Hawaii's Prepaid Health Care Act of 1974 is the only act of its kind
in U.S.
history. Since Jan. 1, 1975, this law has required nearly all employers
to
provide health insurance to their employees who worked 20 hours or
more a
week for four consecutive weeks. Employees must maintain the minimum
of at
least 20 hours a week to remain eligible.
ERISA and the Prepaid Health Care Act
Hawaii's Prepaid Health Care Act passed the same year as the federal
Employee Retirement Income Security Act (ERISA), which superceded
all state
laws related to employee benefits. When Standard Oil sought to
invalidate
employer-mandated health coverage in Hawaii, it sued and won. Hawaii's
congressional delegation stepped in and won an exemption from ERISA.
However, this Congressional action stipulated that no substantive
changes
could be made to the Prepaid Health Care Act as it was passed in
1974.
Coverage Ensured by the Prepaid Health Care Act
 The
act also set the standard for benefits provided by employer-based
health
plans. Coverage benefits must be equal to those provide by the
plan with the
largest number of subscribers in the state.
If an employee is disabled and unable to work, the employer must
continue to
pay its share (98.5 %) of the employee's health insurance premium
cost for
three months following the month when the employee became disabled.
The
employee also continues to pay his or her portion (1.5 %) of the
premium.
Prepaid Health Care Act & Hawaii's Uninsured
In the 1980s, Hawaii's uninsured population was estimated at 5
percent. The
state was credited as having the lowest uninsured rate in America,
according
to by the U.S. Census Bureau's Current Population Survey. Employer-mandated
health insurance was given much of the credit for this.
However, by 1996-97, the uninsured rate had increased to 8.1 percent.
According to the latest Current Population Survey (2001), about
10 percent
of Hawaii's population (approximately 120,000) is currently uninsured.
Formula for Premium Payment
Hawaii employers may cover the full cost of the health insurance
premium, or
share the cost with their employees. Based on a fixed formula,
the law
requires employers to contribute 50 percent of the premium cost
for single
coverage, and the employee must contribute the balance, provided
the
employee's share does not exceed 1.5 percent of his or her wages.
| A Complex
Calculation for Business
A person who works 40 hours per week at a salary of
$10 per hour would earn
$1,733 per month. If the cost of insurance (single
coverage) is $150 per
month, half that amount is $75, and 1.5 percent of
the worker's salary is
$26. As stipulated by the Act, the worker would pay
the lesser of the two
amounts ($26) and the employer would pay the rest ($124).
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Prepaid Health Care Act Exclusions
These categories of employment are excluded from coverage.
- government
services
- seasonal employment approved by the State Department
of Labor &
Industrial Relations
- insurance agents and real estate salespersons
paid solely by
commission
- sole proprietors with no employees
Administration & Regulation of the Act
The Department of Labor & Industrial Relations, Disability
Compensation
Division, administers the Prepaid Health Care Act. Under the
advisement of
the Prepaid Health Care Advisory Council, the department's director
approves
all employer-based health care plans and ensures that the plans
meet certain
standards. The Department of Commerce & Consumer Affairs,
Insurance division
regulates health insurers, including health maintenance organizations
and
mutual benefit societies. The Insurance Division also receives
inquiries and
complaints on health insurance, and administers reviews of health
plans'
decisions under Hawaii's Patient Bill of Rights & Responsibilities
Act.
Prepaid Health Care Act & Hawaii's Uninsured
When Hawaii blazed the trail in health coverage reform by establishing
the
Prepaid Health Care Act in 1974, the only employer mandate of its
kind, the
nation didn't follow. With an uninsured rate of 30 percent in the
early
1970s, the percentage dropped to about 5 percent after the mandate
became
law. Hawaii once held the honor of having the fewest uninsured
residents of
any state, but now it has tumbled down the national ranks (ranked
8th) with
more than 120,000 of its people not covered — that's 10 percent
of
the state's population.
The Hawai'i Uninsured Project has assembled a committee
of community leaders
to assess the impact of the Prepaid Health Care Act of 1974 on
consumers,
providers, insurers and businesses in Hawaii. While other work
groups are
generating solutions for target areas in which health coverage
access can be
improved or expanded, this committee serves as a community and
research
resource and forum for the exchange of viewpoints. Its objective
is to
ensure that community discussions and debates of the Prepaid
Health Care Act
are accurately informed.
The Hawai‘i
Uninsured Project has assembled a committee of community leaders
to assess the impact of the Prepaid Health Care Act of 1974 on consumers,
providers, insurers and businesses in Hawaii.
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