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California Obamacare cuts, threats to Hawaii 's exchange

California's got smaller Obamacare dreams, while Hawaii may be saying "Aloha" to its troubled Obamacare exchange.

California's Obamacare marketplace—the largest state-run health exchange in the U.S.—will spend less money next year and expects to enroll fewer people than originally projected.

Covered California's paring back for the third year of Obamacare enrollment comes after its second season saw lower-than-expected sign-ups, and the expenditure of most of the $1 billion in federal funds that the insurance exchange had been granted.

"The lessons from real-world experience are sharpening projections going forward," Covered California said in a press release.

The exchange expects to spend $58 million less in the coming fiscal year, a 15 percent reduction.

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Covered California said the spending drop, which will leave it with a budget of nearly $333 million, is at least partly due to the fact that building the exchange's technology, and "some of the outreach, education and marketing expenses ... are no longer needed."

Covered California Executive Director Peter Lee at a news conference.
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Covered California Executive Director Peter Lee at a news conference.

And the exchange expects to sign up fewer than 1.5 million customers in the next enrollment cycle, which begins in November. That would be, at best, only slightly better than the 1.4 million customers Covered California signed up in the second enrollment season that ended in February.

Covered California projects it will have about 2 million customers in 2019.

"In the last two years, we established a solid foundation, and we are confident as we transition now from start-up mode to ongoing operations," said Peter Lee, executive director of Covered California. "Covered California is changing lives and giving consumers affordable access to the best doctors and hospitals in our state."

Hawaii exchange may shut down

As Covered California is fine-tuning its Obamacare operations, Hawaii's own exchange is preparing for the possibility of shutting down altogether.

The exchange, called Hawaii Health Connector, is a nonprofit authorized by the state to handle enrollment for residents. The exchange recently failed to get the approval from legislators necessary to continue operations.

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Jeff Kissel, head of the exchange, told CNBC on Wednesday that state officials are in "active discussions" with the federal government this week about how to resolve the situation.

Kissel said there are several possible scenarios, including the exchange staying in business after obtaining necessary funding, the exchange shifting its operations to the state of Hawaii itself and the federal exchange, HealthCare.gov, temporarily handling enrollment until the state can administer sign-ups.

"The state of Hawaii wants to maintain a state-based marketplace," Kissel said. He noted that the Health Connector's board had already agreed to shift operations to the state if that is desired by officials.

Remaining a state-based entity is a key concern because the U.S. Supreme Court next month is set to rule in a case in which plaintiffs claim that customers of HealthCare.gov are ineligible to receive federal tax credits that help nearly 90 percent of all Obamacare customers pay their monthly health plan premiums. The plaintiffs argue that only customers of state-run exchanges, such as those of Hawaii, California and 12 others are eligible for such subsidies.

If Hawaii's residents are required to use HealthCare.gov to enroll in Obamacare plans for 2016, and the Supreme Court invalidates the subsidies for federal exchange's customers, people in the Aloha State would be ineligible to receive such assistance.

A spokesman for the federal Centers for Medicare and Medicaid Services, which operates HealthCare.gov, said, "CMS continues to have discussions with the state on the options and steps they need to take to best serve their state's consumers."

"We remain committed in working with Hawaii so that people from Hawaii have the ability to shop for quality, affordable health coverage," said the spokesman, Aaron Albright.