Hawaii’s health care waiver could serve as blueprint

by Zack Hale, State of Reform, August 15, 2016

With a number of states in the process of submitting waivers provided for under Section 1332 of the Affordable Care Act (ACA), Hawaii is poised to be the first to gain exemption from certain parts of the federal law and could serve as an example for others seeking greater flexibility in how to extend health care coverage.

Hawaii represents a unique case study because the state has already adopted rules for employer-sponsored health insurance that go even farther than the provisions outlined in the ACA, rendering the federal SHOP (Small Business Health Option Program) system redundant.

For perspective, Hawaii was the first state in the nation to pass a law requiring employer-sponsored health care coverage in 1974.

So far, only 1 percent of Hawaiian businesses have enrolled employees on the federal exchange. The remaining 99 percent engage in direct enrollment through carriers. While the state’s waiver application is narrow in scope, it could serve as an example for other states contemplating their own proposals.

With 1332 waivers eligible to take effect in 2017, State of Reform caught up with Beth Giesting, health care transformation coordinator in the Office of the Governor, who explained why Hawaii is seeking exemption from the SHOP exchange:

“We’re going to be the first state in the country that has a waiver under consideration, and we are pretty optimistic that it will get through the process. In practical terms, it is basically saying that we are [eliminating] the SHOP exchange; we are doing just fine with prepaid.

I understand that none of the SHOP exchanges [nationally] worked very well. It might be time for Plan B.

Nobody used the homegrown SHOP, but the problem with using the federal SHOP is that our rules (because of prepaid) are so different from the federal rules. So if an employer in Hawaii went to the federal SHOP, they might be told that they don’t need to provide anything and can make up their own rules in terms of what they and their employee have to provide.

It’s just so completely different that we can’t participate in the federal SHOP, and we don’t want our employers to even look there. That’s mostly why we want to get out of the whole thing.”

Some of the key differences between Hawaii’s Prepaid Health Care Law and the ACA include:

• “Full-time” is defined as working 20 or more hours per week, while the ACA has a 30-hour definition.
• Employees cannot be charged more than 1.5 percent of wages for premiums, compared to a sliding scale from 2 percent to 9.5 percent under the ACA.
• Employers must provide the equivalent of platinum or gold coverage.
• Other cost-sharing rules, such as out-of-pocket maximums, are also more favorable to the employee than the rules in the ACA.

While Hawaii’s proposal isn’t a major change in terms of policy, it’s worth keeping an eye on for innovation followers as states continue to adjust their coverage system goals in the post-ACA era.

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2010: Health Insurance? No need: Abercrombie promises to dump Prepaid Health Care Act