Hawaii’s Health Exchange Is the Nation’s Worst

by Jillian Kay Melchior
Only 257 have enrolled so far in a system exempt from transparency rules.

Look to the states, say Obamacare proponents desperate for success stories. A state they won’t be looking to is Hawaii, where the rollout of the health-care law has been an epic fiasco.

We’ve been told over the past few weeks that states invested in Obamacare have been able to make it work. On November 12, for instance, the Washington Post noted relatively high enrollment (which means in the tens of thousands) in New York, Washington, Colorado, and Kentucky, adding that “all are among the states that embraced Obamacare and crafted their own exchanges rather than rely on the federal site, which has been riddled with breakdowns.”

So is Hawaii, yet it has the worst state-based exchange in the nation. Though it enthusiastically embraced the health law, it has been crippled by tech problems, and the executive director recently announced that she will be stepping down. Because Hawaii legislators exempted the health law from many of the rules that hold other government ventures accountable, there remain more questions than answers about the debacle.

By latest count, only 257 Hawaiians have enrolled — all of them individuals who earn enough to be disqualified from subsidies. Moreover, the Hawaii Health Connector still can’t effectively connect to the state’s Medicaid system, leaving the poorer applicants who’ve attempted to buy insurance in indefinite limbo.

Put differently, it has cost $778,000 in federal funds for each individual who has successfully enrolled in Hawaii — and all of them have been people who would likely have been able to afford health insurance.

That low enrollment is, in large part, a result of the tech glitches that caused significant delays for the Hawaii Health Connector. The state chose to use CGI Group, the same contractor responsible for HealthCare.gov, and in the end, it took two weeks past the deadline for Hawaii’s glitch-plagued site to fully launch.

By some accounts, CGI’s problems were predictable. The company was chosen even after it presided over a problematic $87 million upgrade of Hawaii’s tax-collection system. The tax system it built has crashed repeatedly, and it will cost up to $50 million more to repair.

Given that experience, Hawaii’s Senate president, Donna Mercado Kim, says she strongly cautioned against using CGI Group to build the Hawaii Health Connector. But her warnings were ignored, she tells National Review Online. “I can’t understand it myself. It just boggles my mind that they seem to have a hold on Hawaii.”

Even though the state awarded CGI Group a $53 million contract, paid for with federal tax dollars, the procurement process was not subject to standard transparency requirements. Act 205, which established the Hawaii Health Connector, explicitly states that “the Connector shall not be an agency of the State and shall not be subject to laws or rules regulating rulemaking, public employment or public procurement.” Local reporters say the health exchange will not make public many of the papers pertaining to its procurement choices or the selection of CGI Group for the Hawaii Health Connector.

Already, conspiracy theories are circulating in Hawaii about who in government has friends in the IT and health sectors. Those theories become somewhat more plausible in the context of another recent story: Last year, the former head of the governor’s political campaign solicited donations from the health-care sector for a “private-public partnership” that advises health-care policy in Hawaii. The Hawaii Medical Service Association, the state’s biggest insurer, donated $200,000, and Kaiser Permanente gave $80,000.

It’s also worth noting that these major insurers now sit on the governor-appointed board of the health exchange, which prompts concerns about conflict of interest; in Hawaii, universal enrollment will add about $300 million a year to the state’s overall insurance market.

These board members are supposed to avoid conflicts of interest — but once again, sunshine is lacking. By law, the Hawaii Health Connector is not required to respond to open-records requests. And though it does hold public meetings, posting minutes online, it’s unclear whether that’s a legal requirement or a mere courtesy the exchange has extended of its own volition.

“There’s huge accountability problems,” says Gina Mangieri, a reporter with Hawaii’s KHON2. “So far, my experience has been that the Connector was transparent with what they wanted to share and often standoffish with what they didn’t — everything from financial data to the truth behind the technical glitches,” she continues. “Even just getting the first wave of sign-up numbers was like pulling teeth.”

Mangieri tells National Review Online that when she submitted records requests to the exchange, they refused to provide her with information. And when she appealed to the state’s Office of Information, “which is very progressive, they just throw up their hands: ‘Sorry, can’t help; wish we could,’” citing Act 205’s restrictions on access to information.

Barbara Kim Stanton, director of AARP in Hawaii and a strong supporter of the Affordable Care Act, also expressed concerns about the secrecy shrouding Hawaii’s state exchange. “Enrolling the uninsured is too important for the public to be left in the dark,” she said.            

Senator Roz Baker, considered the architect of Hawaii’s Act 205, tells National Review Online, “The way [sunshine] laws have been interpreted really hamstrings a nimble organization, and with the aggressive timelines that we had in terms of meeting the grant and getting the Connector up, it really would not have worked.”

The exchange was established as a nonprofit because “public-private partnerships are the way of the future,” she adds. “It gives you the ability to leverage [the private sector]. In my view, government is not the repository of all wisdom, and it cannot do things by itself. It needs to do things with people in the community who can access things that it cannot.#…#We felt that this [structure] gave us the opportunity to craft something that might work in Hawaii.”

That homage to the private sector is all well and good — except when you consider that Hawaii’s exchange looks an awful lot like a government agency, minus the accountability.

A more “nimble” exchange is a poor excuse for the lack of transparency, especially in light of how badly Hawaii’s health exchange has functioned, despite the enormous taxpayer cost. Though the exchange is theoretically required to be financially independent down the road, Hawaii alone has already received $205 million from the federal government, and Act 205 explicitly says that “the State may appropriate [taxpayer-collected] moneys to the Connector.”

Even in its management, the health exchange has close ties with the state government. The governor appoints board members, who are then approved by the Hawaii Senate. Four board members are the heads of Hawaii state departments. A state auditor will review the health exchange’s books each year, and the results are submitted to the insurance commissioner of the Hawaii Department of Commerce and Consumer Affairs. For at least a decade, the legislature has reserved the right to “have access to, inspect, and make copies of any documents retained” pertaining to the financials of the health exchange.

Hawaii can call this a nonprofit, but what’s in a name? The state-based exchanges exist only because of a broader government takeover of one of the most intricate and delicate parts of the economy. Failure was predictable, but Hawaii’s botched rollout is a particularly shameful example of how poorly government was equipped to take on the task it had appropriated. In the absence of a free health-care market, Hawaiians at least deserve answers about this costly failure.

— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity.