Hawaii law requires employers to provide health coverage to their regular employees under the Prepaid Health Care Act (HRS Chapter 393). Expect several state questions on it. The Act is administered by the director of labor and industrial relations (DLIR), not by the Insurance Division (HRS 393-3, 393-31). The national guide covers the general group concepts: group underwriting, master contract and certificates, contributory and noncontributory plans, experience rating, COBRA, conversion and coordination of benefits.

National concepts in brief

• Group underwriting looks at the group as a whole. The employer holds the master contract, and members receive certificates.
• Noncontributory plans are fully employer-paid and generally enroll everyone eligible.
• Experience rating prices a group on its own claims history.
• Federal COBRA lets people continue group coverage for a limited time at their own cost.
• Coordination of benefits decides which plan pays first.

Prepaid Health Care Act: who must be covered

• Regular employee: works at least 20 hours a week for one employer, not counting seasonal work (HRS 393-3).
• When coverage starts: once the employee has worked four consecutive weeks (HRS 393-14).
• Wage threshold: the employee earns monthly wages of at least 86.67 times the Hawaii minimum hourly wage (HRS 393-11).
• Employers not covered by the Act: the State and its political subdivisions, the federal government and other states (HRS 393-3).
• Employees not covered: people who rely on prayer or spiritual means for healing under the teachings of a group (HRS 393-22).
• Waiver: an employee with other qualifying coverage may waive by written request approved by the director. The waiver lasts one year and can be renewed (HRS 393-21).

Who pays

• The employer pays at least half of the premium for the employee's coverage (HRS 393-13).
• The employee's share may not exceed 1.5% of the employee's wages.
• If 1.5% of wages is less than half the premium, the employer pays the rest.
• A collective bargaining agreement can set different terms.
• Premium supplementation: an employer with fewer than eight covered employees may get help from the premium supplementation fund when its share exceeds the statutory cost limits (HRS 393-45).
• Disability: when a covered employee is hospitalized or kept from work by sickness, the employer keeps paying its share for at least three months after the month the disability began (HRS 393-15).

What a qualifying plan must provide

• The employer chooses a plan that furnishes care (service type) or one that reimburses expenses. The choice binds for one year (HRS 393-12).
• A plan qualifies if its benefits equal, or are medically reasonable substitutes for, those of the plan of the same type with the most subscribers in Hawaii (HRS 393-7(a)).
• Required benefits (HRS 393-7(c)) include:
  • inpatient hospital care for at least 120 days of confinement a year;
  • maternity benefits, at least where the employee has been covered for nine consecutive months before delivery.

Penalties

An employer that fails to provide required coverage pays the greater of $25 or $1 per employee per day of noncompliance (HRS 393-33).

Hawaii group health policy rules

• Franchise plans may cover as few as five employees of one employer, or ten members of an association that has existed at least two years (HRS 431:10A-117).
• Group and blanket policies with family coverage must cover newborns on the same terms as individual policies (HRS 431:10A-206).
• An employer that covers dependent children must enroll a child named in a qualified medical child support order without waiting for an enrollment period (HRS 431:10A-208).
• Hawaii's ban on lenders tying a loan to a particular insurer does not apply to credit insurance. Wellness rewards up to 20% of coverage cost are not rebates (HRS 431:13-103(a)(9)(E)).
• Group life rules (conversion, grace period, incontestability) are covered in the Life Policy Provisions guide.

Common exam traps

• The Prepaid Health Care Act is enforced by the DLIR, not the Insurance Division.
• The numbers to know: 20 hours a week, 4 consecutive weeks, an employee share of no more than 1.5% of wages, and an employer share of at least half the premium.
• The State is not an employer under the Act.
• Required hospital coverage is 120 days a year. Maternity requires 9 months of coverage first.
• The penalty is the greater of $25 or $1 per employee per day.