Jeffrey Wade
Hawaii has a unique healthcare law that requires employers to offer healthcare to employees. The Prepaid Health Care Act (PHCA) supersedes the Affordable Care Act's (ACA) federal minimum requirements for care. Employers in Hawaii must contribute at least half of the premium providing the employee contributes no more than 1.5% of their wages towards the premium. This is stricter than the ACA, which mandates that employers with 50+ full-time employees offer health insurance and allows a waiting period of up to 90 days from hire.
| Characteristics | Values |
|---|---|
| Employers required to provide health insurance | All employers with one or more employees, whether full-time or part-time, permanent or temporary, are required to provide health insurance to their eligible employees in Hawaii unless the employees fall into an excluded category. |
| Excluded categories | Individuals working less than 20 hours per week, agricultural seasonal workers, insurance or real estate salespersons paid solely by commission, individuals working for family members, or children under 21 working for their mother or father. |
| Employer contribution | Employers must contribute at least half of the premium providing the employee contributes no more than 1.5% of their wages towards the premium. |
| Tax credits | Small employers with fewer than 25 full-time equivalent employees and an average wage of less than $50,000 a year may be eligible for a tax credit to offset the cost of health insurance premiums. |
| Family coverage | Employers are not required to provide family coverage, but they may offer it with the employee paying either 100% or 50% of the family premium. |
| Waiver form | Employees who want to waive coverage must fill out Form HC-5. |
| Plan approval | Plans must be approved by the Hawaii Department of Labor and Industrial Relations (DLIR). |
| Minimum standards | Plans must meet minimum standards set by the state, including coverage for hospital stays, surgeries, medical expenses, diagnostic services, maternity care, and substance abuse treatment. |
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What You'll Learn
Hawaii's Prepaid Health Care Act (PHCA)
Hawaii has a unique healthcare law, the Prepaid Health Care Act (PHCA), which requires employers to offer healthcare to employees. Initially passed in 1974 and reenacted in 1981, the PHCA contains essential requirements regarding employer-sponsored health plans. The law sets minimum standards of healthcare benefits for workers in Hawaii, which include coverage for hospital stays, surgeries, medical expenses, diagnostic services, maternity care, and substance abuse treatment.
The PHCA supersedes the ACA's federal minimum requirements for care. While the ACA requires employers with 50 or more full-time employees to provide plans that meet minimum essential coverage (MEC) and affordability, the PHCA mandates that all employers with one or more employees, whether full-time or part-time, permanent or temporary, must provide health insurance to their eligible employees. However, individuals working less than 20 hours per week, agricultural seasonal workers, insurance or real estate salespersons paid solely by commission, individuals working for family members, and children under 21 working for a parent are excluded from this requirement.
Under the PHCA, employers must contribute at least half of the premium cost for single coverage, with the employee paying the rest, provided their share is not more than 1.5% of their wages. This means that employees in Hawaii likely pay less for health care coverage on average compared to those in other states. Employers may also choose to pay the entire cost of the health insurance premium.
The PHCA offers flexibility in providing medical benefits to employees through health reimbursement arrangements (HRAs). HRAs allow employers to reimburse employees for their qualifying medical expenses, including health insurance premiums, on a tax-free basis. An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a recommended option for employers in Hawaii, as there are no limits on allowance amounts, ensuring compliance with the law regardless of the individual plan chosen by employees.
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Employee eligibility
In Hawaii, all employers with one or more employees, whether full-time or part-time, permanent or temporary, are required to provide Prepaid Health Care Act (PHCA) coverage to their eligible employees. However, employees falling into certain categories are excluded from this mandate. These include individuals working less than 20 hours per week, agricultural seasonal workers, insurance or real estate salespersons paid solely by commission, individuals working for specific family members (spouse, son, daughter), and children under 21 working for their parents.
For employees who are eligible for health insurance, there are several factors to consider. Firstly, Hawaiian resident employees working 20 or more hours per week must be offered medical benefits. This differs from the ACA, which considers an employee full-time only after they work 30 or more hours per week. Additionally, employers must ensure that the health plans their employees purchase are "Hawaii-approved" and meet the minimum standards set by the Hawaii Department of Labor and Industrial Relations (DLIR).
When it comes to contribution requirements, Hawaiian resident employees cannot pay more than 1.5% of their monthly wages towards their employee-only medical premium. In contrast, the ACA requires employees to pay less than 9.86% of their monthly wages towards the same (as of 2021). In Hawaii, the employer must cover at least 50% of the employee-only premium contribution. For example, if an employee earns $4,000 per month, their contribution towards the premium cannot exceed $60. If the monthly premium is $100, the employer must pay $50, and the employee pays the remaining $50.
It is important to note that certain employees can waive coverage. These include employees already covered by a federally established health insurance or prepaid healthcare plan (such as Medicare, Medicaid, or military medical benefits), those covered as dependents under a qualified health care plan, and those who are recipients of public assistance or covered by a state-legislated healthcare plan. Additionally, employees who are followers of religious groups that rely on prayer or other spiritual means for healing can also waive coverage. To do so, they must complete and submit Form HC-5 to their employer.
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Employer contribution
Hawaii has a unique healthcare law that requires employers to offer healthcare to employees. This is known as the Prepaid Health Care Act (PHCA) or Hawaii employer mandate, and it supersedes the ACA's federal minimum requirements for care. All employers with one or more employees, whether full-time or part-time, permanent or temporary, are required to provide PHCA coverage to their eligible employees in Hawaii unless the employees fall into an excluded category.
Employers in Hawaii are required to contribute at least half of the premium cost for single coverage, providing the employee contributes no more than 1.5% of their wages towards the premium. This is stricter than the ACA, which requires that employees pay less than 9.86% of their monthly wages towards the employee-only premium. If an employee's contribution constitutes less than half of the premium, the employer is liable for the remaining portion.
Small employers with fewer than 25 full-time equivalent employees and an average wage of less than $50,000 a year may be eligible for a tax credit to offset the cost of health insurance premiums for employees. Under state law, certain employers may also be eligible for premium supplementation.
Employers in Hawaii may also offer family coverage, with the employee paying either 50% or 100% of the family premium. However, employers are not required to provide family coverage under the PHCA or ACA.
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Waivers
In the US, the Affordable Care Act (ACA) permits states to apply for State Innovation Waivers (also referred to as Section 1332 waivers) to implement alternative strategies for providing residents with access to affordable, high-quality health insurance while retaining the basic protections of the ACA. These waivers allow states to modify how they implement key elements of the ACA and adopt alternative ideas that depart from its standards and requirements.
Section 1332 waivers are subject to approval by the US Department of Health and Human Services and the Department of the Treasury. While they allow for some flexibility, they are not without limits. The purpose of these waivers is to allow states to adopt different approaches to achieving the ACA's core goals, as long as these approaches provide access to affordable, good-quality health insurance coverage at the same or lower cost to the federal government.
- Provide benefits that are at least as comprehensive as the "essential health benefits" that all plans in the individual and small-group insurance markets must cover.
- Offer cost-sharing protections and coverage that are at least as affordable as those in the marketplaces.
- Ensure that at least a comparable number of people have health coverage as under current law.
- Not increase the federal deficit.
Under Section 1332, the Health and Human Services Secretary can waive certain ACA provisions, including those dealing with health insurance marketplaces, available subsidies, the requirement for individuals to have coverage or pay a penalty, and the "shared responsibility" requirement for employers with 50 or more full-time-equivalent workers.
It is important to note that many important components of the ACA cannot be waived under Section 1332. For example, a state cannot use a 1332 waiver to waive the ACA's prohibition against insurers denying coverage based on pre-existing health conditions, its ban on annual and lifetime coverage limits in most plans, its requirement to cover certain preventive medical care at no charge to enrollees, or its requirement to cover adult dependents up to age 26.
In the state of Hawaii, all employers with one or more employees, whether full-time or part-time, permanent or temporary, are required to provide Prepaid Health Care Act coverage to their eligible employees unless the employees fall into an excluded category. Excluded categories include individuals working less than twenty hours per week, agricultural seasonal workers, insurance or real estate salespersons paid solely by commission, individuals working for family members, and children under 21 working for their parents.
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Tax credits
In Hawaii, small businesses with fewer than 25 employees may qualify for a small business tax credit of up to 35% (25% for non-profits) to offset the cost of health insurance. This credit increased to 50% for small businesses (35% for non-profits) in 2014. To be eligible, the employer must contribute at least 50% of the total premium cost of the health coverage for the employee (not family members).
On December 30, 2016, the U.S. Department of Health and Human Services (HHS) and the Department of Treasury approved Hawaii's application for a State Innovation Waiver under the Affordable Care Act (ACA) for the period of January 1, 2017, through December 31, 2021. This waiver allowed Hawaii to replace the ACA Small Business Health Options Program (SHOP) tax credits with the State's Prepaid Health Care Premium Supplementation Program. The Premium Supplementation Program provides financial assistance to eligible small businesses that provide health insurance coverage to employees.
The ACA defines a full-time employee as anyone working 30 or more hours per week, while in Hawaii, a full-time employee is defined as anyone working 20 or more hours per week for four consecutive weeks. Small businesses with no employees are not considered employers and must purchase an individual (non-group) policy inside or outside HealthCare.gov.
The ACA contains comprehensive health insurance reforms and includes tax provisions that affect individuals, families, businesses, insurers, tax-exempt organizations, and government entities. These tax provisions include important changes to how individuals and families file their taxes, as well as benefits and responsibilities for employers, which are determined by the size and structure of their workforce.
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Frequently asked questions
Yes, all employers in Hawaii with one or more employees, whether full-time or part-time, permanent or temporary, are required to provide health insurance to their eligible employees. This is a requirement of the Hawaii Prepaid Health Care Act (PHCA), which supersedes the ACA's federal minimum requirements for care.
Individuals working less than 20 hours per week, agricultural seasonal workers, insurance or real estate salespersons paid solely by commission, individuals working for family members, and children under 21 working for their parents are excluded from this requirement.
Employers must contribute at least half of the premium, and employees cannot pay more than 1.5% of their monthly wages towards their employee-only medical premium.
