The Hawaii Prepaid Health Care Act is a unique act designed to benefit employees. Employers must provide special financial support to an employee’s healthcare needs and help cover medical costs in cases of extended hospitalization or necessary medical leave.
If you’re a business owner in Hawaii, you need to know this about the Hawaii Prepaid Health Care Act.
What Is the Hawaii Prepaid Health Care Act?
The Hawaii Prepaid Health Care Act has been in effect since 1974. The act requires employers to provide health care to their employees. The health care provided must meet specific minimum standards defined by the state of Hawaii to be considered sufficient to fulfill the Hawaii Prepaid Health Care Act stipulations.
The Hawaii Prepaid Health Care Act defines expected employer contributions to eligible employee healthcare-related expenses. The act is designed to prevent employees from accruing substantial medical debt and to prevent overutilization of public health care resources by shifting the responsibility onto employers.
The Hawaii Prepaid Health Care Act is the first and only health care act of its kind. No other state in the United States places such strict requirements on employers for employee health care coverage.
The State of Hawaii considers it a source of pride, citing that less than 10% of the state’s residents are uninsured and that most people there have access to affordable health care through the act.
How Does the Hawaii Prepaid Health Care Act Work?
The Hawaii Prepaid Health Care Act requires employers to provide approved, suitable health care coverage to employees who work at least 20 hours a week for a minimum of four consecutive weeks. This means the act applies to full-time employees, part-time employees, and any employees on flexible scheduling who meet the minimum work hour requirements.
Employers can pay the entire health care premium for their employees or split the cost under certain circumstances. Some existing worker’s union agreements in Hawaii require that employers pay a minimum of half of their eligible employees’ health care premium cost.
Employees can pay half of their own health care insurance premiums as long as the cost isn’t more than 1.5 percent of their monthly paycheck. Employees will always pay the lesser amount, between half and 1.5 percent.
In most cases, employers will pay almost all their employees’ healthcare insurance costs. Employers will never pay less than half. If the average acceptable health care plan costs a total of $200 per month per employee, employers will spend a minimum of $100 per employee per month in health insurance costs.
Can Employers Opt Out of the Hawaii Prepaid Health Care Act?
There is no way for employers to opt out of the Hawaii Prepaid Health Care Act. Employers must offer all qualifying employees an approved healthcare plan and assume responsibility for all relevant healthcare costs.
There may be situations where employees already have health care coverage they prefer to the employer’s approved plan. In such cases, an employee can waive their right to coverage by filing a form with the Hawaii Department of Labor and Industrial Regulations. The form is valid for one calendar year and must be re-filed before December 31 to continue waiving employer coverage.
Employers cannot ask employees to waive their healthcare coverage or offer alternative incentives if they choose to waive coverage. The decision to voluntarily decline participation is exclusively at the employee’s discretion.
In cases where union agreements conflict with the Hawaii Prepaid Health Care Act requirements, employers are expected to uphold their role in union agreements. Union agreements may be negotiated to provide different types of health care assistance or a specific type of insurance.
Employees who prefer to utilize a union agreement instead will waive their right to participate in the Hawaii Prepaid Health Care Act.
Are There Exclusions to the Hawaii Prepaid Health Care Act?
Employees who work in government services aren’t eligible for the Hawaii Prepaid Health Care Act because government employees have a separate health insurance arrangement through the government.
Sole proprietors and single-member LLCs without employees are not required to participate as they are the only members of their business.
If the State Department of Labor and Industrial Regulations recognizes a position as seasonal employment, employers don’t have to provide health insurance coverage for seasonal employees.
If an employee’s salary comes exclusively from commission, such as with real estate agents, insurance salespeople, or people who work in direct sales, the people filling those roles aren’t considered hourly employees. Their role is similar to an independent contractor, so employers aren’t required to provide them with health insurance.
How Does the Hawaii Prepaid Health Care Act Work During Medical Leave?
Employers are expected to continue paying workers’ premiums if they are hospitalized or otherwise medically unable to work as per their healthcare provider. Employer payments toward healthcare premiums aren’t intended to go on indefinitely, but expectations can vary across situations.
The Hawaii Department of Labor and Industrial Regulations (HDLIR) will have more information about the expectations of an employer in cases of extended illness or hospitalization. Employers must continue to pay premiums until HDLIR says it’s legally permissible for them to stop or recommends an alternative.
Note that the Hawaii Prepaid Health Care Act will cover insurance premiums during hospitalization and medical leave, even in scenarios when an employee didn’t become injured or ill at work. The act covers all healthcare necessities.
If an employee were to break their leg during a ski vacation in Colorado, their employer would still be expected to cover their medical costs regardless of the fact that the injury occurred off company time and outside of the state of Hawaii.
What Should You Know About the Hawaii Prepaid Health Care Act and Taxes?
In most cases, employee health care costs are tax deductible for an employer. While it may seem like a substantial expense to provide suitable health care coverage for most of your employees, the silver lining is that paying this expense often significantly reduces your corporate tax liability.
For more information about filing corporate taxes in Hawaii when your employees utilize the Hawaii Prepaid Health Care Act, it’s best to consult an accountant or a tax professional experienced in working with Hawaiian businesses.
They’ll be able to give you highly detailed tax-related information that reflects the specific details of your circumstances.
What Are Some FAQs About the Hawaii Prepaid Health Care Act?
There are some situations where it may not be obvious what an employer or an employee should do to maintain compliance with the health care act. These are some situations employers may encounter when providing health care for their employees.
What Happens if an Employee Has Two Jobs?
It’s common for someone to work two part-time jobs. When this happens, the employer who schedules the employee for the most hours or the employer who meets the mandatory criteria first (20 hours a week for four consecutive weeks) is responsible for providing health coverage.
What Happens if an Employee Fails To Pay Their Percentage of Their Premiums?
Health care coverage can be terminated if an employee fails to pay their portion of the premiums. However, this is highly unlikely — the act is designed to make premiums affordable. This situation usually only occurs if an employee receives temporary disability and fails to make payments while on extended medical leave.
Must Eligible Insurance Cover an Employee’s Dependents?
Employers are only required to provide single coverage insurance, but employees can choose to pay a greater share of their wages to add their dependents to their health insurance under the same plan.
Which Health Care Plans Are Approved for the Hawaii Prepaid Health Care Act?
The Hawaii Department of Labor provides a list of approved healthcare plans employers can offer their employees through the act.
Maintaining Compliance with Mosey
Every state has its own list of business requirements in addition to federal requirements. Maintaining compliance can be a lot for companies to take on, especially for smaller businesses with jack-of-all-trades team members. Let Mosey’s automation join your team.
Mosey’s automated compliance solutions help business owners keep track of compliance and tax-related matters by running in the background. Schedule a demo with Mosey to learn how we can simplify the process of managing compliance for your business.
