Governor Neil Abercrombie

BY JIM DOOLEY – As the U.S. Supreme Court weighs the legality of President Obama’s national health care initiative, a new Hawaii nonprofit agency is spending $15.4 million to put the plan in action here.

Governor Neil Abercrombie said today that “Hawai’i is the first state in the nation to declare its intent to develop” a locally controlled exchange where small businesses and individuals will be required to purchase health coverage or qualify for federal Medicaid coverage.

Governor Neil Abercrombie

The national program, formally called the Patient Protection and Affordable Care Act and informally called Obamacare, has been challenged as unconstitutional and the Supreme Court is expected to decide that issue by the end of this month.

Coral Andrews, executive director of Hawaii Health Connector, the nonprofit agency that plans to open and operate the health care exchange, was asked if the state plans to go ahead with its plans regardless of how the Supreme Court rules.

“Obviously there are different outcomes that could emerge from that Supreme Court decision, but my answer to you is I have every indication that we’re moving forward,” she said.

Some states have opted to allow federal authorities to open and operate the health exchanges now required under the law to be open for business by January 1, 2014.

But Hawaii is plowing ahead with plans to establish its own exchange.

Created under a 2010 state law, Hawaii Health Connector is a private corporation that operates as a “quasi-governmental agency” in partnership with the state and federal governments.

In the next year or so, Hawaii Health Connector plans to spend nearly $2 million on payroll costs and another $11.5 million on consultant contracts.

Andrews said her $155,000 salary is $30,000 below original budget projections. Andrews is still hiring staff at the Health Connector and declined to discuss other employee salaries, but said she expects the final payroll to be at or below the agency’s original $1.7 million personnel budget estimate.

All the money comes from a $14.4 million federal grant received last November.

The state also received an earlier $1 million federal grant for preliminary groundwork establishing the Health Connector.

According to the state’s application for the $14.4 million grant, Hawaii Health Connector expects to spend the bulk of the money – some $11.5 million – on consulting work.

The largest consultant line items are for design, construction and maintenance of an Internet website where individuals and businesses without health insurance must shop for coverage.

$1.7 million is earmarked for initial planning of the web portal.

$8.4 million is planned for hiring a vendor to actually design and operate the website.

Andrews said an initial $452,000 technology consulting contract has been awarded to a Boston-based firm, Public Consulting Group.

When that contract award was announced last month, the Health Connector said it covered the “first phase” of the nonprofit’s information technology requirements.

The grant application, which was approved and funded by the federal government, also called for spending $500,000 on legal costs. The budget estimated those costs to be 1,250 hours of legal work billed at $450 per hour.

A local law firm, McCorriston Miller Mukai McKinnon, Goodsill Anderson Quinn & Stifel, has been retained as the Health Connector’s legal consultant but Andrews declined to discuss specifics of the consulting contract.

The budget also calls for retention of a public relations consultant, to be paid $474,000 (1,896 hours of work at $250 per hour) but no contract has been awarded yet, said Andrews.

A local public relations firm, Hastings & Pleadwell, has been hired to provide short-term assistance to the Health Connector, said Andrews.

That firm helped the Health Connector when it came under intense criticism during this year’s legislative session because the agency’s governing board of directors includes officials of health insurance companies and health care providers here,  including Hawaii Medical Service Association and Kaiser Permanente.

Critics told lawmakers the board’s makeup created unavoidable conflicts of interests for its members.

Last minute efforts to change the board membership failed at the Legislature.

The $14.4 million federal grant application anticipates expenditure of $848,000 for office space, furnishings and equipment.

Andrews said the Health Connector has leased office space on Merchant Street in downtown Honolulu and is in the process of ordering furniture and computer equipment.

“Right now, we’re working on folding tables and chairs,” she said.

She said the nonprofit sought price quotes from four furniture suppliers but three couldn’t meet the agency’s budget or delivery dates.

Unlike virtually all other states, Hawaii has long required businesses to acquire health insurance coverage for their employees.

Called the Prepaid Health Care Act, the program was established in 1974. It does not cover individuals or employees who work fewer than 20 hours per week.

Some 100,000 Hawaii residents aren’t covered by the Prepaid Health Care Act and The Health Connector is envisaged by state officials as the vehicle to close gaps in coverage.

The Connector “will be crucial in moving Hawai’i toward universal coverage,” said state Healthcare Transformation Coordinator Beth Giesting.

State Insurance Commissioner Gordon Ito told lawmakers this year that the Health Connector web portal will operate like “an Orbitz or Travelocity” website.

Customers will enter their personal data and then be matched with coverage offers from competing health insurance firms, he said.

The federal health care law requires that state-operated exchanges must eventually be self-sustaining, and the Health Connector’s future expenses will have to be financed with fees, charged to the public or with other sources of revenue possibly assessed on health plans that offer services to the public on the web site, Andrews said.

 

Editor’s note: this story has been edited to correct the name of the Health Connector’s legal consultant and to clarify possible sources of Health Connector revenues.

 

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Jim Dooley joined the Hawaii Reporter staff as an investigative reporter in October 2010. Before that, he has worked as a print and television reporter in Hawaii since 1973, beginning as a wire service reporter with United Press International. He joined Honolulu Advertiser in 1974, working as general assignment and City Hall reporter until 1978. In 1978, he moved to full-time investigative reporting in for The Advertiser; he joined KITV news in 1996 as investigative reporter. Jim returned to Advertiser 2001, working as investigative reporter and court reporter until 2010. Reach him at Jim@hawaiireporter.com