$28M debt plan pulled from health exchange bill

HONOLULU — A legislative committee has approved a bill related to Hawaii’s health exchange, but it removed a key part of the proposal that would allow the exchange to issue $28 million in debt financing.

The decision came after concerns were raised about the plan, including the idea that the state would back the debt using its reserve fund.

“We’re not saying we don’t want it, we’re saying we want the finance committee to look at the serious issues,” said Rep. Angus McKelvey. “You don’t want to pull money out of the reserves.”

The House Committees on Health and Commerce and Consumer Protection voted Wednesday to remove the debt-financing plan from the bill, but McKelvey said the finance committee could later put the language back in and approve the bill.

The Hawaii Health Connector will need about $28 million to maintain operations through 2022, according to the latest sustainability plan from its CEO Jeff Kissel. At that point it’s expected to break even and begin paying off the loan interest estimated at $4 million through its revenues, Kissel said.

If the bill fails, the exchange will get by, but it would hamper enrollment efforts, he said.

“There’s sufficient funding for us to reduce our activity to a minimal level so that people won’t lose their coverage,” Kissel said. “We can protect our people, but it would effectively stop the growth of new enrollments.”

In its first year, enrollment fell far short of projections, reaching about 10,000 people instead of the 100,000 to 200,000 some public officials predicted. The enterprise only collected about $121,000 in issuer fees instead of the $1 million it anticipated in its budget, and the state granted the exchange $1.5 million.

But enrollment, which brings in revenue, has improved since Kissel came on board.

Under its sustainability plan, the exchange had a target of enrolling 27,260 people by June 30. As of Tuesday, the Connector had enrolled 32,500 individuals, Kissel said. That number of enrollees puts the exchange’s revenues in the ballpark of $4 million per year, based on an average monthly revenue of $10 to $12 per enrollee, Kissel said.

The panel moved the debt financing language to its committee report, so that it would be available for the finance committee to consider. But the plan to finance the non-profit health exchange faces hurdles.

“We don’t usually guarantee a debt of non-state agencies,” said Roderick Becker, deputy director of the Department of Budget and Finance. “If it is appropriate to back their debt, we would prefer that the general fund back it, instead of a reserve fund, because they’re reserves. They’re used for rainy days and when revenues decline and things like that.”