The health insurance marketplaces are being setup to provide consumers with more options and more choices. The online marketplaces are intended to bring together insurance carriers and promote competition with the aim of driving costs down. When the insurance marketplace goes live on October 1, consumers will be able to choose from a variety of carriers and find a plan that fits their needs and budget. However, Hawaii residents will be dealing a less choice on the Hawaiian marketplace.

The Hawaii health insurance exchange, Hawaii Health Connector, will open with two carriers, Hawaii Medical Service Association and Kaiser Permanente Hawaii. There is some concern that with only two carriers, there will be a spike in rates once the marketplace launches.  There are multiple reasons for this worrying lack of competition in the state.

•    Other existing insurers, such as University Health Alliance and Hawaii Medical Assurance Association, have withdrawn their exchange integration plans. They cite difficulty to compete with the large plans in the state and uncertainty of potential market size as some of the reasons for this decision.

•    Several insurance companies, such as Summerlin Life & Health Insurance Co, have abandoned operations in the state due to a state premium tax applicable on for-profit insurers. Several other insurance companies have forfeited their plans to enter Hawaiian markets due to this state premium tax.

•    Overall, there is a general lack of competition in the state and there aren’t many operating insurance carriers. Some carriers are in the preliminary stages of entering the market, and it is possible that they might, in the future, begin selling on Hawaii Health Connector.

Officials at Hawaii Health Connector understand this issue and are taking steps to mitigate potential “rate shocks.”. Officials are currently having discussions with other carriers that plan to enter the market after the October 1 deadline. Officials feel that the opportunity of operating on a transparent system and dealing with limited competition will be too tempting for new carriers to give up. If all goes as planned, Hawaii will see some new insurance carriers entering the health insurance marketplace and residents will soon benefit from the competitive marketplace.

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