Chairs Herkes and Keith-Agaran, Vice Chairs Yamane and Rhoads and Committee Members:
The League of Women Voters of Hawaii cannot support SB2434, SD1, HD1 without amendments, and we respectfully offer six amendments for your consideration.
Hawaii’s health insurance exchange (the “Connector”) is at the heart of the federal Affordable Care Act (ACA) strategy for making health insurance available and affordable to some 100 thousand people in Hawaii’s individual and small group markets.
Hawaii’s individual and small group markets are currently dysfunctional, offering inadequate choices and high prices, and to many individuals offering nothing at all. The exchange promises to increase competition among insurers and if organized well it can focus insurer competition on price and quality rather than on risk avoidance. The exchange will also open the door through which lower and middle-income residents can obtain premium tax credits and cost reduction payments to reduce the cost of health insurance and health care services, and through which low-income people can access Medicaid and Children’s Health Insurance Program (CHIP) coverage.
Compared with most states, Hawaii is further along in establishing an exchange that will comply with federal requirements under the Affordable Care Act (ACA). The health insurance exchange task force (and later the Interim Board of Directors for the Connector) has worked diligently to see that the exchange is in place and operational by January 1, 2014. The federal Department of Health and Human Services (HHS) must, however, determine by
January 1, 2013, whether or not a state will have an exchange in place by that date. In states that fail to establish exchanges on a timely basis, the federal government must establish “federally-facilitated exchanges.”
January 1, 2013 is less than a year away. In 2011, Hawaii passed Act 205 establishing the Hawaii Health Connector (“Connector”), opting for a clearinghouse arrangement, with a nonprofit 15-member Board. Under S.B. No 2434 the Interim Board is to be replaced with an eleven-member board on June 30, 2012. The Governor’s nominations to the Board which will be considered by the Senate on Tuesday, March 20th.
GOVERNANCE FEATURES OF THE HAWAII HEALTH CONNECTOR
Fortunately, the current and future Board has included many regulatory stakeholders such as the State Insurance Commissioner and a representative from the Department of Health and Human Services. I say “fortunately,” because it is the State Insurance Commissioner who can be most influential in maximizing the number of qualified
health plans that wish to offer insurance through the exchange, and it is in the consumer’s interest to have competition among a large number of insurers. And the Department of Health and Human Services could be considered the most influential health care purchaser in the State, by virtue of determining eligibility (and overseeing the State’s share of premium payment) for those eligible for Medicaid. We are counting on both these
regulators to protect the interest of consumers.
Unfortunately our interim Exchange Board has included little consumer representation and little employer representation. In addition, though Federal funding was available for a Consumer Advocate to the Board, the Interim Board did not apply for this funding. Nearly all states with established exchanges have created independent governing Boards, and most include representatives from state government, consumers, subject matter experts, and small and large employers. Typically, states with active purchase exchanges prohibit industry
representation,1 The League of Women Voters of Hawaii strongly believes health insurers and health insurance producers (agents and brokers who sell health insurance) should be prohibited from serving on the Connector which sells its products or those of a competitor.
We applaud the fact that pursuant to Chapter 435 the Interim Board established a conflict of interest policy governing the nonprofit. But this arrangement allows the Connector to determine for itself how to handle interest conflicts, and insurers dominate consumer interests on the Board. This is essentially a public exchange operated by a nonprofit, and we question whether the Board should operate outside Sunshine Law, §§ 92-1 to 92-13 and why the Board is not subject to State Ethics regulation.
Operational Issues: Individual Market vs. Small Group Market
We are dismayed that SB2434 proposes to segment the Connector market by dividing this market into two separate programs, an individual market and a small group market. While the measure requires that an insurer who offers a plan to the more profitable small group market offer a plan to the individual market, the measure also permits waivers of this requirement by the insurance commissioner, if an insurer demonstrates that offering plans to both markets would result in insolvency or other extreme economic hardship.
Our goal with this health insurance exchange should be clear – to maximize the supply of insurance from qualified health plans that participate in the exchange, while permitting health insurers to cover all operating costs and earn a reasonable return on the qualified policies. Having the largest maximum pool of similar exposures to loss while at the same time continuing to allow medical underwriting 2 without restriction seems the ideal approach. We see no compelling reason for two separate programs, and believe segmenting the market could easily have an adverse effect on the number of insurers who would be willing to participate in the individual program. If few qualified insurers step up to offer plans through the individual market, it seems entirely possible this would also have a direct and negative effect on the State’s Medicaid program.
We want the health exchange to have a single pool that can attract larger insurers, because these organizations are normally prepared to invest in wellness programs. Most consumers now recognize lifestyle-related factors such as obesity caused by insufficient exercise and unhealthy food choices, excessive alcohol use, smoking and use of street drugs can increase utilization and therefore insurance prices. We want to help drag down the health care cost curve with the help of insurers and health care providers who provide such programs. We’re all in this effort together!
The League applauds the Insurance Commissioner’s sometimes heroic efforts to attract and retain financially strong insurers to Hawaii. However, we believe there should be a single pooled market for the small group and individual sectors, and a single risk pool for this program. We hope that this Committee will delete the first section of this measure establishing two separate programs for individual and small group markets as well as the related exception permitting non- participation by insurers.
In fact, besides indirect utilization control, the Connector will have other significant rate regulation influence. The State Insurance Commissioner sits on the Board and the ACA requires exchanges to receive and make available to the public rate increase justifications from Qualified Health Plans before the Qualified Health Plan can put the increase into effect. And speaking of information, why would a “transparent marketplace,” such as that envisioned in the Connector’s mission statement, isolate rate quotations for an individual from rate quotations for a small group?
Navigator Program and the Role of Insurance Producers
Regarding the Navigator program described in this measure, navigators will educate and inform health insurance consumers and assist them in navigating the exchanges. SB2434 correctly prohibits insurance producers and brokers from serving as navigators for the connector, since these parties play an active role in marketing exchange products. What is the definition of “producer” under the measure – does it include insurance agents? We are concerned that web-based agents might steer consumers towards plans that are most profitable for the agent, not necessarily the best placement for the consumer. We do not want web-based agents to undermine the Connector. Web-based brokers must allow consumers to view all Qualified Health plans offered through the Connector, display all Qualified Health Plan information provided through the exchange, not steer consumers to particular plans through incentives such as rebates or giveaways, and allow consumers to withdraw from the web-based broker and use the exchange website instead. Agents and brokers will also have to be registered with the exchange and comply with its requirements. How this will all work is far from clear, but we expect all Hawaii producers to support the exchange.
The League of Women Voters respectfully suggests the following six amendments:
1. that SB 2434, SD1, HD1 Section 3 be amended as follows:
(a) By deleting this subsection in its entirety.
SECTION 3. Section 435H-4, Hawaii Revised Statutes, is amended as follows:
2. By amending subsection (a) to read:
"(a) The Hawaii health connector shall be a nonprofit entity governed by a board of directors that shall comprise fifteen members appointed by the governor and with the advice and consent of the senate pursuant to section 26-34; provided that the governor shall submit nominations to the senate for advice and consent no later than February 1 , 2012[;], and no later than February 1 in any year thereafter in which nominations are made; and provided further that the senate shall timely advise and consent to nominations for terms to begin July 1, 2012 [,], and no later than July 1 in any year thereafter in which nominations are made. Members of the interim board shall be eligible for appointment to the board."
3. By amending subsection (c) to read:
"(c) Board members shall serve staggered terms [(strikeout)and the interim board shall recommend an appropriate schedule for staggered terms; provided that this(end strikeout)] and shall be appointed to terms of four years; provided that of the initial appointees, five shall be appointed to a two-year term, and five shall be appointed to a three-year term. Each member shall hold office until the member's successor is appointed and qualified. This subsection shall not apply to ex-officio members, who shall serve during their entire term of office."
4. By amending subsection (b) to read:
(b) The membership of the board shall reflect geographic diversity and the diverse interests of stakeholders, representing consumer interests, including consumers who are beneficiaries, advocates for enrolling hard to reach populations, trade associations and other organizations representing the interests of small businesses, and organizations whose primary mission is to advocate for consumers. [(strikeout)Including five consumers, one employer, three insurers, and two providers (end strikeout)] A member of the board or staff of the Hawaii health connector shall not, while serving on the board or the staff of the Hawaii health connector, be employed by, a consultant to, a member of the board of directors of, affiliated with, or otherwise a representative of, an insurer, an agent or broker, a board member, or an employee of a trade association of insurers, a health care provider who has an ownership interest in a professional health care practice receiving compensation for rendering services as a health care provider, or a health care facility or health clinic. The director of commerce and consumer affairs or the director's designee, the director of health or the director's designee, the director of human services or the director's designee, and the director of labor and industrial relations or the director's designee shall be ex-officio, voting members of the board.
5. By amending subsection (f) to read:
(f) The board shall maintain transparency of board actions, including public disclosure and posting of board minutes on the connector's website according to provisions adopted by the legislature [(strikeout) based on recommendations of the interim board. (end strikeout)] The functions of the Hawaii health connector are of such significance to the public that all of its business shall be conducted in accordance with the Sunshine Law, §§ 92-1 to 92-13.
6. By adding subsection (g) to read:
(g) The board shall have authority to constitute a standing committee comprised of one or more representatives from each insurer, and one or more agents or brokers, to provide information to the board.
Thank you for the opportunity to submit testimony.
1 “Focus on Health Reform,” The Henry J. Kaiser Foundation, January 2012, p.2.
2 Medical underwriting is the process that allows insurance companies the right to review the health history of prospective members. An individual’s health status can be used to determine the premium charged. In Hawaii, we have guaranteed renewability, which means that if you paid all of the premiums, you cannot be denied coverage even if you become ill.