Should Hawaii's Current Prepaid Healthcare Act be Repealed?
Richard C. Botti
When Hawaii passed the Prepaid Healthcare Act in 1974, health coverage was less than $20 per month per individual. Employers were allowed to split the cost with employees 50/50, as long as the employee’s 50 percent did not exceed 1.5 percent of the employee’s wages.
Thirty-plus years later, with the cost of an individual plan at least $250 per month without drug, dental and vision coverage, the 1.5 percent cap remains the same, creating a government mandate on employers to pay for most of the costs. For an employee earning $10 per hour at 40 hours per week, that comes to a 90/10 split, with 90 percent from the employer. An employee would have to be paid $60,000 plus in order to create a 50/50 split.
Hawaii’s Prepaid Healthcare Act has provided a silver lining to Hawaii for many years. It has created preferable healthcare premiums because it has created a large pool that has avoided adverse selection. This is no longer valid, because some plans are now quoting premiums based on demographics rather than one large pool. Many small employers have gone to Plan B: hire part-time workers who are exempt, sub out work to independent contractors, and/or reduce the total number of full-time employees to a core in order to absorb the costs of healthcare coverage just for the core group.
The Legislature should revisit the 1.5 percent cap and create something more realistic to current costs. Yes, it would require congressional approval because of Hawaii’s exemption from federal preemption under federal law. This should not be used as an excuse for the status quo. In the meantime, businesses will adapt to live within their budgets by any means possible. Bottom line: It’s an unfunded mandate for small businesses and should be modified.
William M. Kaneko
Fundamentally, the law as it stands works: Hawaii consistently has one of the lowest medically uninsured rates in the United States, with currently about 9 percent of the population, or 120,000 persons, uninsured.
Comparatively, the nation has 46 million uninsured, with states such as Arizona, California, Oklahoma and Florida hovering at around 18 percent uninsured. Our state’s low uninsured rate is directly linked to the Hawaii Prepaid Healthcare Act (HPHA), the only Employee Retirement Income Security Act (ERISA)-exempt health-insurance program in the United States.
For more than 30 years, HPHA has been the cornerstone of access to healthcare in Hawaii, requiring private employers to provide health insurance to employees working 20 hours or more for four consecutive weeks. Many states would like to experiment with employer health-insurance programs, but are precluded by the ERISA, which preempts state laws that seek to impact employee-benefit plans.
Every now and then, there is a surge of inquiry into the efficacy of the HPHA. When confronted with the possibility of repeal of the HPHA and the likely skyrocketing numbers of uninsured, the discussion stops. The costs and adverse impacts to society would be overwhelming. Hawaii’s hospitals and emergency rooms are already drowning in deficits, partially due to uncompensated care of the uninsured. In 2008, bad debt and charity care totaled about $141 million for Hawaii’s hospitals.
The solution to greater access to healthcare in Hawaii is not to repeal the HPHA, but to pursue “gap-filling” measures for the 9 percent uninsured, which the HPHA and current insurance programs do not adequately address, including coverage for part-time workers, the self-employed, immigrants, migrants (from freely associated states) and individuals who fall outside the coverage of public-assistance programs. Such refinement of the HPHA is a more prudent and sensible approach than repealing the nation’s most coveted health-insurance program. Let’s not throw the baby out with the bath water.
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