount is the second highest of the 13

states and District of Columbia that are operating state-based exchanges. The exchange’s

estimated annual budget is $97 million and $75 million in 2015 and 2016, respectively.

Rhode Island The Rhode Island exchange, HealthSource RI, was founded in 2011 and has a total estimated cost

of approximately $46 million, although the actual figure is likely to be higher. This estimate of

$46 million is considerably lower than the $140 million in total grant awards for Rhode Island and

the estimated cost to build, implement, and operate a health exchange from 2011 through 2014.

Rhode Island’s estimated annual cost is approximately $23 million to operate the exchange.

Vermont The Vermont exchange has a total estimated cost of approximately $72 million from inception

through FY2014. Grant awards for the Vermont exchange total $173 million and the estimated

annual budget is approximately $5.3 million for FY2015. Vermont has continued to pursue DDI

funding from CMS.

Washington The Washington exchange has a total estimated cost of approximately $177 million from

inception through August 2014. Grant awards for the Washington exchange total $266 million.

The estimated budget for the 2015-2017 biennium is approximately $147 million.

3.6. Funding Models

The ACA has awarded over $4 billion to fund the establishment of state-based marketplaces. However,

starting on January 1, 2015, federal establishment funds will no longer be awarded, and all state-based

marketplaces, including those operating on the federal IT platform, must be financially self-sustaining.

States may request extensions, but these funds may not be used for ongoing maintenance or

operational costs. The success of these funding mechanisms is likely to impact the degree to which

states can fund important marketplace functions, such as consumer assistance and outreach.69

69

Dash, Sarah J., Justin Giovannelli, Kevin Lucia, and Sean Miskell. "State Marketplace Approaches to Financing

and Sustainability." The Commonwealth Fund Blog. November 6, 2014. Accessed December 11, 2014.


3.6.1. Funding Models for Financial Sustainability

The ACA includes a provision allowing the exchanges to “charge assessments or user fees to

participating health insurance issuers, or to otherwise generate funding, to support its operations.”70

Act 205 reaffirms that the Connector “may charge assessments or user fees to participating health and

dental carriers, or may otherwise generate funding to support its operations.”71

These provisions do not preclude other funding sources. The Center on Budget and Policy Priorities

summarized the financing model options72 for state-based marketplaces as:

User fees/assessment on premium revenue of QHP issuers (i.e., plans provided through the

exchange);

Assessment on premium revenue of all Individual market and Small Group issuers licensed in the

state;

Assessment on premium revenue of all issuers licensed in the state;

User fees on exchange customers;

Redirect a portion of revenue from existing state insurer tax(es);

Redirect appropriated funds for expiring state health care program(s) or high risk pool;

Website advertising sales;

General fund revenues; and

Other.

However, the ACA provision on assessments has heavily influenced the published funding models that

state-based exchanges have adopted.

In developing financing approaches, states have sought to ensure that they have sufficient funding to

supporting ongoing operations, while also minimizing costs for customers. Several of the key factors that

states have weighed to determine their financing approaches include overall operating budget,

http://www.commonwealthfund.org/publications/blog/2014/nov/state-marketplace-approaches-to-financing-

and-sustainability. 70

45 CFR Part 155.160 71

Hawaiʻi Sessions Laws, 2011; Act 205 §3 72

State Policy Decisions in Exchange Implementation: State-Based Exchanges. Center on Budget and Policy

Priorities: January 2013. Accessed December 11, 2014. http://www.cbpp.org/files/state-policy-decisions-in-

exchange-implementation-SBE.pdf.


projected enrollment levels, and projected premiums on which assessments will be based.73 Figure 3.13

illustrates the current intended long-term financing approaches instituted by state-based

marketplaces.74 These approaches do not represent exclusive methods for generating revenue, nor do

they ensure that state exchanges will achieve financial self-sustainability in the case of assessment-

based funding.

Figure 3.13: State-Based Marketplace Financing Mechanisms for Individual Marketplaces75

Long-Term Intended Revenue Source to Fund Marketplace

States Additional Information

Assessment only on plans offered through the marketplace

California, Hawaiʻi, Idaho, Massachusetts, Minnesota, Nevada, Oregon, Washington

Washington instituted an additional $4.19 per member per month (PMPM) assessment on marketplace carriers to supplement its share of the state’s existing 2 percent premium tax.

Broad-based assessment on plans inside and outside of the marketplace

Colorado, Connecticut, District of Columbia, Kentucky, Maryland

Colorado is assessing a $1.25 PMPM fee on all plans offered inside and outside of the marketplace in addition to a 1.4 percent assessment only on marketplace plans, as well as using revenue from other sources.

State appropriations only New York

Long-term financing mechanism not finalized

New Mexico, Rhode Island, Vermont Vermont is temporarily funding its marketplace through June 2015 through its State Healthcare Resources Fund, which is funded through an insurer assessment, employer assessment, and other revenue streams. Rhode Island is using federal grant funds while developing a sustainability plan.

Currently, all states (including the District of Columbia), with the exception of New York, New Mexico,

Rhode Island, and Vermont, are assessing fees on plans sold through the marketplace to generate

revenue. Four states and the District of Columbia are also assessing fees on plans sold outside the

marketplace.

Hawai’i has the second lowest Effective Combined Assessment Percent among marketplaces that assess

fees only on plans purchased through the marketplace; only Idaho maintains a lower assessment rate.

Six state-based marketplaces and the federally facilitated marketplace, which acts as the funding model

73


and Sustainability." The Commonwealth Fund Blog. November 6, 2014. Accessed December 11, 2014. 74

This includes state-based marketplaces and federally supported state based marketplaces. This table reflects

state based marketplace decisions for Individual marketplaces as of October 15, 2014, for policy or plan years

beginning on or after January 1, 2015. Some states are using multiple funding sources. 75


and Sustainability." The Commonwealth Fund Blog. November 6, 2014. Accessed December 11, 2014.


for the 34 states that run federally facilitated or state partnership marketplaces, maintain a higher

assessment rate than Hawai’i.

Figures 3.14 and 3.15 illustrate the percent of premium or per member per month (PMPM) fees in those

states that assess fees, as well as the federally facilitated marketplace.

Figure 3.14: Insurer Assessment Levels on Individual Market Qualified Health Plans for Marketplaces

that Assess Fees Only on Plans Purchased Through the Marketplace, 2014–1576

State

2014 2015

Percent of Premium

Per-Member Per-Month

Fee

Effective Combined

Assessment Percent77

Percent of Premium


Fee

Effective Combined

Assessment Percent

Nevada — $4.95 2.1% — $13.00 5.5%

California — $13.95 5.5% — $13.95 5.4%

Oregon — $9.38 4.7% — $9.66 4.5%

Washington — — — 2% $4.19 3.6%

Federally facilitated marketplace

3.5% — 3.5% 3.5% — 3.5%

Minnesota 1.5% — 1.5% 3.5% — 3.5%

Massachusetts78

— — — 2.5% — 2.5%

Hawaiʻi 2.0% — 2.0% 2.0% — 2.0%

Idaho 1.5% — 1.5% 1.5% — 1.5%

76



Effective Combined Assessment Percent calculated by dividing the PMPM fee by the monthly premium for the

silver benchmark plan of the state during the given year (before tax credit), and adding that percent to the

percent of premium assessed in the state. Source for silver benchmark plan cost data:

"Analysis of 2015 Premium Changes in the Affordable Care Act’s Health Insurance Marketplaces." The Henry J.

Kaiser Family Foundation. November 17, 2014. Accessed December 11, 2014. http://kff.org/health-reform/issue-

brief/analysis-of-2015-premium-changes-in-the-affordable-care-acts-health-insurance-marketplaces/. 78

The Massachusetts Connector temporarily suspended charging its existing insurer fees for calendar year 2014,

with the stated plan to reintroduce them for 2015 and beyond. Massachusetts is charging a different fee of 3

percent on insurers offering ConnectorCare plans, which offer additional cost-sharing assistance for lower-

income individuals.


Figure 3.15: Insurer Assessment Levels on Individual Market Qualified Health Plans for Marketplaces

that Assess Broad-Based Fees Inside and Outside the Marketplace, 2014–1579

State

2014 2015

Percent of Premium

Per-Member Per-Month Fee

Effective Combined

Assessment Percent80

Percent of Premium


Fee

Effective Combined

Assessment Percent

Colorado 1.40%81

$1.80 2.10%82

1.40% $1.25

2.00%

Maryland 2.00% — 2.00% 2.00% — 2.00%

Connecticut 1.35% — 1.35% 1.35% — 1.35%

District of Columbia

— — — 1.00% — 1.00%

Kentucky 1.00% — 1.00% 1.00% — 1.00%

The viability of assessment-based funding is dependent on achieving sufficient enrollment numbers to

generate adequate revenue. Low enrollment in states, including Hawai’i, that assess fees on plans

purchased through the marketplace raises the question of whether this funding method is viable. Four

states currently do not assess fees in the form of percent of premiums or per-member per-month fees.

Of these states, New York currently relies solely on state appropriations, while New Mexico, Rhode

Island, and Vermont have not finalized an intended long-term funding approach.

The District of Columbia, which in addition to four other states assesses broad-based fees, has been

challenged by questions of legality related to its funding model. The exchange plans to fund its

marketplace through charging a 1 percent fee on annual insurance premiums, the majority of which are

not sold on its marketplace, such as long-term care, visibility, and disability.83 The District of Columbia

has chosen this approach because it does not have a large enough population buying insurance through

its marketplace to adopt the funding plan being employed by most states and the federal government.

79



Effective Combined Assessment Percent calculated by dividing the PMPM fee by the monthly premium for the

silver benchmark plan of the state during the given year (before tax credit), and adding that percent to the

percent of premium assessed in the state. Source for silver benchmark plan cost data:

"Analysis of 2015 Premium Changes in the Affordable Care Act’s Health Insurance Marketplaces." The Henry J.

Kaiser Family Foundation. November 17, 2014. Accessed December 11, 2014. 81

In Colorado, the 1.4 percent premium assessment is only applied to plans purchased through the marketplace.

The Effective Combined Assessment Percent for plans purchased outside the Exchange was 0.72 percent in 2014

and is 0.59 percent in 2015. 82

The “Effective Combined Fee” is only applicable for those plans purchased through the Colorado exchange. 83

Davis, Aaron C. "D.C. Council Approves Broad New Tax on Insurance to Cover City’s Health-care Exchange." The

Washington Post, May 6, 2014. Accessed December 11, 2014. http://www.washingtonpost.com/local/dc-

politics/dc-council-approves-broad-new-tax-on-insurance-to-cover-citys-health-care-

exchange/2014/05/06/da3770bc-d51f-11e3-8a78-8fe50322a72c_story.html.


To cover its $28 million annual budget, the District of Columbia exchange officials estimate that the

exchange would have to levy a 17 percent fee on every health plan sold through its marketplace, which

would be much higher than the 1 percent to 3.5 percent fees assessed by other states, and could

counteract the benefits to low-income residents of buying plans through the marketplace.84 While

supporters of this approach argue that everyone benefits when more residents are insured, insurers not

in favor of this broad-based fee argue that they will be taxed on plans prohibited from being sold on the

exchange without receiving any benefits.85 The American Council of Life Insurers argued that the tax is

unconstitutional as well as a violation of the ACA, and filed a complaint in federal court to challenge the

District of Columbia health insurance marketplace’s funding approach.86 On November 14, 2014, a

federal judge dismissed the lawsuit on the grounds that Congress “intended in the ACA to encourage

States to operate their own Exchanges and to give the States broad authority to provide adequate

funding for those Exchanges when federal funding ceased.”87

84

Davis, Aaron C. "Broad New Tax to Fund D.C. Health Exchange Challenged in Court." The Washington Post, July

3, 2014. Accessed December 11, 2014. http://www.washingtonpost.com/local/dc-politics/broad-new-tax-to-

fund-dc-health-exchange-challenged-in-court/2014/07/03/5b4bdfd8-02d1-11e4-8572-

4b1b969b6322_story.html. 85


3, 2014. Accessed December 11, 2014. 86


3, 2014. Accessed December 11, 2014. 87

DeBonis, Mike. "Judge Dismisses Challenge to D.C. Health Exchange Funding." The Washington Post, November

14, 2014. Accessed December 11, 2014. http://www.washingtonpost.com/blogs/mike-

debonis/wp/2014/11/14/judge-dismisses-challenge-to-d-c-health-exchange-funding/.


4. Improvements and Sustainability

4.1. Achieving Financial Sustainability in the Hawaiʻi Market

Section 1311(d)(5)(a) of the Patient Protection and Affordable Care Act (ACA) ends federal funding for

continued operations of state health insurance exchanges effective January 1, 2015. It authorizes states

to charge assessments or user fees to participating health insurance issuers, and to generate funding

through other sources to support ongoing operations. The Hawaiʻi Health Insurance Exchange Act (Act

205) affirms the ACA, and stipulates that “The Connector may receive contributions, grants,

endowments, fees, or gifts in cash or otherwise from public and private sources including corporations,

businesses, foundations, governments, individuals, and other sources subject to rules adopted by the

board. The state may appropriate moneys to the Connector.”

Connector financial self-sustainability is achievable. The Connector’s sustainability forecast projects a

net cash surplus beginning in FY2022. This forecast assumes a flat expense profile, and revenue

projections based on the size of the accessible market, enrollment, average premium, and the

assessment rate. The Connector is projecting operating deficits in FY2015 through FY2021.


Figure 4.1: Base Case Sustainability Forecast

Figure 4.2: Base Case Sustainability Forecast88

The Connector’s financial sustainability efforts are founded on several key objectives.

Increase Enrollment Levels – this is achievable through a combination of continued and

enhanced marketing and outreach activities, improvements in the usability and reliability of the

Connector technology solution, and improvements in customer service. The Connector has

established target market penetration and enrollment levels.

Attract New Issuers to the Marketplace – today, Kaiser Permanente (KP) is the only issuer

participating in the Small Business Health Options Program (SHOP) marketplace. KP serves

approximately 19 percent of the Small Group market and approximately 28 percent of the Large

Group market. The Hawaiʻi Medical Service Association (HMSA), Hawaiʻi Medical Assurance

88

SMS market study provided Total Health Insurance Market and Total Accessible Market figures. Total

enrollments and revenue projections are outputs of the Connector’s base case scenario.

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000


Sustainability Forecast

Total Revenue Total Expenses

Sustainability Forecast FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Total Health Insurance Market 1,358,684 1,370,912 1,383,250 1,395,699 1,408,260 1,419,028 1,430,380 1,441,823 1,453,358 1,464,985

Total Accessible Market 303,361 304,615 905,163 906,716 908,273 909,828 911,367 912,883 914,402 915,943

Total Enrollments 27,280 33,156 44,934 51,056 62,947 67,877 72,838 80,765 88,415 97,261

Revenue $984,443 $4,063,797 $5,608,564 $7,360,136 $9,311,991 $11,307,098 $12,827,795 $14,768,624 $17,163,818 $19,880,104


Association (HMAA), and University Health Alliance (UHA) serve approximately 81 percent of the

Small Group market, and approximately 72 percent of the Large Group market. HMSA is the

single largest issuer, serving approximately 51 percent of the Small Group and approximately 65

percent of the Large Group markets. While the Connector can encourage and promote issuer

participation by improving its service, the Connector cannot mandate participation. Increased

participation by issuers is critical to achieve significant enrollment growth.

Raise the Assessment Rate from the Current 2 Percent Level – in its revenue forecast, the

Connector has included a rate adjustment to 3.5 percent beginning in 2016 to bring the

Connector in line with the federal marketplace.

Recommend Policy Change – requiring participation for issuers with a significant threshold

share of the market may provide an even playing field.

4.2. Market Projections

A key objective for the Connector in 2015 is to increase enrollment levels. The Connector conducted

market analysis to establish a firm understanding of the total health insurance market in Hawaiʻi, as well

as the total accessible health insurance market in Hawaiʻi.

Figure 4.3: Total Health Insurance Market (in lives)89

89

SMS market study, with the exception of Large Group (100+), Direct: 139-400 percent FPL and Direct: 401+

percent, which were adjusted to be consistent with Department of Consumer and Commerce Affairs (DCCA)

2013 research. Study leverages the Hawaiʻi Department of Business, Economic Development & Tourism (DBEDT)

long range forecast; American Community Survey (ACS) 1-year, 3-year, and 5-year projections; and the US Census

Current Population Survey (CPS). Market segment overlap is expected.


Total Health Insurance Market 1,358,684 1,370,912 1,383,250 1,395,699 1,408,260 1,419,028 1,430,380 1,441,823 1,453,358 1,464,985

Military 143,742 145,036 146,341 147,658 148,987 150,126 151,327 152,538 153,758 154,988

Tri-Care (Dual) 51,770 52,236 52,706 53,181 53,659 54,070 54,502 54,938 55,378 55,821

Tri-Care (Alone) 65,416 66,004 66,598 67,198 67,803 68,321 68,868 69,419 69,974 70,534VA (Alone & with other coverage) 26,556 26,795 27,036 27,279 27,525 27,735 27,957 28,181 28,406 28,634

Medicare 216,490 218,438 220,404 222,388 224,389 226,105 227,914 229,737 231,575 233,428

Medicaid 218,439 220,405 222,389 224,390 226,410 228,141 229,966 231,806 233,660 235,529

Private Sector Employer Sponsored 825,510 827,092 828,682 830,282 831,890 833,507 835,134 836,769 838,414 840,067

Small Group (1 to 50) 226,731 228,091 229,460 230,837 232,222 233,615 235,017 236,427 237,845 239,272

Large Group (51-99) 73,779 74,000 74,222 74,445 74,668 74,892 75,117 75,342 75,568 75,795

Large Group (100+) 525,000 525,000 525,000 525,000 525,000 525,000 525,000 525,000 525,000 525,000

Direct 32,205 32,204 32,206 32,207 32,208 32,209 32,209 32,207 32,206 32,204

0% to 138% 2,205 2,204 2,206 2,207 2,208 2,209 2,209 2,207 2,206 2,204

139% to 400% 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000

401% + 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

Uninsured 95,051 95,906 96,769 97,640 98,519 99,272 100,066 100,867 101,674 102,487

0% to 138% 35,000 35,315 35,633 35,953 36,277 36,554 36,847 37,141 37,438 37,738

139% to 400% 39,698 40,055 40,416 40,779 41,146 41,461 41,793 42,127 42,464 42,804

401% + 20,353 20,536 20,721 20,908 21,096 21,257 21,427 21,599 21,771 21,945

COFA 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500


Several groups within the total health insurance market are not considered part of the total accessible

market for the Connector. Military and government personnel, as well as Medicare and Medicaid

recipients, are ineligible for a Qualified Health Plan (QHP) through the Connector. Individuals on more

than one plan are unlikely to require a QHP through the Connector, and while may purchase dental

plans or additional coverage, are not considered part of the accessible market.

State and federal law limits the Connector’s ability to seize a share of the small and large employer

markets until 2016 (50-99) or 2017 (100+). Hawai’i state law (Act 848) defines a small business as one

with no more than 50 employees through 2015. Therefore, employers with 51 to 99 employees are

ineligible to participate in Connector plans until 2016 and employers with 100 or more employees are

ineligible to participate in Connector plans until 2017.

These conditions drive the accessible market for the Connector. The accessible areas are:

Private Sector; Small Group: Small businesses are eligible to leverage the Connector for health

insurance plans;

Private Sector; Large Group: Large businesses will be eligible to leverage the Connector for

health insurance plans in 2016 for employers with 51 to 99 employees and 2017 for employers

with 100 or more employees;

Direct Market: Individuals enrolled in health insurance plans directly with an insurance company

who report income of more than 138 percent of the FPL are eligible to leverage the Connector’s

health insurance plan offerings;

Uninsured Market: Individuals without health insurance who report income of more than 138

percent of the FPL and are under age 65 are eligible for Connector health insurance plan

offerings; and

Lawfully-Present Residents (e.g., Compact of Free Association (COFA) migrants): Individuals in

the COFA states are eligible to participate in the Connector’s plan offerings.

The Connector’s total accessible market is summarized in the table below.


Figure 4.4: Total Accessible Market (in lives)90

4.3. Cases and Assumptions

4.3.1. Cases

The Connector reviewed the accessible market and produced a base case scenario. A base case was

developed to reflect the Connector’s working enrollment and revenue forecast. The base case is detailed

in the following pages, which incorporates the Connector’s estimated penetration percentages by

market segment.

The Connector engaged SMS, a Hawaiʻi-based market research and analytics company, to perform

market analysis. First, SMS defined the total health insurance market and the total accessible health

insurance market. These market figures are the basis from which both the Connector’s and SMS’

penetration estimates are based. Second, SMS provided the Connector with two enrollment projections.

These two scenarios – a low case and a high case – are included in Appendix B.

4.3.2. Assumptions

The enrollment and revenue estimates included in this report are assumption driven. The average

premium cost is a key assumption. In this report, the Connector assumes the average monthly premium

rate in 2015 is $266 for Individuals and Families, $350 for employees of Small Group (0-50 employees)

employers, and $294 for employees of Large Group (51+ employees) employers. These prices are

derived from analysis consistent with Department of Commerce and Consumer Affairs (DCCA) research

on Hawaiʻi health premium prices and plan participants.

90

SMS market study, with the exception of Large Group (100+), Direct: 139-400 percent FPL and Direct: 401+

percent, which were adjusted to be consistent with Department of Consumer and Commerce Affairs (DCCA)

2013 research. Study leverages the Hawaiʻi Department of Business, Economic Development & Tourism (DBEDT)

long range forecast; American Community Survey (ACS) 1-year, 3-year, and 5-year projections; and the US Census

Current Population Survey (CPS). SMS treats sole proprietorships as I/F candidates, not SHOP candidates.


Total Accessible Market 303,361 304,615 905,163 906,716 908,273 909,828 911,367 912,883 914,402 915,943

Private Sector Employer Sponsored 208,592 209,844 810,325 811,815 813,312 814,818 816,332 817,855 819,386 820,926

Small Group (2 to 50) 208,592 209,844 211,103 212,370 213,644 214,926 216,215 217,513 218,818 220,131

Large Group (51-99) 74,222 74,445 74,668 74,892 75,117 75,342 75,568 75,795

Large Group (100+) 525,000 525,000 525,000 525,000 525,000 525,000 525,000 525,000

Direct 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000

139% to 400% FPL 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000

401%+ FPL 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

Uninsured 57,268 57,271 57,338 57,401 57,461 57,510 57,535 57,528 57,516 57,517

139% to 400% FPL 39,234 39,232 39,274 39,313 39,350 39,378 39,393 39,383 39,371 39,366

401%+ FPL 18,034 18,039 18,064 18,088 18,111 18,132 18,142 18,144 18,145 18,152

COFA 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500


The Connector assumes the average premium will grow by 6 percent each year. This growth rate is an

average taken from Congressional Budget Office (CBO) estimates on health insurance premium growth

rates for 2016 through 2024.91

The Connector assumes the average monthly Advanced Premium Tax Credit (APTC) subsidy for an

Individual and Family plan is $154 in 2015.92 The Connector also used a small business tax credit

percentage of 42.5 of the average premium for the first two years of participation in a Connector health

plan for companies with no more than 20 employees93. This percent is an average between 50 percent

given to tax-paying business and 35 percent given to tax-exempt businesses. The average subsidy

growth rates – both individual and business – are aligned with the annual premium growth rate of 6

percent.

The Connector’s revenue is driven by a fee assessed on the monthly premium of an enrolled individual.

The Connector’s fee is 2 percent of premiums through 2015. The fee is assumed to rise to 3.5 percent of

monthly premiums beginning in 2016.

These assumptions are summarized in the table below.

Figure 4.5: Assumption Summary for Base Case

The final key assumption is market penetration. The Connector’s forecast, or base case, is detailed in the

following pages. Two additional scenarios prepared by SMS are included in Appendix B. The market

91

"Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act."

Congressional Budget Office. April 1, 2014. Accessed December 3, 2014.

http://www.cbo.gov/sites/default/files/45231-ACA_Estimates.pdf. 92

The APTC subsidy figure used for this report was calculated from the lowest percentage of premium reduction

(58%) and applied to the average premium in Hawaiʻi ($266) as a conservative estimate. 93

The Small Business Tax Credit applies to companies with no more than 25 employees for the first two years of

participation in Connector plans. The SMS market study does not report on companies with two to 25

employees, but rather, reports on companies with two to 19 employees. The latter was used for the Small

Business Tax Credit calculation as a conservative estimate.

Model Assumptions Individuals and Families SHOP

Avg Premium $266 $350 small group (0-50 employees)

$294 large group (51+ employees)

Avg Premium Growth 6% 6%

Member Months 6 months in first year 6 months in first year

Avg Subsidy $154 42.5% of premium, first 2 years each

company is on exchange plan,

businesses with 2-19 employees

Avg Subsidy Growth 6% 6%

Connector Fee 2.0% through 2015; 3.5% beginning 2016 2.0% through 2015; 3.5% beginning 2016


penetration rates for Individuals and Families are summarized by income level and Lawfully-President

Resident (LPR) association, while the market penetration rates for SHOP are summarized by firm size.

4.4. Base Case Projection

4.4.1. Market Penetration

For 2015 Individual and Family plans, the Connector projects a 15 percent market share of lives in the

138-400 percent FPL income bracket and an 11 percent market share of lives in the 401 percent and up

FPL income bracket. The Connector projects a 50 percent market share of LPRs in 2015. In the next 10

years, the Connector estimates reaching a 35 percent market share of lives in the 138-400 percent FPL

income bracket, a 22 percent market share of lives in the 401 percent and up FPL income bracket, and a

75 percent market share of LPRs.

For 2015 SHOP plans, the Connector projects a 5 percent market share of lives tied to private sector

small businesses. The Connector anticipates achieving 13 percent of this market by 2019. Once large

businesses are eligible to participate in Connector plans, the Connector projects a 1 percent market

share of lives tied to private sector large businesses in 2017 with growth to a 6 percent market share in

FY2024.

Figure 4.6: Market Penetration for Base Case

4.4.2. Enrollment

The Connector’s base case assumptions project a SHOP enrollment total of 11,264 lives and an

Individual and Family enrollment of 16,016 by the end of 2015. By the end of 2024, the SHOP and

Individual and Family enrollment totals reach 64,665 and 32,596, respectively, for a projected

enrollment total of 97,261 lives. The following table and charts summarize the Connector’s enrollment

forecast.

I/F FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

138-400% FPL 15% 16% 18% 20% 22% 24% 27% 29% 31% 35%

401%+ FPL 11% 12% 13% 15% 16% 18% 18% 20% 21% 22%

COFA 50% 75% 75% 75% 75% 75% 75% 75% 75% 75%

SHOP FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Small Group (2-50) 5% 7% 9% 11% 13% 13% 13% 13% 13% 13%

Large Group (51+) 0% 0% 1% 1% 2% 3% 3% 4% 5% 6%


Figure 4.7: Base Case Enrollment Forecast

Figure 4.8: Base Case Enrollment Forecast


Small 11,264 14,689 19,741 24,105 29,267 29,813 30,361 31,290 32,225 33,165

Large 0 0 5,250 5,250 10,500 13,125 15,750 21,000 26,250 31,500

138%-400% FPL 9,063 9,477 10,669 11,863 13,057 14,251 16,036 17,221 18,405 20,778

401%+ FPL 3,196 3,365 3,648 4,213 4,498 5,064 5,066 5,629 5,910 6,193

COFA 3,758 5,625 5,625 5,625 5,625 5,625 5,625 5,625 5,625 5,625

11,264 14,689 24,991 29,355 39,767 42,938 46,111 52,290 58,475 64,665

16,016 18,467 19,943 21,701 23,180 24,939 26,727 28,475 29,941 32,596

27,280 33,156 44,934 51,056 62,947 67,877 72,838 80,765 88,415 97,261

Total I/F

Enrollment Estimate

SHOP

Individual

/

Family

Total SHOP

0

20,000

40,000

60,000

80,000

100,000

120,000


Live

s

Enrollment Forecast

Total SHOP Total I/F


Figure 4.9: Base Case Enrollment Forecast, SHOP (in lives)

Figure 4.10: Base Case Enrollment Forecast, Individuals and Families (in lives)

4.4.3. Enrollment Growth Sources

The Connector’s enrollment growth is driven in the five key categories that compose the accessible

market:

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000


Live

sEnrollment Forecast: SHOP

Small Large

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000


Live

s

Enrollment Forecast: I/F

138%-400% FPL 401%+ FPL COFA


APTC Eligible: Individual and family customers in the 138 percent to 400 percent FPL on direct

plans or uninsured

APTC Ineligible: Individual and family customers in the 401 percent or greater FPL on direct

plans or uninsured

Lawfully-Present Residents: Individual and family customers from the COFA population

Small Business: Employers and dependents from companies with no more than 50 employees

Large Business: Employers and dependents from companies with more than 51 employees

beginning in 2017

The figure below illustrates the growth in each market segment over the next 10 years.

Figure 4.11: Sources of Enrollment Growth

4.4.4. Revenue

The Connector’s base case projects $984,000 in service fee revenue in 2015. The table below

summarizes projected revenue growth through 2024.

27,280

11,715 2,9981,868

21,901

31,500

0

20,000

40,000

60,000

80,000

100,000

120,000

2015 138%-400% FPL(APTC Eligible)

401%+ FPL(APTC Ineligible)

COFA Small Business Large Business 2024

Sources of Enrollment Growth2015 - 2024

97,261


Figure 4.12: Base Case Revenue Forecast from Assessment Fees94

Figure 4.13: Base Case Revenue Forecast from Assessment Fees

94

For FY2015, the revenue estimate from the Connector’s finance team is slightly higher than the model

prediction due to the expected timing of enrollments.


Small $473,088 $2,022,003 $2,833,628 $3,817,495 $4,919,290 $5,758,089 $6,205,000 $6,720,425 $7,313,340 $7,954,413

Large $0 $0 $364,198 $772,100 $1,227,639 $1,951,946 $2,528,854 $3,411,654 $4,649,598 $6,023,812

138%-400% FPL $289,286 $1,097,778 $1,264,472 $1,499,049 $1,757,381 $2,041,337 $2,399,870 $2,793,365 $3,171,896 $3,697,877

401%+ FPL $102,012 $388,462 $440,168 $523,028 $614,309 $714,751 $802,638 $898,260 $1,027,370 $1,142,291

COFA $119,939 $555,553 $706,098 $748,464 $793,372 $840,974 $891,433 $944,919 $1,001,614 $1,061,711

$473,088 $2,022,003 $3,197,826 $4,589,595 $6,146,929 $7,710,035 $8,733,854 $10,132,080 $11,962,938 $13,978,225

$511,237 $2,041,794 $2,410,738 $2,770,541 $3,165,063 $3,597,063 $4,093,941 $4,636,544 $5,200,880 $5,901,879

$984,443 $4,063,797 $5,608,564 $7,360,136 $9,311,991 $11,307,098 $12,827,795 $14,768,624 $17,163,818 $19,880,104Revenue Estimate

SHOP

Individual

/

Family

Total SHOP

Total I/F

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000


Revenue Forecast

Total SHOP Total I/F


Figure 4.14: Base Case Revenue, SHOP

Figure 4.15: Base Case Revenue, Individuals and Families

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000


Revenue Forecast: SHOP

Small Large

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000


Revenue Forecast: I/F

138%-400% FPL 401%+ FPL COFA


4.5. The Economic Impact of Tax Credits on the Community

The Connector is a provider of economic value to the Hawaiʻi community on both an individual and

business level. The ACA includes tax provisions to provide credits to individuals and small businesses

that enroll in plans through the Connector.

4.5.1. Advanced Premium Tax Credit (APTC)95

The federal government provides subsidies to individuals and families enrolling in qualified health plans

through the federal or a state exchange. The objective of the subsidy is to limit the portion of income

that individuals and families spend on health insurance premiums. The subsidy can be applied towards

enrollment in any plan type, except catastrophic, but the subsidy amount is calculated based on the

premium of the second lowest cost Silver plan available.

In Hawaiʻi, individuals and families enrolled in health insurance through the Connector are eligible for

the subsidy if the enrollees are ineligible for employer or government coverage, meet income and

residency requirements, fall between 0-400 percent of the FPL, and have not been claimed as a

dependent of another eligible individual. The APTC amount is calculated based on an enrollee’s age,

income, family size, and the premium of the plan selected.

The table below indicates the maximum amount of income a single adult will pay towards the premium

of a Silver plan.

Figure 4.16: Percentage of Income Paid Towards Premium for Single Adult by Income96

These tax credits can be applied according to two schedules – a monthly subsidy or an annual subsidy. If

the enrollee chooses the monthly option, the subsidy is applied to the premium to reduce the monthly

95

Burke, Amy, Arpit Misra, and Steven Sheingold. "Premium Affordability, Competition, and Choice in the Health

Insurance Marketplace, 2014." ASPE Research Brief. June 18, 2014. Accessed December 3, 2014.

http://aspe.hhs.gov/HEALTH/REPORTS/2014/PREMIUMS/2014MKTPLACEPREMBRF.PDF. 96

Burke, Amy, Arpit Misra, and Steven Sheingold. "Premium Affordability, Competition, and Choice in the Health

Insurance Marketplace, 2014." ASPE Research Brief. June 18, 2014. Accessed December 3, 2014.

http://aspe.hhs.gov/HEALTH/REPORTS/2014/PREMIUMS/2014MKTPLACEPREMBRF.PDF.

FPL

Max % of Income Paid

Towards Silver Plan

100% 2.00%

150% 4.00%

200% 6.30%

250% 8.05%

300% 9.50%

350% 9.50%

401% -


cost for the enrollee. If the enrollee choses the annual option, the subsidy is taken into account when an

enrollee’s tax return is filed and processed.

The Connector is assuming an average APTC amount of $154 a month in FY2015 with 6 percent annual

growth. The following table indicates the estimated APTC subsidy.

Figure 4.17: Base Case APTC Subsidy Forecast

Figure 4.18: Base Case APTC Subsidy and Enrollment Forecast

APTC is a major driver of economic value for customers enrolling in health insurance through the

Connector. The ACA shifts tax credit responsibility away from the state to the federal government.

According to the research brief that details national APTC averages, 69 percent of individuals eligible for

the tax credit are paying a post-credit premium of under $100 a month. Data on tax credits awarded

through the federal exchange and state exchanges indicate that the average premium for APTC-eligible

customers is reduced by approximately 76 percent. In Hawaiʻi, this credit provides a considerable

economic benefit for individuals in select income brackets who choose to enroll with the Connector.


Individual Credits $8,374,056 $18,158,741 $20,916,070 $24,796,305 $29,069,463 $33,766,484 $39,697,095 $46,206,040 $52,467,457 $61,167,890

Migrant Credits $3,471,930 $9,189,596 $11,679,822 $12,380,611 $13,123,448 $13,910,855 $14,745,506 $15,630,237 $16,568,051 $17,562,134

Total $11,845,986 $27,348,337 $32,595,892 $37,176,916 $42,192,911 $47,677,339 $54,442,601 $61,836,277 $69,035,507 $78,730,024


-

5,000

10,000

15,000

20,000

25,000

30,000

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

FY2015FY2016FY2017FY2018FY2019FY2020FY2021FY2022FY2023FY2024Li

ves

Sub

sid

y

APTC Subsidy Forecast: Individuals and Families

138%-400% FPL COFA APTC Subsidy


4.5.2. Small Business Health Care Tax Credit

The ACA provides federal tax credits for small business owners who enroll through the SHOP

marketplace. These credits return to employers up to 50 percent of their expenses on employee health

coverage, and effectively return money to the Hawaiʻi economy by transferring costs to the federal

government.

Small businesses that employ 25 or fewer full-time equivalents (FTE),97 spend on average less than

$50,00098 a year on employee wages,99 and contribute at least half of employee health care costs

through the SHOP marketplace (or qualified exception) qualify for tax credits when they file for taxes at

the end of the tax year. Seasonal employees, owners of 5 percent or more of the business, and 2

percent or greater shareholders of S corporations are not counted in these calculations.100 Due to

technological issues and delays in launching SHOP marketplaces, some exchanges, such as the federally

facilitated marketplace granted exceptions to employers who directly enrolled with issuers for 2014

alone.101

Employers that meet the stated criteria qualify for a tax credit equal to 50 percent (35 percent for tax-

exempt businesses) of the total contributions paid on employees in the taxable year or the total

contributions that would have been paid had all eligible employees enrolled in a marketplace plan at the

average premium (as determined by the United States Department of Health & Human Services),

whichever is less. Employers receive the credit as a deduction when taxes are filed. Tax-exempt business

can receive this amount as a refundable credit.102 The credit is provided to businesses for the first two

years that they enroll with the Connector.

To calculate the estimated economic impact of the small business health care tax credit for the Hawaiʻi

community, the Connector considered companies with FTE counts of two to 19 – a conservative

estimate. While the tax credit allows for upwards of 25 FTE, the market profile leveraged for this report

did not provide an exact number of employees working for companies with 20 to 25 FTEs. The

Connector also assumed that all the companies with two to 19 FTEs per employee have an average

annual employee wage below $50,000, and chose to use an average of 42.5 percent as the credit, a split

between 35 percent for tax-exempt businesses and 50 percent for non-tax-exempt businesses.

97

Full-Time Equivalents (FTE)s = 𝑆𝑢𝑚 𝑜𝑓 𝑎𝑙𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑒 ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑 𝑛𝑜𝑡 𝑖𝑛 𝑒𝑥𝑐𝑒𝑠𝑠 𝑜𝑓 2080 ℎ𝑜𝑢𝑟𝑠 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟 𝑝𝑒𝑟 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑒

2080

98 This value is determined every year as follows: For 2013 and earlier: 2x $25,000; 2014 and beyond: 2 x $25,000

x Cost of Living adjustment 99

Average Annual Wages = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑡𝑜𝑡𝑎𝑙 𝑜𝑓 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑒 𝑤𝑎𝑔𝑒𝑠 𝑝𝑎𝑖𝑑

𝐹𝑇𝐸𝑠

100 26 U.S. Code § 45R

101 Internal Revenue Service, “Small Business Health Care Tax Credit for Small Employers.” June 26, 2014.

http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers. 102

26 U.S. Code § 45R


Figure 4.19: Small Business Tax Subsidy

Figure 4.20: Cumulative Small Business Tax Subsidy

4.6. The Path to Sustainability

The Connector is on the path to sustainability. As it transforms from start-up to stable business, there

are real and achievable opportunities to do much more and potentially accelerate the timeline to

achieve sustainability.

The Connector is analyzing and developing plans to provide more efficient, more complete, and more

cost-effective services to its customers. The Connector believes that collectively these opportunities

have the potential to result in net revenue gains and cost avoidance totaling millions of dollars each

year, and have the potential to reduce certain segments of operating cost by as much as 40 percent per

year. They are grouped into three categories:

Opportunities to Enhance Revenue from Added Market and Services

Opportunities to Extend Services That Support Cost Avoidance

Opportunities to Reduce Operating Costs


Business Credits $4,817,834 $11,766,684 $5,390,884 $6,646,936 $7,129,356 $5,173,570 $305,477 $325,749 $347,365 $370,417


-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000


Live

s

Sub

sid

y

Tax Credit Subsidy (2-year): SHOP

Small Group (2-19) Cumulative Tax Credit


4.6.1. Opportunities to Enhance Revenue from Added Market and Services

The Connector is assessing four discrete opportunities to expand the accessible market and offer

services to support individuals who currently fall into the associated market categories:

COBRA Subscribers – who have the potential to achieve substantial cost-savings by shopping in

the exchange. COBRA subscribers, whose premiums were heavily subsidized by their employer

while they were employed, are likely to bear the full cost of COBRA coverage when their

employment ends.

Hawaiʻi’s College Student Population – the University of Hawaiʻi system includes 10 campuses

with a total enrollment of approximately 60,000 students. In addition, Hawaiʻi is served by more

than 10 additional private and for-profit institutions. The Cal State University (CSU) Health

Insurance Project may serve as a model to assist a subset of the student population to achieve

the basic minimum level of coverage. Findings from CSU analysis showed that prior to 2014

Open Enrollment, 25 to 30 percent of the student population lacked health insurance due to

affordability. Following 2014 Open Enrollment and targeted outreach to the student population

as part of the CSU, uninsured levels are estimated to have fallen to 10 percent. Without

insurance, these students would be limited to university health service options, which lack basic

elements of ACA-compliant coverage.

Hawaiʻi Employer-Union Health Benefits Trust Fund (EUTF) – EUTF represents a market of

approximately 188,000 lives. The Connector has the capability to provide application and

enrollment services to this population, potentially offering greater choice at a lower cost than

currently available.

Health Insurance Captives – the Connector may be able to expand its accessible market by

supporting health insurance captives, a growing segment of the market particularly relevant to

large corporations and public entities.

4.6.2. Extend Services that Support Cost Avoidance

The Connector is assessing three discrete opportunities to provide better service to customers and

stakeholders through an integrated solution while avoiding the costs associated with the management

and operation of disparate solutions. They include:

Performing MAGI Medicaid Eligibility Determination – by leveraging delivered capabilities in

the current OneGate solution which have been successfully implemented in Vermont.

Providing Integrated Eligibility Determination, Application, and Enrollment Support Across

State-provided Social Services – using the Integrated Eligibility (IE) capabilities of OneGate, pre-

built rule bases, and state-specific rules configurable using the Oracle Policy Automation (OPA)

component of OneGate.


Enabling a 360 Degree View of the Customer – building on the extension of integrated eligibility

determination to support enhanced analytics and decision-making.

4.6.3. Opportunities to Reduce Operating Costs

The Connector has identified opportunities to reduce its current operating cost profile. They include the

following:

Alignment of operating costs, such as marketing costs per enrolled life, with industry

benchmarks;

Ensuring that the IT bill of materials includes those items required to be successful, and

eliminates items that are not utilized or that could be replaced with existing, more cost-effective

items; and

Simplifying the technical architecture and infrastructure to reduce medium- and long-term

maintenance costs.

All three of these cost reduction opportunities are key components of the Connector’s 2015 business

and IT operating plans.

Solution Platform as an Enabler

The Connector selected and implemented OneGate, a commercial software solution, as its Health

Insurance Exchange (HIX) platform. The Department of Human Services (DHS) has also licensed OneGate

to enable integrated eligibility functions. OneGate is an enabling solution platform: its capabilities make

it possible for the Connector to purse these revenue enhancement and cost avoidance opportunities.

OneGate is capable of enabling the state’s vision of a fully integrated end-to-end process for eligibility

determination, application, and plan enrollment.

Figure 4.21: State of Hawaiʻi’s Vision


OneGate’s solution architecture provides the Connector with the flexibility to evolve and grow to meet

business needs both within the HIX market and across health and human services organizations. Figure

4.22 provides an overview of the OneGate solution foundation.

Figure 4.22: OneGate Foundation

A key foundational component of OneGate is OPA, which is a dynamic, natural language rules engine

that allows for complex federal and state eligibility rules to be more easily updated, maintained, and

used to drive application and eligibility determination processes. The use of OPA in OneGate is key to

the fulfillment and extension of Connector-supported services. OPA integrates with the SOA layer of the

solution to facilitate communication with other ConnectHawaiʻi technical components and with external

systems. These capabilities offer a modular, flexible, and scalable solution foundation capable of

meeting today’s needs and the needs of the future.

The Connector believes that it has the right platform not only to achieve, but also to accelerate the

achievement of sustainability.

ONEGATE PORTAL

Consumer-facing portal for individuals, small business employers & employees, navigators, and brokers

ONEGATE RULES

Federal rules for HIX and HHS programs. Extension to support State-specific

policy

ONEGATE INTEGRATION SERVICES

Pre-integrated COTS system, service

orchestration, and technology adapters

ONEGATE CASE MANAGEMENT

Employee-facing case management

application enabling HIX and HHS functions

Third-Party COTS Foundation

Liferay Portal Oracle Policy Automation Oracle SOA Suite Oracle Siebel CRM


5. Connector Financial Summary

5.1. Introduction

The Connector was established as a Hawaiʻi corporation on July 1, 2011 and was organized to operate as

a nonprofit entity as defined by IRC 501(c)(3). The Connector has been funded by three federal grants

issued by the United States Department of Health and Human Services’ (HHS) Centers for Medicare and

Medicaid Services (CMS) since November 29, 2011 and insignificant amounts of other donated funding

since inception.

The Connector was awarded the following CMS Cooperative Agreements to Support Establishment of

State-Operated Health Insurance Exchanges grants:

Grant Term Grant Award

November 29, 2011- November 28, 2013 $ 14,440,144

August 23, 2012 – August 23, 2015 $ 61,815,492

April 8, 2013 – April 7, 2015 $ 128,086,634

The initial $14.4 million grant was requested by and initially awarded to the State of Hawaiʻi Department

of Commerce and Consumer Affairs (DCCA) of which $4.2 million was distributed to the Connector

based on a sub-recipient grant arrangement. Effective March 11, 2013, the $10.2 million remainder of

the initial award was formally transferred to the Connector. Therefore, the total $14.4 million proceeds

of the initial award are included in the following Connector financial information.

5.2. Financial Summaries

5.2.1. Summarized Statement of Activities

Years Ended June 30,

2014 2013 2012

Support & Revenue

$ 68,895,007

$

68,895,007

$ 34,283,553 $ 1,483,633

Expense

49,040,310 14,938,586 1,404,014

Revenue over Expense

19,854,698 19,344,967 79,619

Less: Capitalized Expenditures, net

(23,981,421) (19,413,501) (62,837)

Add: Depreciation and Amortization Expense

4,248,660 63,444 1,040

Revenue over(under) expenditures

$ 121,937 ($ 5,091) $ 17,822


5.2.2. Summarized Statements of Financial Position

June 30,

2014 2013 2012

ASSETS Cash $ 65,646 $ 10,445 $ 24,580

Grants Receivable 28,601,372 18,317,926 955,443 HIX License Rights & Software, net 37,007,859 18,823,018 - Furniture & Equipment, net 592,411 498,058 44,911 Other Assets 1,547,513 80,679 21,226

Total Assets $ 67,814,801 $ 37,730,126 $ 1,046,160

LIABILITIES

Accounts Payable & Accrued Expenses $ 28,534,473 $ 18,304,498 $ 965,501

NET ASSETS 39,280,328 19,425,628 80,659

Total Liabilities and Net Assets $ 67,814,801 $ 37,730,126 $ 1,046,160

5.2.3. Summarized Schedule of Grant Funding from Inception through June 30, 2014

Grant Description Expended Obligated Unobligated Total Award

1st Level One Grant $ 14,440,144 $ - $ - $ 14,440,144

2nd Level One Grant 52,311,912 8,743,972 759,608 61,815,492

Level Two Grant 37,616,142 23,959,976 66,510,516 128,086,634

$ 104,368,198 $ 32,703,948 $ 67,270,124 $ 204,342,270

5.3. Fiscal Year 2014 Financial Activity Management Discussion and Analysis

5.3.1. Composition of and Changes in Statements of Activities

Fiscal Years Ended June 30, 2014 vs. 2013

Revenue: During FY2014, the Connector earned $68.8 million and $0.1 million of grant and issuer fee

revenue, respectively versus $34.3 million of grant revenue in FY2013. During FY2014, issuer fees of 2

percent were earned by the Connector based on the total insurance premiums of Individual policies

processed through the Connector’s marketplace for health and dental insurance coverage from January

2014 through June 2014. There were no issuer fees earned on Small Business Health Options Program

(SHOP) policies processed through the marketplace during FY2014. Issuer fees on SHOP policies began

for policies effective July 1, 2014.

Expenditures: During FY2014, the Connector incurred total expenditures of $68.8 million, which was 101

percent greater than total FY2013 expenditures of $34.3 million. Total expenditures encompassed

development and operations expense plus long-term asset costs capitalized during the period. The

FY2014 increased expenditures are primarily due to the entity incurring more significant development

and establishment costs associated with marketplace technology, consumer assistance programs, and

entity infrastructure. Specifically, the $34.5 million increase in expenditures over FY2013 encompassed

an additional $19.0 million of IT design, development, and implementation (DDI) costs, $7.1 million of


additional consumer assistance and outreach program expenses, $1.1 million for Contact Center

development, $2.0 million of additional personnel costs, $2.4 million of IT maintenance and operations

expenses, and approximately $3.0 million for additional subject matter expert consultants and

temporary staffing. These increased costs are reflective of the fact that in FY2014 the Connector moved

from being a start-up development stage entity in FY2013 to a combined development-stage and

operational entity.

Depreciation and Amortization: See Statements of Financial Position discussion in Section 5.3.2.

Fiscal Years Ended June 30, 2013 vs. 2012

Revenue: During FY2013 and FY2012, the Connector earned $34.3 million and $1.4 million of grant

revenue. There were no other significant revenue sources in these periods.

Expenditures: During FY2013, the Connector incurred total expenditures of $34.4 million. The FY2013

expenditures encompassed costs associated with IT DDI ($26.3 million), development of consumer

assistance programs and outreach services ($1.6 million), procurement and contract management ($2.2

million), and establishment and administration of the entity’s infrastructure ($4.4 million). The FY2012

expenditures of $1.4 million primarily included organization start-up costs, procurement administration

costs, and contract management costs.

Depreciation and Amortization: See Statements of Financial Position discussion in Section 5.3.2.

5.3.2. Changes in Statements of Financial Position as of June 30, 2014 versus 2013

The Connector’s Statements of Financial Position (SFP) are primarily comprised of Grant Receivable

($28.6 million), Account Payable and Accrued Expenses (-$28.5 million), and Health Insurance Exchange

(HIX) license rights and software ($37.0 million). The grant receivable and accounts payable /accrued

expense balances are recorded on an accrual basis of accounting based on U.S. Generally Accepted

Accounting Principles (GAAP). These balances include all outstanding balances due to and due from the

Connector from federal grant funding or to third-parties and substantially offset each other.

The Connector’s most significant asset is the HIX license rights and software, which includes HIX

purchased third-party software license rights and software development costs of $37.0 million and

$18.8 million as of June 30, 2014 and 2013, respectively. The amounts capitalized as HIX license rights

and software are capitalized pursuant to ASC 350 of U.S. GAAP and include the costs incurred for the

purchase of perpetual license rights and the DDI contract costs incurred to develop the internal use

software.

Effective October 1, 2013, the HIX license rights and software capital asset is being amortized to expense

through September 30, 2018, the current estimated lives of the assets. During FY2014, HIX license rights

and software had a net increase of $18.2 million due to $1.2 million of additional capitalized license

rights, $21.1 million of additional software development costs, less $4.1 million of current period


amortization. The capitalized expenditures and amortization are included in the applicable line items in

Table 5.2.1.

5.3.3. Overview of Grant Awards, Expenditures, Obligated Funding, and Remaining Balances

As of June 30, 2014, the Connector expended $104.4 million of the $204.3 million of grant funding

during the period from November 29, 2011 through June 30, 2014. Grant funding of $1.4 million, $34.3

million, and $68.7 million was expended during the years ended June 30, 2014 and 2013, and the period

ended June 30, 2012, respectively.

As of June 30, 2014, the Connector had obligated grant funding in the amount of $32.7 million for IT DDI

services and consumer assistance program funding associated with existing contractual arrangements to

be delivered or completed subsequent to June 30, 2014. The obligated funding includes $21.3 million

and $11.4 million for IT DDI costs and consumer assistance funding program costs, respectively, through

various periods ending no later than December 31, 2015. In addition, subsequent to June 30, 2014 the

Connector also executed additional contracts with total obligated funding of approximately $7.0 million

for IT DDI, public relations, marketing, and marketplace assister grants.

Pursuant to the ACA Section 1311, the Connector will no longer receive funding for operations of the HIX

marketplace as of December 31, 2014. Based on the current interpretation of the federal regulations

and per communications with CMS personnel, utilization of grant funding for IT DDI costs and consumer

assistance program expenses will be allowed if existing grant funding remains and pre-approval is

obtained from CMS. The Connector has budgeted grant funded expenditures of approximately $30

million from the unobligated grant funding for the period from January 1, 2015 through June 30, 2015.

These grant-funded budgeted expenditures are subject to prior CMS approval.

5.4. Grant Funding Activity

5.4.1. Schedule of Grant Funding Activity from Inception through June 30, 2014

Period from Grant Inception through June 30, 2014

Expended Obligated Unobligated Total Award Budget

Personnel Costs $ 7,788,711 $ - $ 7,810,072 $ 15,598,783

Marketplace Assister Grants 2,612,713 -

7,387,287 10,000,000

IT Contracts 70,664,432 21,552,821 35,409,096 127,626,350

Non-IT Contracts 15,783,519 11,151,127 22,154,518 49,089,164

State DHS Costs Allocated to Connector 4,542,754 - 2,657,246 7,200,000

Connector Costs Allocated to Medicaid/DHS - - (11,856,089) (11,856,089)

(11,856,089)

Other 2,976,069 - 3,707,993 6,684,062

$104,368,198 104,368,198

$ 32,703,948 $ 67,270,124 $ 204,342,270

5.4.2. Management Discussion and Analysis

Grant Expenditures by Federal Grant Budget Activities from Inception to June 30, 2014


The Connector had expended and obligated a total of $137.1 million from November 29, 2011 through

June 30, 2014. The total $137.1 million of grant funds expended and obligated were utilized for the

following purposes:

Utilization of Total Expended & Obligated Grant Funding by Grant Budget Activity through June 30, 2014

%

IT Contracts 67%

Non-IT Contracts 20%

Personnel Costs 6%

Marketplace Assister Sub-recipient Grants 2%

State of Hawaiʻi DHS Costs Allocated to Connector 3%

Other 2%

100%

As of June 30, 2014, the Connector had expended or obligated $92.2 million of grant funds to the

following major contractors:

Utilization of IT Contract Expenditures & Obligated Grant Funding by Major Contractor through June 30, 2014

Contractor

Contractor Services % CGI Technologies and Solutions, Inc. HIX Software & License Rights 63% Mansha Consulting LLC

Project Management Office 25%

Public Consulting Group, Inc. Project Management & IT Consulting 7%

Turning Point Global Solutions LLC Independent Validation & Verification 3%

% Kataria Holdings LLC IT Consulting 1% Other IT Consulting 1%

100%

5.5. Fiscal Year 2015 Operating Activity to Date

5.5.1. Summarized Operating Budget versus Actual (July 1, 2014 to September 30, 2014)

Three Months Ended September 30,

Budget Actual Variance

Support & Revenue $ 21,106,879 $ 16,325,881 $ 4,780,998

Expense 14,798,659 10,532,306 4,266,353

Revenue over Expense 6,308,220 5,793,575 514,645

Less: Capitalized Expenditures, net (8,682,899) (8,041,386) (641,513)

Add: Depreciation and Amortization Expense 2,500,000 2,368,541 131,459

Revenue Over Expenditures $ 125,321 $ 120,731 $ 4,590


5.5.2. Management Discussion and Analysis

In April 2014, the Connector Board of Directors approved the FY2015 annual operating budget, which

included grant revenue of $21.0 million, and issuer fee revenue of $0.1 million and total expenditures of

$21.0 million for the quarter ended September 30, 2014.

During the quarter ended September 30, 2014, the Connector recognized grant revenue of $16.2 million

and issuer fee revenue of $0.1 million. Grant revenue and grant expenditures for the first quarter of

FY2015 were 23 percent lower than budget due to the delay in completion of the budgeted IT DDI for

the period although these projects are still scheduled to be completed within FY2015 and funded with

grant funding. Issuer fee revenue recognized was consistent with the operating budget for the quarter

ended September 30, 2014.

5.6. 10-Year Financial Forecast

5.6.1. Cash Flow Financial Forecast for Fiscal Years Ended June 30, 2015 to June 30, 2024

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Issuer Fee Revenue $984,443 $3,929,512 $5,608,564 $7,360,136 $9,311,991 $11,307,098 $12,827,795 $14,768,624 $17,163,818 $19,880,104

Federal Grant Funding $55,085,589 $3,174,742 $0 $0 $0 $0 $0 $0 $0 $0

State Appropriation $1,500,000 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other $524 $0 $0 $0 $0 $0 $0 $0 $0 $0

$57,570,556 $7,104,254 $5,608,564 $7,360,136 $9,311,991 $11,307,098 $12,827,795 $14,768,624 $17,163,818 $19,880,104

$47,044,154 $3,174,742 $0 $0 $0 $0 $0 $0 $0 $0

Capitalized and Prepaid Assets $8,041,386 $0 $0 $0 $0 $0 $0 $0 $0 $0

Maintenance & Operations:

$1,125,000 $3,007,088 $2,990,000 $2,990,000 $2,990,000 $2,990,000 $2,990,000 $2,990,000 $2,990,000 $2,990,000

$345,000 $740,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000

$1,665,016 $9,252,912 $9,510,000 $9,510,000 $9,510,000 $9,510,000 $9,510,000 $9,510,000 $9,510,000 $9,510,000

$58,220,556 $16,174,742 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000 $13,000,000

($650,000) ($9,070,488) ($7,391,436) ($5,639,864) ($3,688,009) ($1,692,902) ($172,205) $1,768,624 $4,163,818 $6,880,104

($528,063) ($9,598,550) ($16,989,987) ($22,629,851) ($26,317,860) ($28,010,762) ($28,182,966) ($26,414,342) ($22,250,524) ($15,370,420)Aggregate Cash Surplus (Deficit)

Personnel Expenses

Professional Services

Other Operating Expenses

Total Expenditures, net

Net Cash Surplus (Deficit)

Fiscal Years Ended June 30,

Development, Operations, &

Consumer Assistance Costs

Revenue

Expenditures

Total Revenue


5.6.2. Monthly Cash Flow Forecast for Fiscal Year Ended June 30, 2015

5.7. Financial Statements and Independent Auditors’ Reports (see Appendix E)

1. June 30, 2013 and 2012

Audited Financial Statements

Independent Auditors’ Report Required by Government Auditing Standards (GAO): Internal

Controls Over Financial Reporting and On Compliance and Other Matters

Independent Auditors’ Reports Required by OMB Circular A-133 on Compliance for Each

Major Program; Internal Controls Over Compliance; and the Schedule of Federal Awards

2. June 30, 2014 audited financial statements and other federal audit reports will be submitted

upon completion.

Actual FY Ended

June 30, 2014

Actual Q1 FY

2015 (July-

September 2014)

Q2 FY 2015

(October -

December 2014)

January 2015 February 2015 March 2015 April 2015 May 2015 June 2015Total Budgeted FY

2015

Issuer Fee Revenue $120,836 $120,157 $179,377 $85,875 $94,113 $102,101 $117,726 $133,104 $151,989 $984,443

Federal Grant Funding $68,734,285 $16,205,200 $26,767,032 $2,826,450 $2,826,450 $2,826,450 $1,211,336 $1,211,336 $1,211,336 $55,085,589

State Appropriation $0 $0 $0 $700,000 $700,000 $100,000 $0 $0 $0 $1,500,000

Other $39,887 $524 $0 $0 $0 $0 $0 $0 $0 $524

$68,895,007 $16,325,881 $26,946,409 $3,612,325 $3,620,563 $3,028,551 $1,329,062 $1,344,439 $1,363,325 $57,570,556

$44,752,866 $8,163,764 $26,767,032 $2,826,450 $2,826,450 $2,826,450 $1,211,336 $1,211,336 $1,211,336 $47,044,154

Capitalized and Prepaid Assets $23,981,421 $8,041,386 $0 $0 $0 $0 $0 $0 $0 $8,041,386

Maintenance & Operations: $0 $0 $0 $0 $0 $0 $0 $0 $0

$0 $0 $0 $125,000 $125,000 $125,000 $250,000 $250,000 $250,000 $1,125,000

$0 $0 $0 $115,000 $115,000 $115,000 $0 $0 $0 $345,000

$38,783 $0 $0 $491,509 $491,509 $491,509 $63,497 $63,497 $63,497 $1,665,016

$68,773,070 $16,205,150 $26,767,032 $3,557,959 $3,557,959 $3,557,959 $1,524,833 $1,524,833 $1,524,833 $58,220,556

$121,937 $120,731 $179,377 $54,367 $62,604 ($529,407) ($195,770) ($180,393) ($161,508) ($650,000)

$242,668 $422,045 $476,411 $539,016 $9,608 ($186,162) ($366,555) ($528,063) ($528,063)

Personnel Expenses

Professional Services

Other Operating Expenses

Total Expenditures, net

Net Cash Surplus (Deficit)

Aggregate Cash Surplus (Deficit)

Fiscal Year Ended June 30, 2015

Development, Operations, &

Consumer Assistance Costs

Revenue:

Expenditures:

Total Revenue


6. The Connector in the Community

Since its inception, the Connector has worked with consumers, health plans providers, large and small

businesses, labor unions, community leaders and organizations, philanthropic organizations, and many

other organizations to help each group understand how the Patient Protection and Affordable Care Act

(ACA) impacts them.

The Hawaiʻi Prepaid Health Care Act (PHCA) has provided Hawaiʻi with a long history of securing health

coverage for its residents, but the ACA builds on that foundation by providing more robust consumer

protections, incentives to directly lower costs for individuals and small businesses, and standardizes

health insurance plans for all by including prescription drug and other health benefits. The goal of the

Connector is to help each stakeholder group understand the issues and concerns that impact them and

to establish lines of communication so that each constituent group has a path to communicate with the

Connector and to the public. The ACA provides support to the Connector so that it can consult and

engage with community stakeholders on a regular basis, including:

Connector enrollees

Individuals and entities with experience in facilitating enrollment in health coverage

Advocates for enrolling hard-to-reach populations, which include individuals with mental health

or substance abuse disorders

Small businesses and self-employed individuals

State Med-QUEST and CHIP agencies

Public health experts

Health care providers

Large employers

Health insurance issuers

Agents

Other government and non-government stakeholders


Figure 6.1: The Connector’s Stakeholders

The Connector provides several channels by which each of these major constituent groups can receive

information about the Connector, its offered plans, and additional health literacy information. Each

channel is designed to work in concert to offer potential enrollees both assistance and information at

every level in the process, and combine both technological convenience and personalized human

support. The Connector’s outreach channels include:

HawaiiHealthConnector.com: The informational website for the Connector. Individuals and

businesses can begin the application process, find outreach events in their communities, and

find answers to frequently asked questions.

Contact Center: The phone call center for the Connector. Via the 1-877 number, individuals and

businesses can reach trained professionals for enrollment assistance and questions seven days a

week. The Contact Center provides assistance in seven different languages.

Kōkua: Members of the Hiʻi Ola Program, which provides in-person assistance and information

to residents looking for help with enrollment, as well as health literacy information. Kōkua are

available at pop-up shop events held throughout the islands, as well as by appointment daily at

the Connector’s partner Marketplace Assister Organizations (MAOs).

Marketplace Assister Organizations (MAOs): Organizations throughout the islands, including

community health centers, hospitals, and other community centers that work to make the

Connector’s services available to their communities. Individuals can meet individually with a

Kōkua, or visit an MAO for handouts or other information related to health insurance.

Uninsured Individuals and Families

Insured Individuals and Families

Disabled Individuals

Tribal Members

ConsumersInterest Groups

Senators and Representatives

Government Agencies

Public Health Experts

Community Organizations

Insurers

Insurers

Agents

Large Companies

Small Companies

Self-Employeed

Employers


Agent Partnership Program (APP): A partnership between the Connector and agents

throughout the state who assist individuals and businesses in enrolling in insurance.

While much of the public perception has been focused on the online system, many of the testimonials

from individuals, families and small businesses demonstrate the importance of the Hiʻi Ola Program and

APP.

Literacy of health insurance nationwide is extraordinarily low. A 2013 survey from the Urban Institute

Health Policy Center found that only 40 percent of people most likely to use the marketplaces felt very

or somewhat confident that they understood key insurance terms, such as “deductible,” “premiums,” or

“co-pay,” and almost two-thirds (60 percent) of that population said they were not too confident or not

at all confident in their understanding of at least one concept related to health insurance.103 It is

imperative, then, that not only the Hiʻi Ola Program exist but that it also meet the uninsured and

underinsured populations where they are, with content, help, and information that puts the

complicated issue of health insurance into easily understandable terms.

6.1. In-Person Assistance – The Role of the Kōkua

6.1.1. The Connector’s Hi’i Ola Program

The Connector created the Marketplace Assister Hiʻi Ola Program to provide residents and businesses

with in-person guidance and advice from the time they begin to explore health insurance options to the

time they ultimately select and enroll in a plan. The goal of the program, and a requirement of the ACA,

is to provide any individual across the State of Hawaiʻi access to face-to-face assistance in enrolling. This

in-person resource works in tandem with the Contact Center and the Connector’s online system to

ensure individuals are supported throughout the entire enrollment process.

The Hiʻi Ola Program includes assisters called Kōkua. Kōkua include Hiʻi Ola Program Specialists, MAOs,

and the individual assisters who work within those MAOs. Kōkua are consumer advocates, dedicated to

empowering people to make the best health care decisions by making health insurance easier to

understand and easier to purchase.

There are two types of assisters who work within the Hiʻi Ola Program: In-Person Assisters (IPAs) and

Certified Application Counselors (CACs). While some IPAs work directly for the Connector to provide

education and outreach services, the vast majority of IPAs are hired by the MAOs through grant funding

provided by the Connector. CACs are Kōkua attached to Certified Application Counselor Organizations

(CACO). These organizations do not receive grant funding, but they do receive training and ongoing

support to help them enroll people in health insurance coverage.

103

Linda J. Blumberg, Sharon K. Long, Genevieve M. Kenney, and Dana Goin. Public Understanding of Basic

Health Insurance Concepts on the Eve of Health Reform. Urban Institute Health Policy Center. July 2013.


The organization of the Connector’s Hiʻi Ola program includes a program director, a community

engagement manager, and five community engagement specialists. Program staff, supported by federal

grant funds, provide leadership and oversight to the 30 partner organizations and more than 120 Kōkua

assisters within the Hiʻi Ola program. The Kōkua collectively speak 20 different languages, and all work

and live on each of the Hawaiʻian islands.

Kōkua specialize in grassroots advocacy and communications. The foundation of their work is to

establish culturally and linguistically appropriate access to information on health insurance. From there,

Kōkua develop opportunities to educate their communities, in groups or one-on-one, on the benefits of

health insurance and how they will guide each individual through the enrollment process. Kōkua also

provide health literacy information. In helping individuals choose the appropriate plans for their lives,

they also help people better understand their choices and how their care and coverage can improve

their quality of life.

Kōkua assister outreach activities include: one-on-one appointments, door-to-door canvasing,

informational tables, enrollment workshops, talk-story sessions, and representation on panels. By

establishing a regular and robust presence throughout the islands, the Kōkua have been able to enroll

3,745 people on ConnectHawaiʻi since October 2013 and have supported tens of thousands of successful

enrollments of individuals through Med-QUEST.

6.1.2. Training for Kōkua

Every Kōkua goes through extensive training and certification including 16 online training modules,

exams and a two-day face-to-face training that includes in-depth information on the ACA, the PHCA and

the Connector’s unique dual rules system. The training also covers instruction on the technology tools

and portals that will help Kōkua enroll individuals and small businesses, as well as sessions on cultural

competency. The Hiʻi Ola program invested in certifying its staff as trainers by Ira Sengupta, founder of

the Cross Cultural Health Care Program in Seattle. Cultural competency is of the utmost importance in

the work Kōkua do, and much of the program’s successes can be attributed to this training.

In addition, Kōkua attend an annual training in which they are prepared for the role of assisting

residents with finding affordable health insurance. Kōkua are trained to understand exactly how to

assess an applicant’s eligibility status for potential tax credits, and are given a complete walk-through of

the online portal and contingency plans for any technical challenges they may experience with the

website. The Kōkua work closely with the team at the Contact Center on enrollments, which allows each

Kōkua to remain personally associated with a resident or business’s application throughout the entire

process – from application to enrollment.

6.1.3. Successes of the Hi’i Ola Program

The Connector now partners with 30 community organizations that employ an estimated 122 certified

Kōkua in every Hawaiʻi county:

89 Certified Kōkua or IPAs


33 Certified Kōkua or CACs

As of July 2014, more than 53,000 people interacted with Kōkua at one of the 4,175 outreach events

throughout the islands. Twenty-one community organizations continued as MAOs in 2014, and more

than 100 Kōkua were on board to help Hawaiʻi residents find insurance at the start of the 2015 Open

Enrollment period.

6.2. In-Person Assistance: Agent Partnership Program

Agents also play a key role in the Connector’s ability to reach those residents who need health care

most. The Connector’s Agent Partnership Program (APP) promotes branding and awareness for the

Connector, especially among the small business community.

In Hawaiʻi, agents help educate consumers about the Connector and its insurance affordability

programs. The APP works in partnership and collaboration with the Hiʻi Ola and other community

stakeholders to maximize enrollment potential and coordinate communications.

Working with agents represents the type of local tactical efforts that have become even more essential

to developing new channels to reach individuals and small businesses.

6.2.1. Launching the APP

Participating agents go through an extensive training program. In order to participate in the program,

agents must meet a few basic qualifications:

Figure 6.2: Requirements for Participation in the APP

Valid producer’s license in the state of Hawaiʻi

Be in good standing with the State Department of Commerce & Consumer Affairs, Hawaiʻi Insurance Division

Retain Errors & Omissions Insurance

Complete all Connector-required training and certification programs

Hold a signed “Producer Participation Agreement/Contract and Related Documentation” that has been approved and fully executed by the Connector

The Connector uses a computer-based training web portal to provide specialized training for

participating agents. All training and assessment modules have been reviewed and cleared for

compliance and adapted for both licensed agencies and individual agents and in accordance with the

ACA regulations104 and PHCA, respectively.

104

45 CFR 155.220


Once the online and final assessment modules have been completed and all training requirements have

been met, agents receive a Connector agent certification card to demonstrate to Hawaiʻi consumers that

they are professionally trained and certified to represent the products and services of the Connector.

The APP team developed an agent-specific office and resource guide that walks agents through the

process of recruitment and on-boarding as well as the program guidelines, instruction and a set of

detailed field tools and resources for use in working with potential enrollees. Agents also have access to

the specialized agent distribution channel to help them conduct local tactical marketing activities that

support and supplement branding, educational efforts, and enrollment goals.

6.2.2. Challenges and Solutions

Despite identifying agents as a vital communications channel through which the Connector can reach

those in need of insurance, the program has faced a few challenges in its development and is limited in

the amount of compensation provided by the health issuers.

First and foremost is the issue of commissions: the Connector does not pay commissions to agents and

at least one major issuer does not provide commissions to all agents. Commissions are an obvious driver

of interest in program participation, so initial enrollment has been low relative to national broker

participation. California and Massachusetts are the only states in which Small Business Health Options

Program (SHOP) marketplaces set and pay agent and broker commissions directly. The SHOP

marketplace in Rhode Island provides a per-person payment to agents that enroll small employers.105

The discussion around how best to support agents and brokers through state exchanges is happening

nationwide. Unlike agents and brokers in many other states, Hawaiʻi pays commissions to a much

smaller share of agents. At least one health issuer in Hawai’i accepts almost all enrollments through

storefront and direct enrollment instead of leveraging agents.

The absence of a consistent policy of paying commissions to all agents may create a misaligned

incentive. Agents will make commissions for selling some health insurance plans and not others.

Support has also been a challenge: currently resources are limited for a dedicated customer service

representative (CSR) line for agents at the Connector’s Contact Center. That limits the assistance

participating agents can receive as they work through enrolling those who come to them for application

help.

To address some of these challenges, the Connector implemented a Producer Advisory Committee (PAC)

to provide guidance and support for this program. The PAC consists of licensed, well-seasoned,

influential, and reputable agents with health and health insurance industry experience. The Connector

has also implemented agent-specific marketing and communications campaigns that provide support to

105

Sarah Dash, Kevin W. Lucia, Katie Keith, and Christine Monahan. Implementing the Affordable Care Act: Key

Design Decisions for State-Based Exchanges. The Commonwealth Fund. Georgetown University. July 2013.


agents in the field. The campaigns include everything from direct mail campaigns and flyer templates to

guides for hosting community meetings and advertising. The APP has also recently created an APP-

participant-specific web page and a SHOP calculator tool for participating agents to use in the field. The

campaigns also provide administrative support and a help desk to ensure agents have a direct channel

for answering questions. Finally, the partnership program logs significant time in the field with agents to

provide what the Connector calls “white-glove” servicing: one-on-one training, assistance with

presentations, hosting events like Q&As and panel discussions, and customer servicing help.

The APP has also engaged the executive team in conversations around budgeting and staffing to better

support the program going forward.

6.2.3. Successes of the APP

Since the program’s launch, the Connector has contracted, certified and trained 57 licensed health

insurance agents across the islands. The APP is already responsible for 50 percent more enrollments

during the first two weeks of 2015 Open Enrollment than over the entirety of last year’s enrollment

period. The APP has also implemented a leads management and referral system to distribute, track and

monitor enrollment growth that APP participants can use to better access potential enrollees, as well as

closely monitor progress. Despite a limited budget and staff, the APP has made great strides and

presents a large opportunity for growth within the Connector community.

6.3. Partnering with Insurers

The relationship between the Connector and participating insurers is critical to ensuring Hawaiʻi

residents are provided with a diverse range of plan choices at competitive rates, aligning on enrollment

selections and confirmations, and facilitating effective levels of support. Consumers interact with

insurers at a number of points in the process, as shown in Figure 6.3.

Figure 6.3: Touch Points Between the Connector and Insurers

Intake Application EligibilityShop &

CompareEnrollment Support

Load PlansConfirm

EnrollmentFacilitate Support

Insurers

Connector and Insurer Touchpoints

Consumers

Legend

Connector Activities

Insurer Activities (subset)

Connector/Consumer Touchpoints

Insurer/Connector/Consumer Touchpoints


The first point occurs during the shop and compare step within the marketplace. Insurers load plans for

insurance applicants to select, while also ensuring that plan conditions are consistently up-to-date. The

consumer engages with the insurers’ plan options through the Connector.

The second touch point happens during enrollment. Once an applicant has completed the enrollment

process, the Connector engages with the insurer to align on the consumer’s selection and confirm the

enrollment. Enrollment confirmation is pushed to the consumer from the Connector, but the insurer is

directly involved in the confirmation process.

The third point is support. The consumer can directly leverage both the Connector and the insurer for

support to confirm a selection, understand policies and benefits, and manage their health insurance

profiles. Consistent collaboration between the Connector and insurers allows both groups to keep a

strong alignment when managing customers’ plans and profiles.

One difference of note is the relative difference between the Connector’s Individual and SHOP

marketplaces. The Connector is required to aggregate premiums in the SHOP and provides employers

with one single invoice for health insurance premiums, rather than the employer interacting directly

with insurers. In the Individual market, the health premiums are paid directly by consumers to insurers.

6.4. Future Outreach and Education

6.4.1. Increasing Awareness

A telephone survey from September through October 2014 revealed that while the people of Hawaiʻi

are happy with the coverage they have received from the Connector, seven out of 10 residents have no

direct experience with the Connector or awareness of the services it provides106.

In the coming year, the Connector has identified additional ways to improve outreach to stakeholder

groups, with a specific focus on building relationships with key consumer groups. Those new methods

include:

Conducting regular open house sessions for individuals and groups to raise concerns and ask

questions;

Establishing advisory boards or ad hoc committees to solicit input on particular issues, on an as-

needed basis; and

Further developing both the Hi’i Ola Program and APP.

106

Survey: SMS Research on behalf of the Hawaiʻi Health Connector. September 2014.


6.4.2. The ACA’s Navigator Requirement

The ACA requires marketplaces to establish a “navigator” program to help consumers understand new

coverage options and find the most affordable coverage that meets their health care needs. Navigators

are individuals or organizations that have been trained and able to help consumers, small businesses,

and their employees as they look for health coverage options through the marketplace, including

completing eligibility and enrollment forms. These individuals and organizations are required to be

unbiased, and their services are free to consumers.

To become a navigator, individuals are required to have expertise in eligibility and enrollment rules and

procedures; the range of qualified health plan options and insurance affordability programs; the needs

of underserved and vulnerable populations (such as rural populations and individuals with limited

English proficiency); and privacy and security standards.

The primary distinction between the navigator and in-person assistance programs is the funding source.

The federal exchange funds in-person assistance programs, while state-based funding is all that is

available for navigator programs. In Hawaiʻi, the Connector will explore alternative sources of funding

until exchange revenue becomes available.

Despite the different funding sources, both navigator and in-person assistance programs are

administered jointly throughout the states and have common training requirements. In addition to the

District of Columbia, 13 states established an in-person assistance program in addition to the federally

required navigator program in 2014.107

The Connector’s outreach programs were developed to comply with navigator program requirements. It

will be critically important to continue to support these programs to ensure that uninsured individuals

and families have access to affordable coverage.

107

Dash, Lucia, Keith, and Monahan. Implementing the Affordable Care Act: Key Design Decisions for State Based

Exchanges. The Commonwealth Fund. July 2013.


7. Connector Solution Update

7.1. Customer Experience Update

Following the October 2013 launch, the Connector experienced a number of issues that impacted the

customer experience and led to user dissatisfaction with the application and enrollment process.

Customers’ early interactions with the online, Contact Center, and service components of the

Connector’s solution drove dissatisfaction from both individuals and employers.

The Connector made the experience of all users and stakeholders a primary focus in 2014. Online

improvements have been made to enhance the customer’s experience on the website and enhance the

usability of the Connector’s health exchange solution. Contact Center improvements have been made to

improve the access and effectiveness of the Connector’s support representatives in managing customer

needs. Service-oriented improvements have enhanced the training and outreach activities the

Connector leverages to facilitate effective health plan communication to customers in the Hawai’i

community.

7.1.1. Online Improvements

The Hawaiʻi Health Connector Homepage

Internal Connector metrics indicate that during 2014, 47 percent of new Connector customers started

the application process at the Connector homepage (HawaiiHealthConnector.com).

The Connector homepage is designed to direct customers either to the Department of Human Services

(DHS) KOLEA portal to apply for financially assisted health coverage and Medicaid or to the Connector

portal to apply for Qualified Health Plans (QHPs) without financial assistance. This practice is followed

because the enabling legislation mandated that customers requesting financial assistance follow a

different eligibility process from those who are not requesting financial assistance. These processes have

not yet been integrated.

The Connector has made improvements to the Connector homepage to make the customer experience

more intuitive, and to minimize the navigation required to begin the application and enrollment process.

Focusing on the Customer: The Connector homepage initially targeted both customers and

stakeholders, but did not provide adequate support to either of these groups. During 2014, the

Connector homepage was redesigned to focus exclusively on the customer.

Simplifying Site Navigation: At the October 2013 launch, customers did not intuitively

understand where they needed to go to apply for health coverage. For example, there were

several different points of access to the application and enrollment process depending on

application type, which led to confusion among customers. During 2014, the Connector


redesigned the Connector homepage and created a single point of access for all application

types.

Today the customer experience is streamlined at the point of entry. With two mouse clicks the customer

can begin the application and enrollment process. Customers can more easily determine if they need to

access the KOLEA portal to seek financial assistance, or go directly to the Connector portal if they have

self-determined that they do not want financial assistance. Figures 7.1 and 7.2 illustrate the two steps

that a customer takes to navigate from the Connector homepage to the “Apply Online” page, and from

there to the correct point of entry for the application and enrollment process. The customer first clicks

“Apply Online” on the Connector homepage. From the “Apply Online” page the customer then answers

a simple question from which the Connector directs the customer to either the KOLEA portal or the

Connector portal where they can enter the application and enrollment process.

Figure 7.1: Reaching the “Apply Online” Page from the Connector Homepage


Figure 7.2: Selecting an Application Point of Entry

Improvements to Usability (User Experience (UX)/User Interface (UI))

During 2014, the Connector identified and implemented improvements to the usability of the Connector

self-service interface. In January 2014 the Connector began an intense and comprehensive usability

(UX/UI) improvement initiative. While the UX/UI improvement effort included both the Individuals and

Families (IF) and SHOP experiences, the effort particularly targeted the employer experience in response

to feedback that 75 percent of employers did not complete enrollment due to confusion during plan

selection. The UI/UX improvement effort consisted of three phases: an independent usability

assessment of the end-to-end system, an evaluation of the end-to-end SHOP and IF processes, and a

series of focus groups to gather end-user feedback. Thirty-six of the usability improvements were

implemented in the first quarter of 2014 as part of solution releases and configuration changes. Many

other improvements have been identified and are currently in development, awaiting approval, funding,

or implementation. Three of the primary improvements that have been implemented are described

below.

SHOP Reference Plans: Many SHOP applicants found both the concept of a reference plan and

the PHCA 7a and 7b plan options confusing. A usability improvement was made in the SHOP

application to provide additional information to employers about the definition of a reference

plan (illustrated in Figure 7.3).

Click 2

lick 2


Figure 7.3: Reference Plan Definition Pop-up Box

SHOP Dental: At the beginning of 2014, employers had to open a separate tab to select dental

coverage for employees; they were not directed to dental plan selection by the system. A

usability improvement was implemented to resolve this issue. The new pop-up, illustrated in

Figure 7.4, requires employers to choose whether or not to offer dental coverage.

Figure 7.4: Dental Plan Selection Pop-up Box

IF Medicaid Application Access: One of the major usability improvements to the IF application

and enrollment process was the addition of a pop-up box, illustrated in Figure 7.5, that enables

customers to go directly to the DHS KOLEA portal to apply for Medicaid if they are determined


eligible by the Health Coverage Eligibility Screen (anonymous pre-screening). This reduced

confusion about how to get to the Medicaid application.

Figure 7.5: “Do you want to start a Medicaid Application?” Pop-up Box

7.1.2. Contact Center Improvements

The Contact Center is essential to the Connector’s ability to deliver a high quality customer experience.

For 2014 Open Enrollment, more than 50 percent of IF applicants and more than 90 percent of SHOP

applicants could not complete enrollment without Contact Center assistance.

The Contact Center services a full range of customers, from individuals to employers, to assist with the

application and enrollment process. In 2014, the Connector made the following changes targeted at

improving the experience of every customer receiving assistance through the Contact Center:

Revised Contact Center Service Provider Contract to Enable Staffing to Scale with Demand:

The Connector shifted the Contact Center’s contract from defined staffing numbers to service

level agreements, which enabled staffing to scale as needed. Through this change, the

Connector added an overflow Contact Center in April 2014 in addition to the local center in

Honolulu to improve responsiveness to customer requests and enrollment processing.


Modified Inbound Call Handling Options to Direct Calls More Efficiently: The Connector

modified the interactive voice response (IVR) for the Medicaid general information phone line to

redirect only those calls regarding application input assistance to the Contact Center. During

2014 Open Enrollment, the Medicaid general information phone line defaulted all calls to the

Contact Center, which overloaded the Contact Center staff capacity. In February 2014, more

than one third of the calls represented Medicaid calls. The IVR change reduced inefficiencies

associated with answering and then transferring Medicaid calls that should not have been

directed to the Contact Center.

Designated a Specific Team to Respond to Voicemail: The Contact Center allocated 30 workers

and an external service provider to focus exclusively on answering the approximately 5,000

customer voicemail messages left on a daily basis during 2014 Open Enrollment. The Contact

Center initially did not have sufficient capacity to respond to all customer messages. Both the

call and message volume exceeded projections due to calls misdirected from the Medicaid

general information phone line. The Connector resolved this issue by addressing the root cause

of misdirected Medicaid calls. For 2015 Open Enrollment the Contact Center disabled voicemail

all together and adjusted service level standards to accommodate all calls during business hours.

Proactive Outreach to Customers Requesting Financial Assistance: The Contact Center began

proactively reaching out to applicants requesting financial assistance in January 2014. Rather

than waiting for customers whose cases had come from KOLEA to call the Contact Center to

provide missing data, the Contact Center proactively called customers once their cases were

received from KOLEA. This assistance helped customers who had been denied Medicaid to

receive health coverage more quickly.

Improved Training and Work Process Documentation: The Connector conducted a thorough

analysis and overhaul of its training program, including the process associated with making and

communicating work instruction changes. These changes are explained in greater detail under

Service-Oriented Improvements: Training, Knowledge Expansion, and Experience.

Today when a customer calls the Contact Center, the customer experience has improved in the

following ways:

The average time for customers that have been denied Medicaid to receive health coverage

enrollment with the Connector is projected to be 32 days based on early indicators from 2015

Open Enrollment, down from the 2014 Open Enrollment average of 90 days.

The Contact Center capacity to take more calls with less wait time has improved significantly.

Average daily capacity in November 2014 was 285 calls, up 55 percent from an average of 183

calls per day in January 2014.


The Contact Center improved its average answer time by 216 seconds from 323 seconds in

January 2014 to 73 seconds in November 2014. The Connector’s target answer time is 55

seconds.

The average handle time for a Contact Center representative to address a customer need was

9.2 minutes in November 2014, down from 14.7 minutes in January 2014. The Connector’s

target handle time was 18 minutes during 2014 Open Enrollment, and has been reduced to nine

minutes for 2015 Open Enrollment.

7.1.3. Contact Center Performance

The Connector has taken steps to improve the performance of its Contact Center to increase efficiency

and enhance the customer experience. The table below summarizes the center’s performance against

target benchmarks from January 2014 through November 2014.

Figure 7.6: Performance Against Target Service Levels108

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Telephone Inquiry Service Level

Occupancy Rate (% of CSR Time Spent Handling Calls)

Average Speed of Answer

Unhandled (Abandoned) Calls

Average Handle Time

Transfers

Web Chat Service Level1 -- -- -- -- -- -- -- --

Complaint Response Service Level

Training Delivery (to CSRs)2

Telecom / Technology Service Level

3

= Target Service Level Met | = Target Service Level Not Met | -- = Metric Not Applicable to Period 1 Web Chat capabilities introduced in September 2014;

2 Training Delivery applicable only in months where training was

delivered; 3 Telecom and Technology Availability reporting began in August 2014

108

MAXIMUS, Hawaiʻi Health Connector Monthly Status Report: Contact Center Actual Arrivals and Performance

Report, January – November 2014.


7.1.4. Key Metrics109

The Connector monitors metrics to track progress against benchmarks and to improve the Contact

Center customer experience. The following diagrams illustrate the Connector’s improved delivery of

customer service from January 2014 through November 2014 across multiple telephone inquiry service

levels. Over the past year, the Contact Center has steadily handled more calls every month while

improving its average speed of answer and abandoned call rate, reducing average time necessary to

resolve customer inquiries, and stabilizing percentage of calls transferred.

Call Volume

The Connector monitors the number of total inbound calls (calls offered) against the total answered

calls (calls handled).

Figure 7.7: Telephone Inquiry Volume

Over the course of this period, the Connector addressed the gap between calls offered and calls

handled. The Contact Center handled only approximately 41 percent of offered calls in January 2014 and

March 2014. The Connector increased capacity by adding an additional Contact Center, instituting a

Kōkua hotline, and improving training. The Contact Center handled more than 90 percent of offered

calls beginning in May 2014 through the end of the reporting period of November 2014.

109

MAXIMUS, Hawaiʻi Health Connector Monthly Status Report: Contact Center Actual Arrivals and Performance

Report, January – November 2014.

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14

Telephone Inquiry Volume

Toal Calls Offered Total Calls Handled


Addressing the call handled rate has been a significant improvement to the service provided to

customers. According to Connector metrics, 98 percent of SHOP customers required Contact Center

support to complete application and enrollment in the first four months of 2014. Improving the call

handled rate ensures that the Connector is providing the best possible telephone service to both

individuals and employers in need of assistance.

Call Abandonment Rate

The Connector monitors unhandled (abandoned) call rates.

Figure 7.8: Unhandled (Abandoned) Call Rate

In the period from January 2014 to November 2014, the Connector made significant progress related to

abandoned calls. The Connector’s acceptable target for abandoned calls is 10 percent. Beginning in May

2014, improvements to Contact Center capacity and customer service representative (CSR) training

enabled the Contact Center to reduce the abandoned call rate well below the acceptable ceiling of 10

percent. It has stayed below the target even with the beginning of 2015 Open Enrollment as

demonstrated by the abandonment rate of 5 percent in November 2014.

Average Speed of Answer

The Connector monitors average speed of answer to measure the time a customer waits before

reaching a representative.

0%

10%

20%

30%

40%

50%

60%

70%


Unhandled (Abandoned) Call Rate

Unhandled Call Rate Unhandled Call Rate Service Target (Max)


Figure 7.9: Average Speed of Answer

Contact Center capacity improvements facilitated a steep reduction in answer times. The wait time

peaked in March 2014 with an average answer time of 1,120 seconds. The acceptable standard is 55

seconds. By May 2014, the Connector was able to reduce the answer time to an average of 29 seconds.

With the beginning of 2015 open enrollment in November 2014, the answer time has increased to 73

seconds. Although slightly above the performance target of 55 seconds, the average speed of answer in

November is a 93 percent reduction from the peak answer time last Open Enrollment and includes a

disabling of voicemail.

Average Handle Time

The Connector monitors the total duration of a handled call.

-

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200


Average Speed of Answer (in Seconds)

Average Speed of Answer Average Speed of Answer Service Target (Max)


Figure 7.10: Average Handle Time

The Connector has worked to reduce the handle time, while ensuring that representatives provide an

effective, thorough level of assistance. The average handle time peaked in March 2014 at 18.5 minutes,

a half-minute longer than the acceptable target. Average handle times began to fall in April 2014 and

stabilized between seven and eight minutes from June to October. The target handle time has dropped

to nine minutes for 2015 Open Enrollment. The average handle time increase to 9.2 minutes in

November 2014 reflects the increased complexity of incoming calls due to open enrollment. Although

slightly above the second-year performance target, the training of Contact Center representatives and

process improvements are reflected in this metric, which indicates that customer concerns are being

answered in about half the time from the previous open enrollment.

Transfer Rate

The Connector monitors the transfer rate to measure the percentage of calls that are routed to another

representative or party to be addressed.

0

2

4

6

8

10

12

14

16

18

20


Average Handle Time (in Minutes)

Average Handle Time Average Handle Time Service Target (Max)


Figure 7.11: Transfer Rate

The Contact Center’s transfer rates have remained below the acceptable ceiling of 20 percent. The peak

rate of transfer – 18 percent in March 2014 – was reduced to 4 percent in June 2014. Transfer rates

stabilized between 5 percent and 10 percent for the remainder of this period.

Transfers are generally related to misdirected calls from Medicaid, such as after-hours Medicaid calls. As

a result, transfer rates are dependent on call rates to the Medicaid general information phone line. The

Connector anticipates that transfer rates will increase to approximately 20 percent during Medicaid

renewal cycles in November 2014, January 2015, and March 2015.

7.1.5. Service-Oriented Improvements

Training, Knowledgebase Expansion, and Experience

The training program to equip all customer-facing agents was modified and expanded in 2014 to

advance the ability of customer service representatives (CSRs), Program Specialists, and Kōkua to

provide high quality customer service. The Connector engaged external support to identify and

implement improvements to the training program. The following changes to the training program were

implemented:

Training for all Kōkua and customer-facing staff now includes face-to-face training. In 2013,

training was provided predominantly online.

The Connector consolidated the training for CSRs, Program Specialists, and Kōkua to align the

communication that customers receive from these groups.

0%

5%

10%

15%

20%

25%


Transfer Rate

Transfer Rate Transfer Rate Service Target (Max)


Program Specialists have been granted access to Siebel Customer Relationship Management

(CRM). This advances their ability to cultivate expertise in their program and assist Kōkua with

problematic cases.

The Connector provided customer-facing agents playbooks, user guides, workaround

documentation, and other role-specific resource materials in order to make agents better

prepared.

Workaround documents that previously contained only instructions for how to handle a specific

system issue were expanded to include guidance for how to minimize impacts to the upstream

and downstream processes associated with the issue. These processes are actively updated as

new information and system changes occur.

The Hi’i Ola Program

Kōkua were not sufficiently prepared for the types of scenarios that presented themselves during the

October 2013 launch. One year later, the Hi’i Ola Program has learned from experience: Kōkua are

better prepared, receive better support, and are equipped with better tools. The Connector has made

several important improvements to the Hi’i Ola Program during 2014 in order to better serve the

residents and employers of Hawaiʻi:

Following the October 2013 launch, many Kōkua did not know how to react when technical

issues arose during a customer’s application and enrollment process. This resulted in delays to

completing a customer’s enrollment as the Kōkua would wait for system fixes when often an

application could be completed through an established workaround. During 2014, the Hi’i Ola

Program implemented a process for Kōkua who encounter an issue to both report the issue and

try to identify a workaround. This process empowers Kōkua to move as far ahead in the

application process as possible, regardless of the issues that they encounter to help reduce

unnecessary delay time.

The Hi’i Ola Program was initially structured so that all important communications flowed from

the Program Specialist to the Point of Contact, and from the Point of Contact to the Kōkua. This

multi-step communication process led to delays in communicating important updates to Kōkua.

During 2014, the communication structure was streamlined to send important communications

to the Point of Contact and Kōkua simultaneously, which reduces process inefficiencies.

Following the October 2013 launch, Kōkua experienced unacceptable wait times when

completing required verification steps through the Contact Center, which increased the amount

of time necessary to complete customer applications. In 2014, the Hi’i Ola Program requested

and received more timely assistance from the Contact Center for these verifications.

Additionally, both Program Specialists and a special type of Kōkua with temporary employment

status were given access to process verification requests, removing the need for Contact Center

involvement.


The Contact Center established a specific hotline in April 2014 for assisters who require

additional support while entering a customer’s application or enrollment. The hotline operates

from 8 a.m. to 8 p.m. Monday through Friday to connect Kōkua directly with specialists able to

resolve case-specific questions and issues. These efforts have improved the speed with which a

Kōkua is able to access the assistance they need and, in turn, complete a customer’s application

and enrollment.

At the beginning of 2014, the community outreach “Events Calendar” on the Connector

homepage did not provide adequate information about upcoming Kōkua events. The Hi’i Ola

Program implemented changes to improve the quality of information available on the calendar.

The “Events Calendar” now includes the complete scope of upcoming Kōkua events, and

provides better logistical information related to these events.

Contingency Planning

The Connector operations team systematized its contingency planning process in 2014. This process has

enabled appropriate resource allocation and training of CSRs, Kōkua, and other staff to mitigate the risk

of cases becoming backlogged as a result of system issues. Before any new capability is deployed, the

Connector operations team executes a four-stage contingency plan for each new feature:

1. Create work instruction documents for all staff who handle customer cases in the system;

2. Define metrics and monitor them to determine if and when a contingency plan needs to be

deployed;

3. Establish guidelines for when to sunset the contingency plan; and

4. Establish steps for how to sunset the contingency plan.

The Connector now has full ownership over the contingency planning process, and no longer relies on

product vendors or systems integrators to provide workaround instructions, user guides, and pre-

implementation system access. As a result of this heightened focus on contingency planning, the

Connector has successfully deployed 15 contingency plans that enable customers to complete the

application and enrollment process, despite system issues.

Planning Downtimes to Minimize Disruptions

At the beginning of 2014, planned system maintenance occurred every Sunday night. In some instances,

maintenance fixes and improvements took longer than expected to stabilize, disrupting service during

peak customer activity times on Monday. Minor system updates were made in the middle of the month,

which is also a peak application and enrollment period.

The Connector has moved planned system maintenance to Saturday nights, and staggered minor system

updates away from the middle of the month to reduce the risk of disruptions occurring during peak

periods. The Connector has also implemented a Business Operations Team sign-off step prior to every


instance of planned system maintenance to ensure that the full potential customer impact is taken into

consideration. All maintenance requests and approvals include automatic notifications to all customer-

facing teams.

Outreach

In January 2014, the Connector determined that as a result of technical issues and other obstacles

approximately 36,800 customers had not received adequate assistance to complete the application and

enrollment process. In an effort to address this issue, the Connector extended 2014 Open Enrollment by

30 days, from March 31, 2014 to April 30, 2014, and granted waivers to any Hawaiʻi resident who

wanted to enroll in health coverage through the Connector system but had not completed the

enrollment process due to technical difficulties. From January 2014 to April 15, 2014 the Connector took

additional steps to enroll residents by undertaking a major outreach effort, which provided the support

necessary to complete the application and enrollment process to customers who had encountered

issues. During this period, the Connector sought to reach out at least three times to every customer who

had started but not completed an application, or who had received a missing information letter from the

DHS. As a result of these efforts, 1,473 Hawaiʻi residents were enrolled in QHPs in April, which was the

second highest number of enrollments in any month since the October 2013 launch.

7.1.6. The Customer Experience 2014 Summary

The Connector has made considerable progress in 2014 addressing customer service challenges.

Improvements have been made in several major areas of the Connector’s operating activities and

customer-facing efforts.

The Connector improved the online experience by enhancing the usability of the homepage,

consolidating the entry points to start the application process, and simplifying site navigation.

The Connector improved the Contact Center experience by right-sizing the operational capacity

of this group and driving towards an enhanced call experience for customers.

The Connector made improvements in the areas of training, contingency planning, and outreach

that armed the Connector to better serve its customers.

The Connector’s efforts to enhance the customer experience are evident in several key measurements.

Open Enrollment Readiness110

The Connector’s operating metrics to evaluate its services to customers are stronger in the current 2015

Open Enrollment period (beginning November 15, 2014) versus the 2014 Open Enrollment period

(beginning October 15, 2013), but still leave room for improvement.

110

These metrics are calculated from the Contact Center Weekly Report Sun – Sat.


Call Answer Times: In the first month of 2015 Open Enrollment the average answer time for

Contact Center calls was 151 seconds with voicemail disabled. The average wait time during

2014 Open Enrollment was 377 seconds with an ineffective voicemail option. The Contact

Center’s target answer time is under 55 seconds.

Average Handle Time: In the first month of 2015 Open Enrollment, the Contact Center’s average

handle time was 12 minutes. For 2014 Open Enrollment, the Contact Center’s average handle

was 14 minutes. While the target handle time was 18 minutes during 2014 Open Enrollment, it

has since been lowered to nine minutes for 2015 Open Enrollment.

Abandon Rate: In the first month of 2015 Open Enrollment, the Contact Center’s abandon rate

was 13 percent. The Contact Center recorded an abandon rate of 34 percent over 2014 Open

Enrollment. This metric indicates that the Contact Center is effectively answering customer calls

and handling customer needs. The Contact Center’s acceptable abandonment rate is 10 percent.

Workaround Procedures: In the first month of 2015 Open Enrollment, the Connector had 15

established workarounds in place to guide support staff through potential roadblocks for

customers. No functional workaround mechanism was in place for 2014 Open Enrollment.

Complaint Metrics109

The Connector measures complaints logged by month. The Connector’s efforts to address performance

metrics – reflected in the Contact Center capacity and training improvements – have resulted in tangible

improvements to the customer experience and a reduction in the number of complaints.

Figure 7.12: Complaint Volume

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12,000

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0

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160


Cal

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Complaint Volume

Total Complaints Toal Calls Offered


Figure 7.12 illustrates the complaint volume over the past year. While the complaint volume peaked

with customer traffic to the Contact Center in March 2014, complaint volume dropped significantly

while incoming calls stayed relatively level from May to November 2014.

7.1.7. Customer Experience 2015 Outlook

The Connector will continue to identify and implement improvements to the customer experience in

2015.

Usability (UX/UI) remains a top priority. The Connector is working with its solution partners to

prepare and release additional enhancements in 2015.

Contact Center services will continue to play a critical role in serving the Connector’s customers.

A key objective for 2015 is to ensure that CSRs continue to be well trained and well-positioned

to service the Connector’s customers.

Addressing persistent customer service issues, such as the current practice of determining

eligibility for financial assistance (including Medicaid eligibility), is essential.

Addressing Eligibility for Financial Assistance and the KOLEA-Connector Interface

When a customer applies for health coverage online, there are currently three points of intake to

determine eligibility for Medicaid, Advanced Premium Tax Credit (APTC) and cost-sharing reductions,

and QHPs for those customers who are not requesting financial assistance. There are multiple points of

entry, including the DHS KOLEA portal, the Connector homepage, in-person assistance either at the

Contact Center, or with a Kōkua, and by paper application.

The KOLEA portal is the point of intake for all financial assistance determinations.

The Connector portal is the point of intake for QHPs for those customers who are not requesting

financial assistance.

The Contact Center staff and Kōkua aid callers in the process of applying for both.

Individuals and Families may fill out and submit a single-streamlined paper application to the

Connector or DHS.


Figure 7.13: KOLEA, the Connector, and the Customer Experience

In addition to its complexity, the current process creates limitations for customers, the Connector, and

DHS and increases the likelihood that a customer will decide not to pursue health insurance coverage.

Medicaid eligibility determination does not ask all the questions required to determine APTC

and cost-sharing reduction eligibility. As a result, the complete set of information required to

determine APTC and cost-sharing reduction eligibility are not collected in KOLEA.

DHS has 45 to 90 days to determine Medicaid eligibility. This delays access to health coverage

for those customers who are not seeking Medicaid.

If a customer receives a Medicaid denial and is then passed to the Connector, manual

intervention is required. The customer cannot access the self-service capability to complete

application, eligibility determination, and enrollment. During 2014 Open Enrollment, all cases

passed to the Connector from KOLEA were missing essential information and all cases had to be

resolved through direct CSR engagement with the customer for all steps of the application and

enrollment process.

If a customer submits an application through the Connector for QHP coverage, but later decides

to request financial assistance, the customer must submit a new application via KOLEA, which

requires restarting the application process.

Finally, the KOLEA-Connector interface does not provide an integrated process to deliver the

expected information to the Connector.


For 2015 Open Enrollment, the Contact Center has begun to populate the missing data with

placeholders and to notify the customer, who can then make changes to the placeholders and complete

the application either through the Contact Center or through the Connector portal.

However, these limitations – and associated delays and customer service challenges – are unnecessary.

Capability exists within the Connector’s technology platform to determine APTC and cost-sharing

reduction eligibility in near real-time, enabling the customer to proceed to plan selection and complete

enrollment.

2015 presents the Connector and DHS with the opportunity to work together and present the state with

a proposal for a solution that provides customers with an expeditious and accurate eligibility

determination to enable them to obtain health insurance coverage without unnecessary delay.

7.2. Technology Solution Stabilization Update

The technology solution delivered to meet the October 2013 launch and 2014 Open Enrollment failed to

deliver adequate and consistent system performance and an error-free experience for the Connector’s

customers and stakeholders. The issues have been diverse, ranging from issues with the design and

setup of the technical infrastructure to issues with the configuration of features and functions used

every day as part of the customer online experience or by CSRs in the Contact Center.

Following the close of 2014 Open Enrollment, system performance against service levels has improved

and remained stable, and the number of unresolved defects has steadily declined. Early indicators from

2015 Open Enrollment suggest that stability will persist.

Performance service levels were successfully met in June, July, August, September, and October

– the last complete month of reporting.

Since May 15, there has been only one instance of unplanned system downtime, an 11-minute

outage. System availability has averaged nearly 100 percent.

Web page response time has improved from its peak of 2,484 milliseconds (ms) on March 12 to

383 ms on November 30, and as averaged 241 ms (0.24 seconds) since June 1.

Transaction time has improved from its peak of 17.3 seconds on May 7 to 0.119 seconds on

November 30, and has average one second since June 1.

Defect reporting is at historical lows. Two Severity 2 defects were identified between August 28

and November 30; no Severity 1 defects were identified. Rate of closure exceeds the rate of new

defects and only 28 defects were open as of November 30.

Today, the measures of readiness for 2015 Open Enrollment illustrate the effort and investment that the

Connector and its partners have made to stabilize the technology solution and to deliver the level of

readiness that the Connector, its customers, and its stakeholders should expect.


7.2.1. Performance Against Established Service Level Agreements

CGI, the Connector’s technology solution hosting and maintenance provider, measures the performance

of the solution on a monthly basis against eight defined service levels. Collectively, these service levels

represent one set of measures of the solution’s performance. Figure 7.14 describes each service level

and the measurement method.

Figure 7.14: Service Level Definitions111

SLA # Service Level

Item Description Measurement

Performance Measurement

Tool Calculation

Performance Target

Minimum Performance

1 Availability During All Hours

Measurement of the percentage of system availability each month.

This service level will be determined by dividing the number of hours of Availability during the month by the total number of hours in the month. However, Scheduled Maintenance Downtime will not be included in the calculations for the numerator or the denominator to determine performance on this service level.

Site 24X7 1 minus the total minutes of downtime during the month divided by total minutes in the month (excluding any planned downtime)

99.8% 94.0%

111

CGI Group Inc. SLA Review – Hawaiʻi Health Connector, Review of SLA Performance Levels: Oct., 2013 – Feb.,

2014. February 2014.


SLA # Service Level



Tool Calculation

Performance Target

Minimum Performance

2 Content Maintenance (% deployed within planned window)

The parties will establish an update schedule for updating the Content on the Exchange. The Service Level measures compliance with each update required under that schedule.

Each Scheduled Update is required to be completed no later than the date and time scheduled, with all Content set for that Scheduled Update successfully updated on the Exchange. Any unplanned downtime associated with exceeding maintenance windows is captured by measurement of the Availability SLA.

Deployment Tracking Log

1 minus the total content maintenance packages successfully deployed divided by total content maintenance packages planned for deployment during the month

100% successfully deployed

3 Web Page Response Time (avg response time for month in seconds)

This Service Level measures daily average time that the Web Pages comprising the Exchange to take to respond to a request sent by a User through the User’s browser.

Each day, through an agreed automated process, CGI will sample Web Page responses on no less frequently than every five (5) minutes and compile hourly and daily statistics for specific Web Pages designated by the Connector and an aggregate average response time.

Site 24X7 Calculate hourly average web page response time and daily average web page response time, based on data that is polled every 60 seconds.

1 sec avg 5 sec, 3xD or 10xW


SLA # Service Level



Tool Calculation

Performance Target

Minimum Performance

4 Response Time for Real Time Transactions (avg response time for month in ms)

This Service Level measures daily average time that the Web Pages comprising the Exchange to take to respond to a request sent by a User through the User’s browser.

Each day, through an agreed automated process, CGI will sample Real Time Transactions on no less frequently than every five (5) minutes and compile daily statistics for specific Real Time Transactions designated by the Connector and an aggregate average response time.

Splunk (Number of Splunk hourly averages for all Real Time Transactions processed by the System that were <= 5 seconds), DIVIDED BY(Total number of Splunk hourly averages)

90% 5sec < 75% in 5 sec

5 Help Desk Mean Time to Resolve Severity 1 (HH:MM)

This Service Level measures the mean time for CGI to resolve Severity Level 1 incidents from the time first reported to CGI.

CGI’s trouble ticketing system will automatically track the time from initiation of the incident to closure. The incident will be initiated immediately upon notice to CGI.

Connector-CGI Recovery Dashboard

Average of resolve durations for all Sev 1 tickets created during the month

4 hours > 24 hours

6 Help Desk Mean Time to Resolve Severity 2 (HH:MM)

This Service Level measures the mean time for CGI to resolve Severity Level 2 incidents from the time first reported to CGI.

CGI’s trouble ticketing system will automatically track the time from initiation of the incident to closure. The incident will be initiated immediately upon notice to CGI.

Connector-CGI Recovery Dashboard

Average of resolve durations for all Sev 2 tickets created during the month

8 hours > 5 days


SLA # Service Level



Tool Calculation

Performance Target

Minimum Performance

7 Backup and Recovery (% backups successfully completed)

This Service Level measures completion of the scheduled Backups and of all necessary Recoveries each month.

All Backups and Recoveries will be monitored by the Exchange and completion and failure automatically reported. Time for each Recovery will be measured by the Exchange from start to completion and reported automatically.

GIS Operational Report - Daily/Weekly Backup Log

1 minus total number successful backups in log divided by total number of backups scheduled.

100% 3 consecutive backup fails

8 Batch Completion

This Service Level measures completion of scheduled Batch jobs.

All Batch jobs will be monitored by the Exchange and completion and failure automatically reported.

Healthation Batch Completion Log

1 minus total number batch jobs completed in target window divided by total number of batch jobs run.

100% completion rate within target timeframes

Service levels are monitored continuously using multiple tools, and are reported on in a monthly

dashboard accompanied by a standard Service Level Agreement (SLA) Scorecard.

Figure 7.15 represents the published SLA Scorecard through the period ending October 31, 2014. Service

level performance has stabilized and improvements have been sustained following periods that failed to

meet performance targets, including May 2014 when the solution failed to meet the minimum

requirement for Response Time for Real Time Transactions. While these improvements and their

consistency are encouraging, the period of improved performance from June through October also

coincided with a period of lower activity.


Figure 7.15 – SLA Scorecard as of October 31, 2014112

7.2.2. System Availability

Figure 7.16 illustrates system availability from January through November 2014. There have been 25

documented unplanned downtime events, 17 (approximately 70 percent) of which occurred in March

and April, coinciding with peak periods of activity. The volatility in May is associated with two specific

112

CGI Group Inc. SLA Review – Hawaiʻi Health Connector, Review of SLA Performance Levels: Oct., 2014.

October 2014.

2014

Perf.

Target Min. Perf.

Service Level

Item

Jan Feb Mar Apr May June July Aug Sept Oct

Availability

During All Hours

99.4% 99.96% 99.2% 99.2% 99.3% 100% 99.97% 100% 100% 100% 99.8% 95.0%

Content

Maintenance

(% successfully

deployed)

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% within agreed

maintenance windows

Web Page

Response Time

(avg response time

for month in

seconds)

.42 sec .53 sec .81 sec .98 sec .31 sec .30 sec .26 sec .23 sec .24 sec .23

sec

1 sec avg 5 sec, 3xD

or 10xW

Response Time for

Real Time

Transactions

(avg response time

for month in ms)

N/A 94% 81% 82% 72% 98% 96% 99% 99% 99% 90% < 5

sec

< 75% < 5

sec

Help Desk Mean

Time to Resolve

Severity 1

(mean time to

resolve - HH:MM)

0:57 None 2:19 2:42 None None None None None None 4 hours > 24 hours

Help Desk Mean

Time to Resolve

Severity 2

(mean time to

resolve - HH:MM)

None 3:10 3:58 None 10:02 None None None 1:06 None 8 hours > 5 days

Backup and

Recovery

(% backups

successfully

completed)

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 3

consecutiv

e backup

fails

Batch Completion 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% completion rate

within target timeframes


unplanned outages related to general system operations disruptions. There is a trend of sustained

stability from June forward, reflective of both lower activity and improved performance tuning.

Figure 7.16: System Availability

Expected system availability excludes planned downtime.

7.2.3. Web Page Response Time

Web page response time has improved significantly following spikes experienced in March and April.

The response time of 241 ms observed on November 21 (during 2015 Open Enrollment) represents a

155 percent improvement from the 616 ms observed on February 21, a day with a comparable number

of user sessions during 2014 Open Enrollment. As illustrated in Figure 7.17, while there has been an

increase in response time in the initial two weeks of 2015 Open Enrollment, it has stayed below the

performance target. This reflects the outcome of corrective actions and tuning in response to prior poor

performance. Figure 7.17 illustrates performance from January through November 2014.

90%

91%

92%

93%

94%

95%

96%

97%

98%

99%

100%

System Availability (actual uptime / planned uptime)Jan., 2014 - Nov., 2014 by Week

% Availability Performance Target Minimum Performance


Figure 7.17: Web Page Response Time

7.2.4. Transaction Response Time

Real-time transaction response time has improved significantly following the volatility observed during

and immediately following the 2014 Open Enrollment period. Like web page response time, stabilization

and sustained improvement of this key metric is reflective of corrective actions and tuning in response

to prior poor performance. Figure 7.18 illustrates performance from January through November 2014.

The one anomalous spike on November 17 can be explained by a specific renewals defect that required

a resolution during an evening maintenance window. Accounting for the specific spike, overall

transaction responses have remained stable from post 2014 Open Enrollment into 2015 Open

Enrollment.

0

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4000

5000

6000

0

500

1000

1500

2000

2500

3000

USe

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ns

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ms)

Web Page Response Time vs. User SessionsFeb., 2014 - Nov., 2014

Daily Response Average Response Performance Target Total Daily User Sessions


Figure 7.18: Real-time Transaction Response Time

7.2.5. Mean Time to Resolve Severity 1 and 2 Incidents113

The Connector experienced six Severity 1 incidents between January 1 and October 31, 2014. In each

occurrence, the mean time to resolve the incidents met service level agreement. Figure 7.19

summarizes the occurrence and response to these incidents.

113

Severity 1 incidents are defined as incidents where the system has crashed and for which no workaround has

been identified. Severity 2 incidents are defined as an incident of major system bug for which no workaround has

been identified.

0

1,000

2,000

3,000

4,000

5,000

6,000

0

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6

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12

14

16

18

Use

r Se

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Re

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Tim

e (

s)

Real-Time Transaction Response Time vs. User SessionsFeb., 2014 - Nov., 2014

Daily Response Averages Response Performance Target Total Daily User Sessions


Figure 7.19: Mean Time to Resolve Severity 1 Incidents

The Connector experienced seven Severity 2 incidents between January 1 and October 31, 2014. In six of

seven occurrences, the mean time to resolve the incidents met service level agreements. An incident

occurred in May that exceeded the performance target, but did not exceed the minimum required

performance level. Resolving a Severity 2 incident involves either fixing the incident or identifying a

workaround for the issue, which decreases the severity of the incident to Severity 3. Figure 7.20

summarizes the occurrence and response to these incidents.

0:57:00

2:19:182:42:29

0

1

2

3

4

5

0:00:01

3:59:59

7:59:58

Jan-2014 Feb-2014 Mar-2014 Apr-2014 May-2014 Jun-2014 Jul-2014 Aug-2014 Sep-2014 Oct-2014

Count of Sev 1 Incidents

by Month

Mean Timeto Resolve

(HH:MM:SS)

Mean Time to Resolve Severity 1 Incidents

Mean Time to Resolve Performance Target # Sev 1 Incidents


Figure 7.20: Mean Time to Resolve Severity 2 Incidents

7.2.6. Ongoing Performance Risk and Active Mitigation

Real-time performance monitoring, proactive analysis, tuning, and implementing corrective action plans

are continuous activities, and represent critical success factors to day-to-day operations.

The Connector solution is complex, and the features and functions it provides to its customers require

numerous technical components, infrastructure, interfaces, data exchanges, and software applications

to perform consistently in lock step over extended periods of time. The pressure is exacerbated when

the system is placed under load, and can be further impacted by variables such as data quality, which

are often outside of the control of the solution’s operators and administrators.

The 2015 Open Enrollment period will present new challenges above and beyond those observed and

addressed in 2013 and 2014. New features and functions, such as eligibility and plan re-enrollment, have

been implemented and will be placed under stress as utilization increases. In addition, the Connector is

forecasting a higher level of user activity as employer and individual application and enrollment

increase.

Leading up to 2015 Open Enrollment, the Connector and its partners conducted a series of performance

tests to stress system components under load to assess the system’s ability to meet the expected levels

of service. These tests included the prescribed use of performance testing environments, system

architecture, criteria, schedules, and scenarios. The outcomes of testing identified five issues, and as a

result five specific performance adjustments were made. Multiple rounds of testing have shown a

0:00:00

3:10:003:58:45

0:00:00

Yellow - Exceeds Performance Target

10:02:00

0:00:00 0:00:00 0:00:00 1:06:00 0:00:000

1

2

3

4

5

0:00:00

3:59:59

7:59:57

11:59:56

Jan-2014 Feb-2014 Mar-2014 Apr-2014 May-2014 Jun-2014 Jul-2014 Aug-2014 Sep-2014 Oct-2014

Count of Sev 2 Incidents

by Month

Mean Timeto Resolve

(HH:MM:SS)

Mean Time to Resolve Severity 2 Incidents

Mean Time to Resolve Performance Target # Sev 2 Incidents


substantial reduction in system utilization following performance tuning, and error-free submission of

individual and employer applications under tested scenarios and load levels.

The Connector and its partners have invested heavily in improving performance for customers and

stakeholders. The corrective action and tuning has yielded positive results, and the infrastructure is in

place to support ongoing monitoring and timely response. Continued investment will be required to

ensure that the appropriate technology environment, toolset, and response capability are available to

perform adequate testing and to ensure that the Connector solution is properly positioned to scale as

enrollment grows.

7.2.7. Defect Identification and Resolution Summary

563 defects have been identified since September 29, 2013. Approximately 53 percent of those defects

were logged between September 29, 2013 and January 4, 2014 – an average of approximately 99

defects per month. The defect identification rate began to taper off in January, and fell to nearly zero by

the end of August. The decline during the January to August period is attributable to multiple factors

including: prior identification and correction of the majority of defects; lower levels of utilization outside

of open enrollment periods; and relatively lower levels of change occurring within the system. 15

defects were identified between November 15 and November 20, coinciding with Open Enrollment. No

new defects were observed between November 21 and November 30.

Figure 7.21 illustrates the number of defects open and closed by week across all severities for the period

September 29, 2013 through November 30, 2014.


Figure 7.21: Defect Open and Closure Comparison

95 percent (535 of 563) of all defects identified have been categorized as Severity 3 or 4 defects,

meaning that they have a viable workaround (even if temporary) or represent minor issues that do not

require immediate action. The remaining 28 defects have been categorized as Severity 1 or 2. Seven

defects have been characterized as Severity 1 – meaning that there is an unrecoverable system issue

that prevents activity. 21 defects have been categorized as Severity 2 – meaning that the defect

represents a major system issue for which there is no workaround. As of November 30, 2014, 28 defects

remain open – one Severity 2, 20 Severity 3 and seven Severity 4.

Figure 7.22 illustrates the distribution of defects by severity over time.

0

10

20

30

40

50

60

70

80

Defect Open and Closure Comparison

New Defects Identified by Week Defects Closed by Week


Figure 7.22: Defect Summary – Opened and Closed by Severity

Defect response has been and continues to be a primary focus of the Connector team. Structured daily

activities among the Connector and its partners minimize the risk of inattention to issues, and enable

timely escalation. Approximately 24 percent of all defects identified are resolved within three days, and

48 percent of all defects are resolved within 14 days.

Figure 7.23 illustrates the aging of defects by severity from the Created Date to the Resolved Date (a

predecessor date to formal closure).

Figure 7.23: Defect Aging Summary (Created Date to Resolved Date)

Aging Bucket Severity 1 Severity 2 Severity 3 Severity 4 Total % of Total

Same Day 6 5 33 2 46 8.58%

1 to 3 Days 1 8 73 7 89 16.60%

3 to 7 Days 0 4 55 5 64 11.94%

8 to 14 Days 0 0 69 2 71 13.25%

15 to 28 Days 0 2 58 5 65 12.13%

> 28 Days 0 1 194 6 201 37.50%

Figure 7.24 illustrates the aging of defects open as of November 30. These defects are in varying stages

of the defect resolution lifecycle.

0

100

200

300

400

500

600

Cu

mu

lati

ve D

efe

cts

Op

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Defects Opened/Closed by Severity

Open - Sev 1

Closed - Sev 1

Open - Sev 2

Closed - Sev 2

Open - Sev 3

Closed - Sev 3

Open - Sev 4

Closed - Sev 4


Figure 7.24: Defect Aging Summary (Open Defects as of November 30)

Aging Bucket Severity 1 Severity 2 Severity 3 Severity 4 Total % of Total

1 to 3 Days 0 0 0 0 0 0.00%

3 to 7 Days 0 0 0 0 0 0.00%

8 to 14 Days 0 0 6 0 6 21.43%

15 to 28 Days 0 1 3 1 5 17.86%

> 28 Days 0 0 11 6 17 60.71%

While the Connector has made significant progress, there are a number of defects that have been

addressed by workarounds that do not fully meet the needs of customers, stakeholders, and the

Connector. Many of these workarounds have introduced sub-optimal processes and continue to place

an excessive burden on the Connector, the Contact Center, issuers, and all involved in securing coverage

for customers.

7.3. Technology Solution Advancement Update

At its launch in October 2013, the Connector technology solution delivered an initial set of capability

(features and functions) intended to fulfill the immediate requirements of 2014 Open Enrollment. The

delivery plan was and continues to be to provide incremental capability for consumers to meet

requirements, and to improve upon delivered feature sets, including those that did not meet the

expectations of the solution’s customers and stakeholders (individuals and families, employers and

employees, Kōkua, CSRs, issuers, and various state and federal entities). The Connector’s delivery plan

and approach is consistent with those adopted by all other marketplaces.

Throughout 2014 and leading up to 2015 Open Enrollment, the Connector has added new capability and

has made end-to-end improvements to existing capability as part of a sustained effort to deliver a

complete set of features and functions to its customers and stakeholders. 24 major enhancements (new

or improved capability) have been implemented, including a major revision to the user interface and

user experience for employers and employees – which alone include approximately 60 distinct changes

to better serve that stakeholder group.


Figure 7.25: Major Enhancements by Stakeholder Group in 2014

Stakeholder Group Major Enhancements – New and Improved System Capabilities

Individuals and Families 1. Integrated Disenrollment Transactions 2. Availability of Co-Pay and Co-Insurance Data 3. Special Enrollment Eligibility Determination and Plan Selection 4. Reporting Changes in Circumstance and Other Information 5. Retroactive Enrollment 6. Prospective Cost-Sharing Reduction Level Eligibility 7. Updating Applied Advance Premium Tax Credit (APTC) Preferences 8. Exemptions 9. Eligibility and Plan Enrollment Renewal 10. Improved User Interface for Plan Selection Updates 11. Improved Decision Reports Availability and Content 12. Improved Application Logic and Application Flow

Employers and Employees 1. Integrated Disenrollment Transactions 2. Special Enrollment Eligibility Determination and Plan Selection for Employees 3. Reporting Changes in Circumstance and Other Information 4. Eligibility and Plan Enrollment Renewal 5. Improved User Interface for Plan Selection Updates 6. Enhanced User Interface and User Experience 7. Enhanced Duplicate Application Validation

Kōkua 1. Application Search 2. Improved Case Load Time

Customer Service Representatives

1. Enhanced Capture and Auditing of Changes to Cases 2. Archival of Past Eligibility Determinations 3. Streamlined Siebel Case Management System User Interface


Figure 7.26: Major Enhancements by Implementation Date in 2014

Today, the Connector is providing a substantially more complete and improved set of features and

functions across all stakeholder groups, and is doing so with a continued focus on usability and the

online experience of its user community.

7.3.1. New and Improved Capabilities for 2014

For Individuals and Families

Integrated Disenrollment Transactions: enables CSRs to instantly send a CMS-compliant issuer

disenrollment file as customers request disenrollment, instead of having to call issuers directly.

(February 2014)

Availability of Co-Pay and Co-Insurance Data: adds co-pay and co-insurance data for every plan

to Plan Selection and the prospective Health Eligibility Pre-Screener and Plan Browser.

Customers experience a more transparent process, comparing amounts that correspond to their

cost-sharing reduction level for each plan before they select one. (March 2014)

Reporting Changes in Circumstance and Other Information: enables customers already enrolled

with the Connector to report changes to their household, such as marital status and income,

and have their eligibility updated. The change in circumstance and other information capability

also features enhanced rule logic. This means the Connector system will ask customers to

answer only questions that are pertinent to the change type the customer wishes to report. The

Connector system immediately identifies whether the change qualifies for special enrollment

2014JAN

February 9, 2014

FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

- Integrated disenrollment transactions- Special enrollment eligibility determination and plan selection- Retroactive enrollment- User interface improvements for plan selection updates- Decision report availability and content improvements- Application logic and application flow improvements

March 18, 2014 May 18, 2014 July 7, 2014

- Integrated disenrollment transactions- Special enrollment eligibility determination and plan selection- User interface improvements for plan selection updates

- Application search- Archival of past eligibility determinations- Streamlined Siebel case management system user interface

- Availability of Co-pay and Co-insurance data

- Improved case load time

Ind

ivid

ua

ls a

nd

Fa

mili

esEm

plo

yers

an

d

Emp

loye

esK

ōku

a a

nd

C

SRs

- Prospective Cost-Sharing Reduction level eligibility

- User interface and user experience enhancements- Duplicate application validation enhancements

- Reporting Changes in Circumstance and other information- Applied APTC preference updates- Exemptions- Eligibility and plan enrollment renewal

- Reporting Changes in Circumstance and other information- Eligibility and Plan Enrollment renewal

- Enhanced capture and auditing of changes to cases


and grants it accordingly. Any updated information that does not affect eligibility, such as

contact information, is immediately sent to issuers. Manual intervention is still required by

support representatives related to financial assistance changes. (July 2014)

Special Enrollment Plan Selection: enables customers who either report a qualifying change

through the “Change in Circumstance” function or are specifically granted a special enrollment

period by the Connector, to complete plan enrollment outside the Open Enrollment period. For

example, an individual who has recently married will be granted a special enrollment period in

which the spouse can be added to existing coverage or the couple can enroll together in a new

plan entirely. CMS-compliant 834 files are currently generated automatically, but prior to

sending the information to issuers, the Connector has chosen to stop the automated process

and validate the information manually to ensure consistency. (February 2014)

Retroactive Enrollment: enables customers to receive plan rates according to their original

application date to ensure all consumers receive an accurate rate. Through this feature, the

Connector is able to manually enroll customers whose cases have been delayed processing

without penalizing them for system or process issues. (February 2014)

Prospective Cost-Sharing Reduction Level Eligibility: enables customers to view and compare

plan data in more detail before completing an application. The health eligibility pre-screener and

plan browser now calculates and displays plan information based on prospective cost-sharing

reduction level eligibility. (May 2014)

Updating Applied APTC Preferences: enables customers who qualify for tax credits to manage

them more quickly and easily. When selecting a plan for the first time, customers who qualify

for tax credits are given the option of either selecting to receive credits on a monthly basis (in

the form of a deduction from their monthly premiums) or to receive tax credits in a lump sum at

the end of the year. If they choose to have credits applied monthly, customers are also given the

option of selecting the exact portion of their total qualified credit they would like applied. The

Connector has added a link to the “My Account” page that enables customers to change this

monthly portion. If changes are made, the system sends an automated notification to issuers to

update premiums. This feature provides customers who report a change and who may qualify

for additional tax credits an easy way to quickly apply their health cost savings. (July 2014)

Exemptions: enables customers under special circumstances, such as homelessness, to access

Catastrophic plans114, and waive the federal penalty if they are unable to afford the standard

114

Catastrophic plans are plans that meet all of the requirements applicable to other QHPs, but do not cover any

benefits other than three primary care visits per year before the plan's deductible is met. Catastrophic plans have

much lower premiums than even the lowest cost QHPs. (https://www.healthcare.gov/glossary/catastrophic-

health-plan/)


QHPs offered. CSRs now have the capability to accept and apply federally facilitated market-

issued exemption information and the corresponding certificates. (July 2014)

Eligibility and Plan Enrollment Renewal: enables customers to renew their eligibility and plan

enrollment. The renewals capability includes an automated renewal process and an online

renewal form only available during the renewal period. The renewal form is available to

customers to review the latest information on file and report any changes that have occurred.

Customers who elect to automatically re-enroll do not need to take any action to continue their

coverage unless they become Medicaid-eligible or their plan is no longer available. The eligibility

renewal function reevaluates all customer information for eligibility based on updated FPL and

standards set for the coming year. If certain changes are reported via the renewal form,

eligibility for both the current year and the following year is re-determined. The eligibility and

plan enrollment renewal capability also enables notifications to inform individuals and families

of the renewal period and whether any action is required of them, in addition to fully

automated and integrated transactions to provide updates to issuers. (July 2014)

Improved User Interface for Plan Selection Updates: provides a better user experience for

customers who wish to modify their existing plan enrollment. These customers now see a

different page, which allows them to add or remove household members and preview the

associated premium changes in just two mouse clicks. Customers who wish to change their plan

enrollment completely can now compare new selections to their existing plan in the plan cart.

(February 2014)

Improved Decision Reports Availability and Content: enables customers to view decision

reports at any time. Decision reports explain to customers why they have or have not been

granted eligibility for certain benefits such as APTC. Initially they were only available application

submission; now, however, customers can access them whenever they return to their “My

Account” page. In addition, the language of the reports has been simplified to help customers

better understand the reasons behind their eligibility determinations. (February 2014)

Improved Application Logic and Application Flow: provides users with a more logical, and at

times shorter, application and enrollment experience. The Connector improved the logic that

determines the questions a customer is required to answer as part of the application process, as

well as the application flow. These improvements also enable CSRs and Kōkua to complete

applications more quickly and serve customers more efficiently. (February 2014)


For Employers and Employees

Integrated Disenrollment Transactions: enables CSRs to instantly send a CMS-compliant issuer

disenrollment file when employers request disenrollment. Employers previously had to call the

Contact Center if they wanted to disenroll from their plan coverage. (February 2014)

Reporting Changes in Circumstance and Other Information: enables employers to update their

worksite address and other contact information, as well as make changes to their employee

enrollment period. While employers have been able to modify the list of eligible employees

since October 2013 launch, back-end issuer transactions were added to automatically dis-enroll

employees who have been removed from the list. The change in circumstance and other

information capability also enables employees to report changes to their household, such as

marital status and income, and have their eligibility updated. Any updated information that does

not affect eligibility, such as contact information, is immediately sent to issuers. (July 2014)

Special Enrollment Plan Selection for Employees: enables employees who either report

qualifying changes to their household through the “Change in Circumstance” function or are

specifically granted special enrollment by the Connector to change their plan enrollment outside

the employee enrollment period established by the employer. In addition, when an employer

adds a new employee outside of the employee enrollment period, that employee is

automatically granted special enrollment by the Connector to complete plan enrollment. CMS-

compliant 834 files are currently generated automatically, but prior to sending the information

to issuers, the Connector has chosen to stop the automated process and validate the

information manually to ensure consistency. (February 2014)

Eligibility and Plan Enrollment Renewal: enables employers to review and modify the latest

information on file for their businesses as well as redefine contribution amounts and plans they

would like to offer to their employees. The renewal capability includes a renewals form only

available to employers during an employer’s renewal period. After the close of the employer’s

renewal period, a renewal form is made available to employees to review and modify any

information before allowing them to make any necessary plan selection decisions as a result of

changes to plan coverage options made by the employer. The capability also enables

notifications to inform employers and employees about whether any action is required of them

and fully automated and integrated transactions to provide updates to issuers. (July 2014)

Improved User Interface for Plan Selection Updates: offers the same improvements made for

Individuals and Families to employees. This improved user interface provides a better user

experience for customers who wish to modify their existing plan enrollment. These customers

now see a different page, which allows them to add or remove household members and

preview the associated premium changes in just two mouse clicks. Customers who wish to

change their plan enrollment completely can now compare new selections to their existing plan

in the plan cart. (February 2014)


Enhanced User Interface and User Experience: delivers 60 improvements with a focus on the

employer application and plan selection modules. In spring 2014, in response to feedback that

75 percent of employers were hindered from enrolling by the plan selection pages, the

Connector engaged a user experience specialist to evaluate and recommend changes to the

entire user interface. These improvements represent the Connector’s response to those

recommendations. (May 2014)

Enhanced Duplicate Application Validation: supports the prevention of duplicate submissions

that would otherwise require extra CSR time to reconcile. This validation is applied during

employer application submission for preexisting applications with the same name or employer

ID number. (May 2014)

For Kōkua:

Application Search: enables all assisters, including CSRs, Kōkua, and brokers, to find the case

they want to open more efficiently and effectively through a new search feature in the “My

Account” page. (February 2014)

Improved Case Load Time: improves page load time for assisters who may have hundreds of

customer cases linked to their account. This improvement reduced the load time for customer

cases to an average of 16 seconds from an average of 169 seconds. (March 2014)

For Customer Service Representatives (CSRs):

Enhanced Capture and Auditing of Changes to Cases: provides CSRs and other specialists with a

more complete audit trail and historical information, which is often necessary to assist

customers who have questions about changes to their eligibility or who are facing data-related

system issues. The enhancements to the change log enable the capture and storage of all

changes made to a case from all sources. (July 2014)

Archival of Past Eligibility Determinations: provides information on all past benefits for which

customers have been eligible, enabling both improved customer assistance and reporting.

(February 2014)

Streamlined Siebel Case Management System User Interface: removes unnecessary fields and

improves the display and organization of information in the system. These improvements

enhance usability and reduce the risk of confusion for CSRs, enabling them to more effectively

assist customers with the application and enrollment process. (February 2014)

7.3.2. Remaining Capability Gaps and Opportunities

The Connector is committed to addressing capability gaps, making continued improvements to solution

capability, and increasing operational efficiency for its customers and stakeholders in 2015 and beyond.


Currently, workarounds and sub-optimal processes implemented to address defects continue to burden

the Connector, Contact Center, and issuers, and hinder customers from experiencing an efficient,

seamless process in acquiring health coverage. The Connector has initiated a comprehensive assessment

of both operations and technology to identify and assess all instances where capabilities and processes

do not function at the intended level. Under the leadership of the new Director of the IT Project

Management Office, this assessment will enable the Connector to prioritize and plan the

implementation of necessary changes to ensure that these capabilities and processes fully meet the

needs of customers and stakeholders.

The Connector has already identified the following opportunities for future improvement. The technical

solutions are available to the Connector and are awaiting integration and deployment:

Updating APTC Date Logic Compliance to Meet Federal Standards: This update to the

Connector solution will ensure that the system generates dates for APTC-related changes that

are federally compliant. Currently, the APTC eligibility date logic is incapable of reconciling

specific combinations of changes in circumstance occurring within a short period of time (e.g.,

new baby and change of income occurring within 15 days of each other). This can result in

receipt of adjusted tax credits too early, and requires manual adjustment of tax credit amounts

and dates.

Implementing Age-Out Validation to Improve Eligibility and Enrollment Management: The

implementation of age-out validation and identification will enable the Connector to manage

enrollments more effectively and relieve the Connector’s reliance on issuers. The Connector

currently relies on issuers to report when a customer ages out of his or her current eligibility

(e.g., dependent child turns 26, adult turns 65 and is eligible for Medicare).

Enabling Changes to the Application Type of Existing Applications (Financial or Non-Financial

Assistance Change Reporting): This capability will allow customers who have initially decided

not to seek financial assistance to pursue financial assistance at any time during their

enrollment process without having to start over with application process. This capability will also

apply to customers who decide to stop pursuing financial assistance. Currently, customers have

to decide up front whether or not to apply for financial assistance. If customers later change

their decision, they must submit a new application.

Improving Case Management Workflows: Implementing an integrated workflow will enable

more effective assistance of returning customers by routing their call to a CSR with whom they

have previously worked, if available, and by retrieving the case for the CSR at the last point of

modification. Currently, the IVR menu a customer hears when they call the Contact Center, the

Automated Call Distributor, and Siebel Case Management are not integrated. Customer cases

are randomly assigned to available workers who then manually look up each case. There

currently exists a CRM integration plan and Contact Center desired report mapping that

specifies the workflows necessary, and implementation is anticipated for mid-2015.


The following enhancements have also been identified and are in the planning and requirements

gathering process:

Replacing the Financial Management Solution to Meet Current and Future Needs: Replacing

the current financial management solution (Aldera) with a solution that meets the original

requirements will save hours of manual reconciliation and processing currently required to

generate payments to issuers and fulfill exchange accounting needs. In 2014, Aldera was largely

replaced by a fully manual Excel process due to Aldera’s failure to generate accurate data and

complete the required functions of an accounting system. Aldera, originally a billing system, was

selected by the systems integrator as the financial management solution. It has been riddled

with bugs and never successfully fulfilled the needs of the Connector. Aldera is currently only

leveraged to generate invoices.

Implementing 1095-A Tax Form Conversion: State exchanges are required to provide 1095-A

tax forms to all enrolled individuals. Implementing a conversion process to enable conversion of

customer case data directly to a 1095-A form will relieve the Connector of administrative time

and expenses associated with fulfilling this requirement.

Enhancing Data Warehouse and Reporting Capabilities: Implementing improvements to the

Connector’s data warehouse will enable more robust reporting and improved data

management. While the Connector has implemented a data warehouse, the inclusion of a

number of already identified data elements will enable the creation of more comprehensive

reports.

2014 was a year of great progress. The Connector is much better positioned today to offer services and

capabilities that its customers, users, and stakeholders require to fulfill its mission of enabling the

people of Hawaiʻi to obtain affordable health insurance.

The Connector made it easier for customers to get to the right place and get started on their

application and enrollment activities.

The Connector delivered the critical capabilities required in preparation for 2015 Open

Enrollment.

SHOP usability was substantially improved, and the solution available to employers and

employees continues to surpass those solutions available in the federally facilitated marketplace

and in a number of state-based exchanges.

The Contact Center is much better equipped to handle both the volume and types of (i.e., the

issues) inbound inquiries than it was at the beginning of 2014.

Connector team members are receiving the training and quality of information that they require

to be effective in their roles.


The Connector delivered the critical capabilities that its customers require to manage their

enrollment throughout the year.

The technology solution is increasingly stable following intensive efforts to improve

performance.

But the work is not done. The Connector must continue to provide a continuously improving solution

across all facets of its operations: customer experience, Contact Center, outreach and engagement, and

technology solution.


8. Recommendations and Conclusions

8.1. Purpose

Although not without mistakes and misjudgments, the Connector, working with its counterparts in

government and private industry, has come a long way toward harmonizing the benefits of Hawaiʻi’s

forward-thinking Prepaid Health Care Act of 1974 (PHCA) with the federal Patient Protection and

Affordable Care Act of 2010 (ACA) to deliver access to health, wellness, and preventive care to nearly

every resident of Hawaiʻi. While the opportunity to bring approximately half a billion dollars in direct

federal subsidy to the economy over the next 10 years is important, the ability to extend and improve

the quality of life for the residents of Hawaiʻi is an obligation that must be embraced.

This report provides a detailed account of the condition, activities, and sustainability of the Connector as

required by Act 233. It also seeks to present both the advantages and the challenges the state and the

Connector face as the Connector moves into its second full year of operations.

8.2. Enrollment

As of the end of 2014, more than 15,000 residents have enrolled in Qualified Health Plans (QHPs)

through the Connector. This is a significant increase from the fewer than 500 enrollees in 2013.

Momentum is building, and daily enrollments are increasing as more customers experience a higher

quality enrollment process supported by improved technology, better trained staff, and faster access to

low-cost health insurance plans.

By establishing a state-based marketplace, Hawaiʻi has been able to expand its Medicaid offerings to

more than 50,000 additional residents at virtually no cost to the state. By expanding Medicaid and

offering access to health care through the Connector, Hawaiʻi not only saves millions of dollars each year

in unreimbursed health care costs, but also provides for a healthier and more productive population.

The PHCA extended a broad umbrella of health coverage to the full-time workforce; now the Connector,

together with expanded Medicaid, has further expanded that coverage to tens of thousands more

citizens. When considered as an economic and public health opportunity, the combination of these two

pieces of legislation provides an economic stimulus to the economy second only to that of the

commercial passenger jet, which catalyzed the large-scale development of Hawaiʻi’s tourism industry.

The health care industry in the State of Hawaiʻi can now rely on getting paid for more of the patients

they serve, more residents can access health care providers without fear of putting their finances in

jeopardy, and the money saved can contribute to the growth, education, and creation of a sustainable

environment for all of Hawaiʻi.


As the Connector enters its second year, it is important to realize that the ACA, in partnership with

Hawaiʻi’s advanced health care system, is doing more than providing insurance: it is saving and

extending lives.

Eileen from Hāna was having trouble affording insurance. Despite the cost, Eileen continued to see her

oncologist, but the impact on her finances was devastating. Fortunately, Eileen visited a Marketplace

Assister Organization (MAO) on Maui where Kōkua helped Eileen enroll in an affordable health

insurance plan. She still receives coverage from the same insurance company and sees the same doctors

she did before, but there is one big difference: Eileen saved $550 per month with her new Connector

plan, which adds up to more than $6,600 per year.

Eileen is a person, not a statistic. Eileen and many more like her are early beneficiaries of the programs

offered by the Connector. They are the reason why the Connector is one of the most important

resources developed in and for the community in modern times. The goal at the Connector is to give the

people of Hawai‘i affordable access to Hawaiʻi’s outstanding health care and wellness programs so that

they can pursue healthy lifestyles and obtain the care necessary to live long, fulfilling, and productive

lives.

8.3. Technology

To date, technology implementation is substantially complete, and the Connector does not expect to

require any Hawai‘i state funding to complete development of the systems infrastructure. This report

has provided a detailed description and process flow showing how the Connector system integrates

more than 40 internal and external major functions including the following:

Individual qualification and plan selection;

Small business plan selection;

Real-time identity verification with major credit bureaus and federal services hubs, including the

Social Security Administration, the Department of Homeland Security, and the Internal Revenue

Services (IRS);

Premium assistance qualification;

Special premium assistance programs that must be implemented on short notice to adapt to

changes in regulation, court decisions, or policy, which include migrants from the nations

subject to the Compact of Free Association (COFA) and changes to immigration status

established by Executive Order;

A fully functional Small Business Health Options Program (SHOP), unique in the nation, that

incorporates both state and federal laws in an automated dual rules environment;

Supplemental insurance options for dental and vision;


“Change in circumstance” reporting to provide changes in premium assistance, plan

qualification, and Medicaid status on a real-time basis as circumstances change for customers;

Financial, premium tracking, and reporting with the insurance companies;115

IRS end-of-year tax reporting;115 and

Automated renewal functionality.115

Unlike most common web-based solutions used in daily life such as Amazon, airlines, and banking, the

rules of the ACA are more complicated than typical commercial transactions and demand higher levels

of real-time interaction, security, and privacy protection.

While the federal government and many states are focused on the technology, the Connector solution is

more than a website. The Connector placed nearly four times as many people in the Hawaiʻi-based

Contact Center, added more trained outreach staff to the field, and developed subject matter experts to

support the insurance providers who are serving clients.

Today, the Connector is operating more smoothly than ever before, and the number of customers

accessing health care through the Connector is growing. Additionally, with the cooperation of the

Department of Human Services (DHS), the Connector can now directly accesses the DHS KOLEA system,

thereby greatly reducing the time it takes to secure the Medicaid denial necessary in order to process

clients applying for premium assistance.

The Connector has also been working with the principal vendors ̶ CGI, the system integrator; Exeter,

the developer of the OneGate health exchange platform; Oracle; Optum; and others ̶ to complete the

development of its systems, correct the deficiencies, and improve both reporting and functionality.

As of June 30, 2014, the Connector’s technology costs paid to CGI, Exeter, Oracle, Optum, Mansha,

TurningPoint, PCG, and others totaled less than $70 million of the original $205 million grant. The

Connector plans to identify further sources of savings and complete the objectives as set forth in this

report.

8.4. Operational Readiness

The operations team and its strong leadership made the critical difference in the significant increase in

enrollments. Through the Chief Operations and Consumer Engagement Officer’s efforts, the Connector

trained more Kōkua to render assistance directly in the community, improve functionality at the Hawai‘i-

115

These functions are in process – estimated completion is May 2015, however alternate business processes are

in place to ensure compliance.


based Contact Center and, most importantly, leverage the improved computer technology and web

access more effectively than ever before.

To date, new enrollment for the Connector is up by more than 5,000, nearly a ten-fold increase through

the same date last year. Small business enrollment increased from approximately 250 individuals to

nearly 3,000. Average hold times at the Contact Center decreased from in excess of 20 minutes to less

than three minutes, and the average time spent in the enrollment process declined from more than an

hour to less than 10 minutes.

The operations team has also improved the personal assistance to customers navigating the process of

acquiring coverage. Many of those who are fortunate enough to have employer-provided health care

are not aware of the complexity of the process, the number of choices, and the potential impact on

families and financial well-being if someone makes the wrong choice. The ACA, while extending benefits

to many who were not previously eligible, has made this process even more complex. This is why the

Connector has invested heavily in training its staff to provide personal assistance to customers who may

not be familiar with the options from which they can select, their tax and subsidy status, the vocabulary

of health insurance, and even the English language itself. Fortunately, the Connector can provide

assistance in person or on the phone in all of these areas in multiple languages.

In summary, the work of the operations group extends far beyond the normal operational scope of the

average insurance company. The Connector operates complex technology, integrates information

among federal, state, private insurance, financial, and public interest partners. Its processes must be

user-friendly and understandable to its customers.

8.5. Financial Condition and Prospects

One of the Connector’s primary requirements is to share detailed financial information with the

legislature, administration, the federal government, insurance partners, and taxpayers who are largely

responsible for funding the Connector thus far.

Below are several major financial points:

The Connector was awarded a total of $204 million in the form of three federal grants.

As of June 30, 2014, the Connector expended:

o $70.7 million building computer-based technology;

o $15.8 million on non-IT related professional services, such as consumer assistance

program development, Contact Center establishment, training, establishment of

operational processes and protocol, legal, accounting, marketing, public relations, and

compliance;

o $7.8 million on personnel;


o $4.5 million on Medicaid reimbursement for costs allocated;

o $2.6 million on market place assister grants to community organizations; and

o $2.9 million on facility costs, operating, and other expenses.

Please see Appendix C for a list showing vendor payments that exceed $500,000. The Connector remains

committed to continuing to lower costs by identifying efficiencies.

The federal government, through the ACA, funded the development and initial operation costs

necessary, but the grants do not provide the capital necessary to support ongoing operations while the

Connector enrolls enough lives to support its own operating expenses.

In its first three years of operation, as shown in projections in previous sections, the Connector is

attracting more than $55 million in direct federal tax subsidies to businesses and the residents of

Hawaiʻi. This amount does not include the costs that the medical establishment had to pass on to those

who have insurance or paid for expenses out-of-pocket. In fact, DHS estimates that it spends

approximately $30 million per year of state taxpayer funds on the approximately 7,500 individuals who

are eligible for subsidized coverage under the ACA through the Connector.

As demonstrated in this report, an investment of approximately $28 million over the next six years will

yield a direct tax subsidy from the federal government of over half a billion dollars within 10 years. The

subsidy continues, together with surplus from the Connector that has the potential to grow to

approximately $8 million per year, indefinitely.

8.6. The Connector and the Insurance Industry

Hawaiʻi’s outstanding health care system exists for a number of reasons. The PHCA, by providing

employer-supported basic insurance coverage for a significant part of the community, is a major reason.

The two largest conventional insurers, Kaiser and HMSA, demonstrate the benefits of providing large-

scale health and wellness coverage for the community. In addition, HMAA and UHA, with their unique

business models, are making important contributions to the overall health and well-being of Hawaiʻi.

There are other specialty carriers, including dental, vision, and carriers providing Medicare supplements.

The major insurance carriers, together with the specialty carriers, provide coverage for individuals

through the Connector. Kaiser is the only major carrier providing insurance to small businesses through

SHOP; however, the Connector has a fully functional SHOP program that can and does offer small

business access to affordable health insurance that is compliant with both the PHCA and the ACA. This

functionality is working smoothly, a fact that has been overlooked by many. Unfortunately, the

Connector’s overall system did not operate well enough in its first year to justify the participation of all

of Hawaiʻi’s health insurance carriers.


The Connector will continue to work with the carriers to address their specific issues and demonstrate

the value of SHOP in order to provide seamless coverage for individuals and employers alike and provide

an easy, effective way for Hawaiʻi’s small businesses to capture the two-year federal tax credit of up to

50 percent of their premiums.

Businesses in a number of other states are already generating hundreds of millions of dollars in direct

tax benefit for their economies through SHOP, even though their systems require significantly more

manual intervention than the Connector’s system does to affect coverage through the exchanges.

It is important to note that the Connector has one last important function for the insurance industry in

order to fully complete the implementation of SHOP. At present, premium payments are reconciled in

an off-line system. The federal grant provides funding to completely automate this function, and this

functionality is slated to be deployed after Open Enrollment is complete in 2015.

8.7. Opportunities for Additional Revenue

The Connector’s investment in technology has the potential to pay significant dividends outside of its

core market. However, it is important to note that the original studies performed for the Department of

Consumer and Commerce Affairs (DCCA) and others looked primarily at the uninsured population as the

main market for the Connector’s services.

The past two years have shown that there are many more individuals, in addition to the uninsured, who

can benefit directly from purchasing their insurance through the Connector. Below are just three

examples:

Persons on COBRA: In October 2014 there were more than 27,000 individuals who were

unemployed and eligible to receive COBRA. Based on initial analysis, individuals could save up to

75 percent of the cost of insurance through coverage on the Connector, and are provided more

insurance options than offered by their former employers. This one category of customer has

the potential to add more than 50,000 insured individuals to the Connector’s market.

Pacific Islander Population: Hawaiʻi has a high number of Pacific Island residents and, with the

changes in immigration policies, many more may be eligible for the Connector. The State of

Hawaiʻi paid much of the cost of their health care before the ACA. Today, through the

Connector, Hawaiʻi can transfer the bulk of that cost to the federal government through the

state’s premium assistance program.

Foreign Students: One of Hawaiʻi’s growing sources of revenue is from its foreign student

population. Many of these students are not insured except for the first-aid treatment they can

receive through student health centers. These students, and students who are from families in

which the parents are not otherwise insured, are eligible for coverage through the Connector.

This population exceeds 50,000 today, and is growing.


The Connector’s technology already supports individual and business plan selection. This is an important

feature, and one not well understood by the market. Here are two examples of how the Connector can

market this technology commercially:

Multi-Employer Health Plans: There are a number of multi-employer health insurance plans in

place in the State of Hawaiʻi. These include public, union, and private plans. At present, each

plan must be supported with expensive customized technology. The Connector’s systems can

manage this function for any or all of the aforementioned plans, verifying employee

identification, eligibility, and family status, displaying a selection of plans, enrolling the

employee, and managing payment. There are substantial revenue streams available to the

Connector in this area, which present a future opportunity.

Health Care Captives: Hawaiʻi has an active captive insurance marketplace in which private

businesses self-insure conventional property and casualty insurance exposures. Health care

captives can be another important source of revenue for both the state’s financial institutions

and the Connector. The Connector will work with the DCCA Insurance Division and others in the

state government to explore and develop this source of revenue.

There are other viable sources of revenue that are possible to develop through the Connector’s

technology and corporate structure. The Connector will need some time to build these lines of business

and provide its partners in government and industry with the information necessary for them to

determine if they are viable and appropriate.

8.8. Conclusion

The Hawaiʻi Health Connector is more than just a marketplace designed to provide coverage to an

“uninsured” population as popularized with those familiar with the ACA. It is a dynamic business model

that can – if given the operational funding – provide a significant return to the economy of the State of

Hawaiʻi in terms of both human capital and additional capital for economic growth and development.

While the PHCA made a greater contribution to public health and health coverage than virtually any

other legislation of its kind, the combination of the federal tax subsidies, liberalization of insurance

eligibility requirements, and expanded Medicaid benefits offered through the Connector have the

potential to provide access to Hawaiʻi’s outstanding medical and wellness services to every resident of

the state.

Moreover, because the Connector’s technology supports the dual rules environment, it can and does

reinforce the measures the State of Hawaiʻi must take to ensure that businesses observe the provisions

of the PHCA and provide a higher level of protection to Hawaiʻi’s workers than required by the ACA.

In addition, the United States Supreme Court recently decided it will hear King v. Burwell – a case that

considers whether states without their own exchanges will benefit from federal tax subsidies provided

for by the ACA. Fortunately, Hawaiʻi is well positioned, no matter which way the case is decided.


While there were, and remain, significant challenges for the Connector, including the completion of the

technology platform, adjustments to its relationships with its state and federal partners, and acceptance

by all of the insurance providers in Hawaiʻi, there are opportunities that make it worthwhile to remain

on course and complete the work that was begun in 2011 with the passage of the enabling legislation

for the Connector.

In order to make this happen, however, the Connector must find the funds necessary to continue

operations until sufficient revenue is generated to cover operating costs. Even though the Connector has

underspent its federal grant by more than $50 million, there are no federal funds available to cover

maintenance and operations after January 1, 2015. Enrollment, while growing, is unlikely to produce

sufficient revenue to cover costs unless operations are curtailed to the point where growth is in

jeopardy.

Therefore, the Connector proposes to work with the advice and cooperation of its partners in the state

government to determine if there are opportunities for cost savings, revenue generation, and other

means to cover its shortfall. In the interim, the Connector hopes to undertake the following legislative

initiatives:

Increase potential market by expanding the qualified small business from employers with 50 or

fewer employees to those with 100 or fewer, starting July 1, 2015;

Work with the Insurance Division to determine if modification to existing legislation will be

required to expand Hawaiʻi’s Captive Insurance Law to include health care captives; and

Propose a funding mechanism to cover the residual shortfall with a capitalization program

similar to that of Hawaiʻi Employers’ Mutual Insurance Company to, in the long run, return all

funds advanced to the Connector back to the State of Hawaiʻi.

Through the support of the community, the Connector can earn its place as one of the most important

pieces of infrastructure developed in recent times.


9. Appendices

9.1. Appendix A: Cost Information Sources by State

9.2. Appendix B: Low and High Case Metrics

9.3. Appendix C: Schedule of Significant Contracts

9.4. Appendix D: Community Organizations

9.4.1. Certified Application Counselor Organizations (CACOs)

9.4.2. Marketplace Assister Organizations (MAOs) and MAO/CACO-blend organizations

9.4.3. Certified Agents/Brokers

9.5. Appendix E: Financial Statements and Independent Auditors’ Reports

June 30, 2013 and 2012

Audited Financial Statements

Independent Auditors’ Report Required by Government Auditing Standards (GAO):

Internal Controls Over Financial Reporting and On Compliance and Other Matters

Independent Auditors’ Reports Required by OMB Circular A-133 on Compliance for

Each Major Program; Internal Controls Over Compliance; and the Schedule of

Federal Awards


9.1. Appendix A: Cost Information Sources by State

The following table lists the sources used to estimate cost information for each state operating a state-

based marketplace.

State Total Estimated Cost Summary

California "Covered Calif. Has $363M in Grants Remaining for FY2014-15." California Healthline. April 21, 2014.

Accessed December 21, 2014. http://www.californiahealthline.org/articles/2014/4/21/covered-calif-

has-363m-in-grants-remaining-for-fy-201415.

Johnsrud, Sue. "2014-15 Covered California Budget." Covered California. Accessed December 21,

2014. http://hbex.coveredca.com/financial-reports/PDFs/2014Budget.pdf.

Colorado "Budget and Projected for FY2014; Budget for FY2015." Connect for Health Colorado. Accessed

December 21, 2014. http://connectforhealthco.com/wp-content/uploads/2013/04/20140609-

FY2015-Aggregate-Budget-Details1.pdf.

"Finance Committee, End of FY Income and Expense Summaries." Connect for Health Colorado.

Accessed December 21, 2014. http://connectforhealthco.com/about-us/stakeholders-and-

board/board-committees/finance/.

Connecticut Nagy, Barbara. "Cost To Reach CT's Uninsured: $156 Million." Connecticut Health Investigative Team.

January 5, 2014. Accessed December 21, 2014. http://c-hit.org/2014/01/05/cost-to-reach-cts-

uninsured-156-million/.

District of Columbia Davis, Aaron C. “Broad new tax to fund D.C. health exchange challenged in court.” The Washington

Post. July 3, 2014. Accessed December 21, 2014. http://www.washingtonpost.com/local/dc-

politics/broad-new-tax-to-fund-dc-health-exchange-challenged-in-court/2014/07/03/5b4bdfd8-

02d1-11e4-8572-4b1b969b6322_story.html.

Davis, Aaron C. "D.C. Council Approves Broad New Tax on Insurance to Cover City's Health-care

Exchange." The Washington Post. May 6, 2014. Accessed December 21, 2014.

http://www.washingtonpost.com/local/dc-politics/dc-council-approves-broad-new-tax-on-

insurance-to-cover-citys-health-care-exchange/2014/05/06/da3770bc-d51f-11e3-8a78-

8fe50322a72c_story.html.

DeBonis, Mike. "Judge Dismisses Challenge to D.C. Health Exchange Funding." The Washington Post.

November 14, 2014. Accessed December 21, 2014. http://www.washingtonpost.com/blogs/mike-

debonis/wp/2014/11/14/judge-dismisses-challenge-to-d-c-health-exchange-funding/.

Hawaiʻi Hawaiʻi financial information is included in this 2014 Annual Report.

Idaho Russell, Betsy Z. “Idaho reports flawless opening of health insurance exchange.” The Spokesman-

Review. November 18, 2014. http://www.spokesman.com/stories/2014/nov/18/idaho-reports-

flawless-opening-of-health/.



Kentucky Alford, Roger. “Ky. insurance exchange grows into $39.5M operation.” Modern Healthcare. February

18, 2013. http://www.modernhealthcare.com/article/20130218/INFO/302179998.

Young, Matt. “Beshear reauthorizes health care exchange, again sidestepping state lawmakers.”

Lexington Herald-Leader. July 2, 2014. http://www.kentucky.com/2014/07/02/3320535_beshear-

reauthorizes-health-care.html?rh=1.

Maryland "Operating Budget Data." Maryland Health Benefit Exchange. Accessed December 21, 2014.

http://mgaleg.maryland.gov/pubs/budgetfiscal/2015fy-budget-docs-operating-D78Y01-Maryland-

Health-Benefit-Exchange.pdf.

Massachusetts Apicella, Daniel. "FY2014 and FY2015 Administrative Budget Update." Massachusetts Health

Connector. July 10, 2014. Accessed December 21, 2014. https://www.mahealthconnector.org/wp-

content/uploads/board_meetings/2014/2014-07-10/AdminBudget_071014.pdf.

Dumcius, Gintautas. "Massachusetts' Health Care Exchange Website Fix Cost State Additional $26

Million, Gov. Deval Patrick Says." Mass Live. October 10, 2014. Accessed December 21, 2014.

http://www.masslive.com/politics/index.ssf/2014/10/massachusetts_health_care_exha.html.

Minnesota Todd-Malmlov, April. "MNsure Financing and Budget Overview." MNsure. May 29, 2013. Accessed

December 21, 2014. https://www.mnsure.org/images/Bd-2013-05-29-MNsureFinancing-

BudgetOverview.pdf.

New York "Blueprint Summary for Finance and Accounting." New York State of Health. October 1, 2012.

Accessed December 21, 2014. http://info.nystateofhealth.ny.gov/sites/default/files/8-

0_exchange_five_year_budget.pdf.

Rhode Island Archambault, Josh. "Small State, Big Consequences: Will Rhode Island Be The First With a 'Functional'

State-Based Exchange To Switch To Healthcare.gov?" Forbes. May 22, 2014. Accessed December 21,

2014. http://www.forbes.com/sites/theapothecary/2014/05/22/small-state-big-consequences-will-

rhode-island-be-the-first-with-a-functional-state-based-exchange-to-switch-to-healthcare-gov/.

"Status Updates and Upcoming Policy Choices." Rhode Island Public Expenditure Council. October 1,

2014. Accessed December 21, 2014. http://www.ripec.org/pdfs/2014-October-HSRI-e.pdf.

Vermont "Budget Document: State Fiscal Year 2015." Department of Vermont Health Access. Accessed

December 21, 2014. http://dvha.vermont.gov/budget-legislative/dvha-sfy15-budget-document-

v2.pdf.

True, Morgan. "$72 Million Spent on Vermont Health Connect to Date." VTDigger: Vermont

Journalism Trust. June 13, 2014. Accessed December 21, 2014. http://vtdigger.org/2014/06/13/72-

million-spent-vermont-health-connect-date/.



Washington "August 2014 Grant Report - Cash Basis." Washington Health Benefit Exchange. August 1, 2014.

Accessed December 21, 2014.

http://wahbexchange.org/files/2014/1469/3530/Finance_Report_August_2014_Final.pdf.

"PL-N4 Washington HBE Operations." Washington Healthcare Authority. Accessed December 21,

2014. http://hca.wa.gov/Documents/budget/15-17_PL-N4_Washington_HBE_Operations.pdf.


9.2. Appendix B: Low and High Case Metrics

SMS Low Case

Market Penetration

Enrollment Forecast

SMS High Case

Market Penetration

Enrollment Forecast


138-400% FPL 17.0% 23.0% 26.6% 29.2% 31.0% 32.3% 33.3% 34.0% 34.5% 34.9%

401%+ FPL 8.3% 11.2% 13.2% 14.6% 15.6% 16.3% 16.8% 17.1% 17.4% 17.5%

COFA 85.0% 82.5% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6% 82.6%


Small Group (2-50) 0.7% 1.6% 2.1% 2.8% 3.2% 3.6% 4.2% 4.4% 4.6% 4.7%

Large Group (51+) 0.0% 0.0% 0.8% 1.4% 1.9% 3.3% 4.3% 5.1% 5.8% 6.3%


Small 1,460 3,358 5,027 6,989 8,255 10,209 12,311 13,413 14,449 15,121

Large 0 0 4,200 7,350 9,975 17,325 22,575 26,775 30,450 33,075

138%-400% FPL 10,070 13,623 15,767 17,319 18,399 19,179 19,778 20,190 20,483 20,719

401%+ FPL 2,327 3,140 3,704 4,101 4,385 4,586 4,728 4,813 4,897 4,927

COFA 6,375 6,188 6,195 6,195 6,195 6,195 6,195 6,195 6,195 6,195

1,460 3,358 9,227 14,339 18,230 27,534 34,886 40,188 44,899 48,196

18,772 22,951 25,666 27,615 28,979 29,960 30,701 31,198 31,575 31,840

20,232 26,309 34,893 41,954 47,209 57,493 65,587 71,386 76,474 80,036

SHOP

Individual

/

Family

Total SHOP

Total I/F

Enrollment Estimate


138-400% FPL 22.0% 32.1% 38.1% 42.5% 45.6% 47.9% 49.5% 50.7% 51.6% 52.2%

401%+ FPL 13.3% 20.0% 25.0% 28.5% 30.9% 32.5% 33.6% 34.3% 34.8% 35.2%

COFA 85.0% 86.8% 86.8% 86.8% 86.8% 86.8% 86.8% 86.8% 86.8% 86.8%


Small Group (2-50) 0.8% 6.0% 9.4% 13.5% 14.0% 13.2% 12.1% 11.7% 11.9% 12.1%

Large Group (51+) 0.0% 0.0% 0.8% 1.4% 1.9% 3.3% 4.3% 5.1% 5.8% 6.3%


Small 1,669 12,591 20,437 29,712 31,329 30,842 29,392 29,291 30,422 31,411

Large 0 0 4,200 7,350 9,975 17,325 22,575 26,775 30,450 33,075

138%-400% FPL 13,032 19,013 22,583 25,208 27,064 28,442 29,399 30,107 30,636 30,989

401%+ FPL 3,729 5,608 7,016 8,005 8,686 9,143 9,456 9,653 9,794 9,909

COFA 6,375 6,510 6,510 6,510 6,510 6,510 6,510 6,510 6,510 6,510

1,669 12,591 24,637 37,062 41,304 48,167 51,967 56,066 60,872 64,486

23,135 31,131 36,109 39,723 42,260 44,095 45,365 46,271 46,940 47,408

24,804 43,722 60,747 76,785 83,564 92,261 97,332 102,337 107,812 111,894

SHOP

Individual

/

Family

Total SHOP

Total I/F

Enrollment Estimate


9.3. Appendix C: Schedule of Significant Contracts

Hawaiʻi Health Connector:

Schedule of Significant Contracts

Contractor

Expenditures Incurred from Inception to

June 30, 2014

CGI Technologies & Solutions, Inc.

$ 40,773,036

Mansha Consulting LLC

$ 14,741,927

Department of Human Services, State of Hawaiʻi

$ 7,574,941

Public Consulting Group, Inc.

$ 5,553,287

Maximus Health Services, Inc.

$ 3,896,438

Goodsill Anderson Quinn & Stifel

$ 3,297,423

Milici Valenti Ng Pack, Inc.

$ 2,639,836

Turning Point Global Solutions, LLC

$ 2,209,272

Oahu Publications

$ 1,122,413

Kataria Holdings LLC

$ 593,954

OptumInsight, Inc.

$ 555,982

Department of Commerce and Consumer Affairs, State of Hawaiʻi

$ 512,909


9.4. Appendix D: Community Organizations

9.4.1. Certified Application Counselor Organizations (CACOs)

Cardon Outreach

Kalihi-Plama Health Center

Molokai General Hospital

Waianae Coast Comp. Health Center

Waikiki Health Center

Waimanalo Health Center

9.4.2. Marketplace Assister Organizations (MAOs) and MAO/CACO-blend organizations

Chinese Christian Mission

Hamakua Health Center, Inc.

Hawaiʻi Health Foundation (ended

November 2014)

Hawaiʻi Island HIV/AIDS Foundation

Hawaiʻi Island Workforce & Economic

Development ʻOhana, Inc.

Hoʻola Lāhui Hawaiʻi

HOPE Services Hawaiʻi, Inc.

Hui No Ke Ola Pono

Institute for Human Services, Inc.

Kalanihale

Kauaʻi Economic Opportunity, Inc.

Ke Ola Mamo, Inc.

Kipuka o Ke Ola (Five Mountains)

Kōkua Kalihi Valley Comprehensive Family

Services

Koʻolauloa Community Health & Wellness

Center, Inc.

Legal Aid Society of Hawaiʻi

Pacific Gateway Center

Project Vision Hawaiʻi

Siu Lo Li dba Liʻs Translation

Sovereign Councils of the Hawaiʻian

Homelands Assembly (Hokupili

Foundation)

The ARC of Hilo

The Bay Clinic, Inc.

Waianae Coast Community Mental Health

Center, Inc. (Hale Na'au Pono)

West Hawaiʻi Community Health Center


9.4.3. Certified Agents/Brokers

Aaron Goddard

Adele Beckwith

Alex Sule

Antoinette Lee

Benjamin Omlid

Bricyn Afong

Carole Zogut

Chad Swartz

Christopher Kelley

Corwin Ingram

Damien Morales

Darren Tom

David Elton

Deveenya Bell

Dwight Cushman

Edward Motosue

Elena Martinez

Garren Kawamata

Greg Coscino

Gregg Kageyama

Hasani Anderson

Haylee Faustin

Heather Garbarski

Jeanette Malucci

Jessica Crane

John Todd

Joni Tamayo-Wilson

Juan Martin Escoto

Kai Takekawa

Kaʻili (Avis) Honbo

Karen Rickard

Kathryn Canlas

Lachelle Rodrigues

Les Fujimoto

Linda Ishikawa (Chan)

Marcus Griego

Marcus Meadows

Mario Ellis

Matthew Casabar

Michael Daugherty

Michael Elliott

Myoung Kim

Nathanael Prince

Nathaniel Graham II

Paul Wittekind

Pearl Yuen

Peter Amelotte

Rebecca Logan

Reed Anderson-Teshima

Robert Eaton

Robert Espinoza

Russell Robertson

Stafford Oyama

Stefan Hotya

Steph Flores

Stewart Sato

Tanya Harrington

Timi McDonald

Travis Motosue

Vanessa McGhee

Wendy Grace

Weston Hic

9.5. Appendix E: Financial Statements and Independent Auditors’ Reports

hawaii health connector 2014 annual report

Documents

hawaii health connector

health coverage

state of hawaii

overall state of health

affordable health care

health reform

hawaii prepaid health

health insurance coverage