Hawaii's Prepaid Healthcare Act
The Hawaii Prepaid Health Care Act, which appears in Chapter 393 of the Hawaii Revised Statutes, requires private sector employers to provide minimum health care coverage to eligible employees. Employees become eligible for coverage once they work for an employer for at least 20 hours per week for four consecutive weeks and earn a monthly wage of at least 86.67 times Hawaii's minimum hourly wage.
Employees must be covered at the earliest possible time permitted by the health care contractor after meeting the eligibility requirements. The employer must notify eligible employees of their rights under the Act, provide advance notice of any changes, and provide the employer's health care contractor's name, plan number, group number, effective date of coverage, and employee's cost share for funding health insurance premiums.
Contents of This Guide
- Exempt Employees
- Concurrent Employment
- Waivers of Employee Coverage
- Minimum Coverage Requirements
- Premium Payments
- Coverage for Employees Unable to Work
- Workers Compensation Claims
- Employer Liability
Employees ineligible for coverage under the law include: (1) a "seasonal" or "domestic" worker, as defined in the Act and regulations; (2) an insurance agent or solicitor; (3) a real estate salesperson or broker paid solely by commission; (4) someone working for his or her spouse, child, or, if under the age of 21, for a parent; and (5) someone who, pursuant to teachings, faith, or belief of any group, depends upon prayer or other spiritual means for healing. Employees subject to the terms of a collective bargaining agreement are not covered by the law
Statutory language to the contrary was held preempted by federal law in 1984.
In addition, employees may voluntarily elect to be exempt from coverage if they are: (1) covered by a federally established health insurance or prepaid health care plan (such as Medicare, Medicaid, or benefits for military dependents or military retirees and their dependents); (2) covered as dependents under another qualified health care plan; or (3) recipients of public assistance, or covered by state laws governing medical assistance.
To elect an exemption, the employee must complete form HC-5 and submit it to the employer. The employer must file the completed HC-5 with the state Department of Labor and Industrial Relations (DLIR) by December 31 of each year.
Employees must notify their employer if the exemption terminates. The employer must then provide coverage.
An employee who works the required period and earns the required monthly wage for two or more employers must designate the principal and the secondary employers on Form HC-5 and submit the form to the employers. The employers must then file the form with the DLIR.
The employer paying the highest amount in wages is generally deemed the "principal employer," who is responsible for providing the employee with health care benefits. An exception to this rule applies if the employer who employs the employee for at least 35 hours per week does not pay the most wages.
Under this exception, the "principal employer" is not determined by the amount of wages paid the employee, but by whom the employee decides is the "principal employer." The employee's designation of principal employer is binding for one year or until a change in employment, whichever occurs first.
The principal employer must provide the required coverage. The secondary employer need not provide coverage until notified that it has become the principal employer.
An employee may waive the benefits required by the Act by making a request in writing on Form HC-5 and receiving approval from the DLIR that the employee has other coverage under a prepaid health care plan which provides the required benefits. The waiver is binding for one year and is renewable for one-year periods.
If the employer directly or indirectly coerces or attempts to coerce an employee to make a waiver, the employer may be fined up to $200.
Employers must provide eligible employees with an approved health care plan from a health care contractor or an approved self-insured health care plan, and employers must give employees written evidence of plan coverage.
If an employer offers more than one "approved plan" to employees, it must only pay the cost of the least expensive plan if the employee elects the more expensive coverage. The employee who elects more expensive coverage must then pay the difference in premiums.
Eligible employees: The employer is not required to provide a health care plan to any employee who: (1) is covered by a statutory exemption; (2) is covered by the concurrent employment exception; or (3) has waived health care coverage.
Approved plans: Approved plans include health care plans in which either
- a prepaid health care contractor, such as Kaiser, directly furnishes health care, or
- a health care contractor, such as HMSA, defrays or reimburses all or part of the expense of health care.
Minimum benefits: The law describes the specific types of minimum benefits required. Minimum benefits generally include hospital, surgical, medical, diagnostic, and maternity benefits.
Minimum benefits are benefits that the DLIR finds are: (1) equal to or a reasonable substitute for the medical benefits provided by the most commonly subscribed to prepaid health plans; or (2) provide for sound basic hospital, surgical, medical, and other health care benefits at a premium commensurate with the benefits received. In making the minimum benefits determination, the DLIR considers the type and quality of benefits, limitations on reimbursability, deductibility, and amounts of co-insurance. A plan that provides these minimum benefits is called an "A" plan.
If the Director determines the benefits provided by an employer's plan provide sound basic health care but are more limited than the most commonly subscribed to health plans (HMSA Preferred Provider Plan and Kaiser Plan B), then the employer must contribute at least half of the cost of dependent coverage. These plans are known as "B" plans. The employer must provide an "A" plan or a "B" plan.
If the employer selects a health care contractor, the employer must use the selected contractor for all employees in the state, except those covered by collective bargaining agreements. The selection is binding for one year. As noted above, however, an employer may choose to make available to employees approved plans from different health care contractors, or different approved plans from the same health care contractor. The Health care contractors must give an employer ten days' written notice of cancellation or disqualification and may not refuse to insure or disqualify except for failure to pay the premium.
Self-insured employers must submit satisfactory proof to the DLIR of their solvency and financial ability to defray or reimburse, in whole or in part, the expenses of health care under an approved health care plan.
The employer must pay at least one-half the cost, but the employee's share of the payment cannot exceed 1.5% of his/her monthly wages. If 1.5% of the employee's wages are less than half the cost of the employee's premium, the employer must pay the difference.
The employee may not be required to contribute more than the employee would have to contribute had the employer obtained coverage with the contractor providing the prevailing coverage of that type. The employee may agree to pay a greater share only to provide benefits for dependents.
An employer who has elected to require employee contributions may withhold the employees share from wages no less often than once a month and must promptly transmit the amount to the contractor. If the employee loses coverage because the employer fails to transmit payments deducted from the employee, the employer is liable for the employee's health care expenses, refund of the withheld amounts, and penalties.
Before withholding an employee's share of premium payments from the employee's pay, or deducting a pre-paid premium payment upon the employee's separation from employment, the employer must obtain a written authorization from the employee for the withholding or deduction.
If an employee is hospitalized or otherwise prevented by sickness from working, the employer must continue paying its share of the costs for: (1) three months following the month during which the employee became disabled; or (2) the period during which the employer pays the employee's regular wages, whichever is longer. For example, if an employee becomes disabled in the month of January, and the employee has exhausted his/her paid leave, the employer must continue to pay its share of the employee's premium until the end of April. For disabled employees on leave, the 1.5% limitation on the employee's share is based on the employee's continuing salary or wages in the last complete month of work.
Within two weeks after disability, the employer must notify the employee in writing of the amount the employee must pay to continue coverage. Thus, if the employee is not earning regular wages, and the employee's share of premiums is usually paid by payroll deduction, the employee must be informed of his or her responsibility to make premium payments directly to the employer for forwarding to the health care contractor. At least two weeks prior to the end of the employer's obligation to pay for continuation coverage, the employer must notify the employee in writing of the entire premium cost the employee must pay to continue coverage. Payments are made to the employer for forwarding to the health care contractor. Health care contractors must permit continuation of coverage without reduction of benefits or standards from the plan during the period.
State administrative rules govern the obligations of employers and health care contractors to cover employees who are already disabled at the time the employer changes contractors.
COBRA and HIPAA also require employers to allow employees to pay for further continued coverage under certain circumstances.
In the event of a disputed workers' compensation claim, the health care contractor must pay the costs of medical care and notify the DLIR of its payment. If workers' compensation liability is established, the workers' compensation carrier must reimburse the health care contractor for the amounts which should have been covered by workers' compensation.
Reporting and Notice Requirements
Employers and health care contractors must comply with detailed reporting and notice requirements specified by administrative rule.
Employers must post in a conspicuous place a written notice stating that it has obtained health care coverage required by law, in a form prescribed by the DLIR. Compliance posters may be obtained from the DLIR.
On April 15 of each year, employers must file an annual report with the DLIR listing the amount of total wages paid to covered employees for the year, the annual amount of employer contributions for health insurance, the amount of premium contributions by covered employees, and other required information.
An employer who fails to provide required coverage may be liable for the health care costs incurred by eligible employees during the period of the failure.
An employer who fails to comply with coverage requirements may be penalized not less than $25 for every day the failure continues. If the failure continues for 30 days, the employer may be enjoined from carrying on its business in the state for as long as noncompliance continues.
An employer or employee who fails to comply with any other provision may be penalized $200 per violation.
When benefits are denied because of failure to pay the premium, the prepaid health care contractor must promptly mail a notice of denial to the worker. The employee has 20 days to request review by the DLIR. Either party may appeal the decision of the DLIR to a referee, and following that appeal, seek judicial remedies in court.
Premium Supplementation Fund
The Act establishes a special fund to be used to defray the cost of providing health care benefits for qualifying employers.