Hawaii’s troubled health insurance exchange needs state taxpayers to shore up an estimated $2.5 million deficit next year.

Hawaii Health Connector CEO Jeff Kissell, who just took over the state-created nonprofit in October, told a legislative oversight committee Monday that the state appropriation should be viewed as an investment that will produce $500 million in federal tax subsidies within the next decade.

Aside from improving the website for the insurance exchange and making other operational changes to boost efficiency, the success of the Connector will depend in large part on attracting at least 35,000 new members, he said.

Jeff Kissell, Executive Director of the Hawaii Health Connector speaks to lawmakers at hearing at the Capitol. 29 dec 2014. photograph Cory Lum/Civil Beat

Jeff Kissell, executive director of the Hawaii Health Connector, makes his case for more state support at a legislative oversight committee hearing Monday.

Cory Lum/Civil Beat

The good news is the break-even point no longer requires having 100,000 people enrolled, he said. As the Health Connector’s operations have improved, that number has been lowered to an estimated 50,000 to 70,000.

There are more than 15,000 residents currently enrolled, more than 10 times as many people as this time last year, he said, adding that he’s “highly confident” there will be over 20,000 enrolled by February.

Kissell said he recognized the “mistakes in strategy” and “errors in judgment” that have been made since the Connector’s inception in 2011. He also acknowledged the challenges that lie ahead while presenting an optimistic view of the exchange’s future.

But state money isn’t the only thing he said he needs lawmakers’ to provide so he can get the job done. He also wants to increase the potential market overall.

He sees an estimated 50,000 students in Hawaii who are eligible for coverage. And he hopes to convince lawmakers to change the definition of “small business” from fewer than 50 employees to 51-100 workers.

Kissell wants to propose a funding mechanism to cover the Connector’s shortfall “so we can capitalize this entity and repay the people of this state.” He said the 2015 deficit is expected to come in at $2.5 million, but it could be less depending on operating costs.

“It’s not just a matter of money,” he said. “It’s a matter of extending the quality of life for these individuals.”

Left, Chair person Representative Angus McKelvey, Representative Della Au Belatti and Senator Sam Slom listen to Jeff Kissell, Executive Director of the Hawaii Health Connector at hearing at the Capitol. 29 dec 2014. photograph Cory Lum/Civil Beat

State lawmakers listen to a report on the Hawaii Health Connector during a briefing Monday at the Capitol. From left, Rep. Angus McKelvey, co-chair of the legislative oversight committee, Rep. Della Au Belatti and Sen. Sam Slom.

Cory Lum/Civil Beat

It was the first official meeting of the Health Connector Legislative Oversight Committee, chaired by Rep. Angus McKelvey and Sen. Roz Baker.

The Legislature created the committee last session as part of an effort to take a more proactive role in monitoring the beleaguered Health Connector. Act 233, which took effect July 8 without Gov. Neil Abercrombie’s signature, also appropriated $1.5 million to the insurance exchange and removed people representing insurers from the Health Connector’s board of directors.

Gov. David Ige, who voted in favor of the legislation earlier this year as a senator, has been critical of the Health Connector, calling it a “disaster” while on the campaign trail this fall. His proposed state budget for the next two years did not include funding for the insurance exchange, but he left open the possibility that he would request funding during the session, which starts Jan. 21.

The committee includes eight members, but only four were present for the nearly two-hour briefing Monday afternoon.

Sen. Sam Slom, an outspoken critic of the Connector and the federal Affordable Care Act for which it was created, peppered Kissell with questions and criticisms.

He faulted the Connector for not signing up nearly the number of people it said it would have at this point, wasting taxpayer dollars in the process.

Senator Sam Slom questions Jeff Kissell, Executive Director of the Hawaii Health Connector  at hearing at the Capitol. 29 dec 2014. photograph Cory Lum/Civil Beat

Sen. Sam Slom questions Jeff Kissell, executive director of the Hawaii Health Connector, during a briefing Monday.

Cory Lum/Civil Beat

The federal government gave the Connector a $205 million grant to get up and running. As of June 30, the amount spent on contractors to develop an online portal was less than $70 million.

“The federal government provided enough money to put the inventory on the shelves but didn’t pay the cashier,” Kissell said.

The Connector plans to spend $28 million from the federal grant over the next six years to finish building the portal and start generating a surplus, he said.

“We did not spend $200 million building a computer and have no intention of doing so,” Kissell said. “But as an executive, I can tell you we could have achieved the same results and spent less money.”

Kissell spent his career working for energy companies, most recently as CEO of Hawaii GAS. He replaced interim Executive Director Tom Matsuda, who took the reins after the initial executive director, Coral Andrews, resigned last December amid criticism of her management.

Kissell highlighted the improvements that have been made. There used to be an average wait time on the phone of 20 minutes that is now down to three minutes, and enrollment time overall has decreased from one hour to 15 minutes.

“It is not a website; it is a complicated piece of technology,” he said. “I believe it was unreasonable to expect instant success.”

Kissell apologized for the board’s lack of transparency and tried to assure lawmakers, saying it is one thing to just provide the financials and another to properly explain them.

He heaped praise on the state’s largest insurers, HMSA and Kaiser, calling them “fine institutions.”

He acknowledged it was “possibly our own fault” that Kaiser is the only carrier providing insurance for small businesses. He said he will be working hard to get HMSA back on board since it announced in August that it would be pulling out of the exchange, affecting more than 300 businesses who bought plans covering more than 600 people.

Aside from trying to get more state financial support, Kissell said the Connector plans to increase its revenue by upping the fees on premiums from the current 2 percent to 3.5 percent in 2016.

A more detailed report is expected from the Connector in January.

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