Money Smarts

Exploring the Benefits of Group Health Insurance in Hawaii

Employers in Hawaii face unique challenges when it comes to employee benefits. These include high healthcare costs and persistent recruiting challenges.

Small and large employers in Hawaii must offer their employees a health insurance plan that meets the ACA’s minimum standards. These plans are typically provided through a private exchange or the HMSA marketplace.

Employer-sponsored group health plans are among the best ways to help employees afford high-quality healthcare. Larger employers typically have more negotiating power with insurance companies and can negotiate lower employee rates. However, smaller businesses can still need help finding affordable options.

To help keep costs down, many employers are increasing employee contributions to their group health policies, expanding cost-sharing provisions, and reducing the benefits of their plans. However, a 1974 state law prevents these changes for insurers with projects and operations in Hawaii.

It also requires that all 7(a) plans offered in the state meet specific benefit levels, including deductibles, out-of-pocket maximums, and network sufficiency. ERISA doesn’t preempt the Hawaii mandates, and penalties for non-compliance can be substantial.

In addition, the state’s rules regarding cost-sharing limit the amount of money a patient must pay out of pocket before the plan begins to cover their care. As a result, even with higher out-of-pocket maximums, most employees will only be responsible for about half of their medical costs before they have to begin paying.

Small and medium-sized employer groups in Hawaii are required by law to offer employees health insurance or pay a penalty. To comply with this rule, small and medium-sized employer groups must provide minimum essential health benefits to their employees, including hospital stays, surgeries, prescription drug coverage, medical expenses, diagnostic services, maternity care, and substance abuse treatment.

As a result, offering a comprehensive healthcare package is an excellent way to retain and recruit employees. In addition, by providing the most cost-effective group health insurance, your employees can afford the care they need without straining their budgets.

In a world where more than three-quarters of all workers live paycheck to paycheck, it can be hard for them to save money for unexpected needs or even a vacation. Fortunately, voluntary employee benefits can help them stretch their paycheck and prepare for the unexpected, such as dental or accident insurance. These employee-paid benefits can be administered through payroll deductions, making them low or no cost on your part to offer.

Another alternative to traditional employer-sponsored benefits is a group health reimbursement arrangement (HHRA). Some allow you to reimburse your employees for their health insurance premiums, along with other qualifying medical expenses, tax-free.

There are two types of HRAs: qualified small employer health reimbursement arrangement (QSEHRA) and integrated group coverage HRA (ICHRA). ICHRAs do not have annual allowance caps, so they are an excellent option for Hawaii employers.


A group plan typically comes at a lower price when considering the health insurance premiums and out-of-pocket costs associated with individual plans. In addition, many small business owners choose to share the expense of the policy with their employees.

Hawaii employers that opt to provide their workers with employer-sponsored group health insurance must do so under the provisions of a state law called the Prepaid Health Care Act (PHCA). This law sets stricter rules than the federal Affordable Care Act (ACA) and does not apply to large employers that employ 50 or more full-time equivalent (FTE) employees.

As part of the PHCA, employers must offer their workers a minimum of benefits equal to or better than the plans with the most subscribers in the state. Employers may also provide additional programs that are less restrictive in their benefits.

However, the total of all employee contributions to the project must be limited by the PHCA. The law does not allow surcharges based on employee spousal income or wellness program participation. As a result, rising healthcare costs are effectively restrained by this law.

Enhanced employee retention

Employee retention is a massive issue for most employers. Group health insurance in Hawaii can help you retain employees and reduce turnover. In addition, offering group health benefits can help you recruit and attract top talent.

Small and large businesses must offer their employees health coverage under the Hawaii Prepaid Health Care Act (PHCA) or the Affordable Care Act (ACA). This mandate has led to a significant decline in uninsured workers in the state, and at one time, Hawaii had the lowest uninsured rate in the country.

Employers can purchase compliant PHCA-approved insurance plans2 from licensed insurance providers, use a self-insured plan, or use an integrated HRA (ICHRA). The latter option allows you to pair an approved high-deductible health care plan with an HRA and reimburse employees for the costs of their coinsurance and copayments.

The PHCA also provides job protection for employees who take sick or injured leave, although this does not apply to maternity and paternity leave. However, the federal Family and Medical Leave Act (FMLA) does provide this protection.

Increased productivity

In Hawaii, the Prepaid Health Care Act (PHCA) requires employers to offer workers employer-sponsored group health insurance. This is usually done pre-tax via paycheck deduction and involves a minimum participation requirement.

Surveys confirm that most workers consider employment-based health coverage a significant work benefit. This may be because it is viewed as an investment in their health, which impacts their productivity and organizational performance.

Although the business case for health benefits has received short shrift in mainstream economics, a growing literature suggests that it is worth revisiting. The burgeoning literature argues that good-quality jobs require workers with adequate education and skills, which are embedded in people.

Hence, workers in “good jobs” can be expected to have better health and greater productivity than workers in poorer jobs. In addition, employees in good positions can be expected to be less prone to absenteeism and turnover. This can significantly reduce an employer’s labor costs and improve the firm’s bottom line.

Increased employee satisfaction

Hawaii was ahead of the curve on health care reform, implementing a comprehensive law decades before the Affordable Care Act (ACA). Hawaii’s group coverage is robust, offering employees various essential benefits.

Employers are required to offer health insurance to all full-time employees working at least 20 hours per week under the PHCA. However, there are several complexities to this requirement.

One of the biggest challenges is that the PHCA requires many employees to be part of the plan, limiting employers’ choice of methods. This limit ensures that the pool of employees is large enough to stabilize premiums and provide coverage options.

An integrated HRA can help address the limitations of PHCA by allowing employers to reimburse employees for out-of-pocket expenses, such as coinsurance and copayments. This can help reduce costs and improve employee satisfaction, especially when paired with a high-deductible health plan (HDHP). An experienced HR partner can help navigate open enrollment and assist with choosing suitable health insurance options for your business.