- Associated Press - Friday, June 19, 2015

HONOLULU (AP) - The Hawaii Health Connector is letting go of staff and has lost a key contractor as it transitions to partial federal control of the troubled health insurance exchange.

The federal government is still withholding $70 million in grant money that exchange officials were expecting to be released, Connector CEO Jeff Kissel said on Friday. “They said they still have some questions, and we’re waiting to hear what those questions are,” Kissel said.

The board of the exchange voted two weeks ago to shut down the employer side of the exchange and transition its individual users to the federal website healthcare.gov. They did so because the exchange hasn’t yet become financially sustainable, which was a requirement of President Barack Obama’s Affordable Care Act.

The exchange plans to spend $10 million of those frozen funds to complete the transition, but without it, it would be unable to continue the work, Kissel said.

Meanwhile, contractor Turning Point suspended its work for the exchange because it hasn’t been paid. Turning Point had been responsible for ensuring that the exchange is complying with the law and spending taxpayer money appropriately, which is a requirement of the federal government, Kissel said.

“They are discontinuing their activities with us, because we have no source to pay them,” Kissel said.

The exchange has let go of 29 temporary employees who were helping with outreach, and it has given notice for another round of layoffs to take place on July 1, Kissel said.

The Hawaii Health Connector was set up as a state-run health exchange in part to protect the state’s unique health care law, the Prepaid Health Care Act, which requires employers to subsidize health insurance for most of the state’s working population. The exchange was established with more than $200 million in federal grants, although not all the money was spent.

But early on, the exchange suffered from low enrollment numbers in a state where many are already insured by their employers. In its first year, about 10,000 people were enrolled, instead of the 100,000 to 200,000 that some public officials had predicted.

Under Kissel’s leadership, enrollment surpassed 37,900 people in 2015. The exchange had expected to become financially sustainable by 2022, but it needed about $28 million to pay its bills.

Kissel had sought approval from the Legislature for $28 million in bonds or loans to keep the exchange afloat, but that plan fizzled. In the end, the Legislature approved just $2 million for the exchange in 2015.

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