Business and Health Insurance Costs to Remain High Under Hawaii’s Exemption to National Healthcare Law

BY LAURA BROWN – Under the new federal healthcare law, the Patient Protection and Affordable Care Act, now being implemented, Hawaii’s businesses will continue to shoulder 98.5 percent of the costs of health insurance premiums – higher than any state in the nation.

Hawaii’s Democratic delegation, US Rep. Mazie Hirono, former US Rep. Neil Abercrombie and Sens. Akaka and Inouye, fought to obtain an exemption for Hawaii from the federal law.

Hawaii’s Prepaid Healthcare Act, passed in 1974, will continue to require private employers to offer health insurance to employees who work more than 20 hours per week and for more than 4 consecutive weeks.

The federal law does not include an employer mandate.

Under Hawaii law, an estimated 92 percent of Hawaii’s citizens are insured. However, one side effect is that because of the cost of health insurance, employers offer many part-time jobs instead of full time.

Subsequently, Hawaii ranks first in the nation for workers who hold multiple jobs, according to the US Bureau of Labor Statistics.

Business owners say that Hawaii’s law means that Hawaii’s businesses are at a disadvantage when competing with mainland companies and the law limits their ability to expand.

Hawaii’s law fails to contain costs

Senator Colleen Hanabusa (D-Hawaii), a candidate for the 1^st Congressional District seat now held by U.S. Rep. Charles Djou, touts Hawaii’s Prepaid Health Care Act as an example of what the federal Patent Protection and Healthcare Act will mean for other states once it is fully implemented.

“Hawaii has the lowest (healthcare) premiums in the nation,” Hanabusa says.

But a state-by-state report, Premiums Outpace Paychecks in Hawaii, by Families USA, finds that Hawaii’s healthcare premium costs are not the lowest in the nation and in fact they have nearly doubled during 2000-09.

Health care costs rose 94.2 percent, while Hawaii’s average earnings rose only 25.7 percent over a 9-year period.

“Quite simply, Hawaii’s families are being priced out of health coverage,” says Kim Bailey, Senior Health Policy Analyst for Families USA.

The report finds that for some employers, particularly those that operate small businesses, the cost of health insurance has simply become too costly. The unemployment rate in Hawaii and nationally remains high as employers hesitate to absorb more costs.

Between 2000 and 2008, the share of U.S. firms that offered health coverage declined by 6 percentage points (from 69 percent of firms to 63 percent), with small businesses being the most likely to drop coverage. See report here.

Candidates differ on solutions to skyrocketing healthcare costs

Despite Hawaii’s law, premium costs are expected to continue to skyrocket to more than $20,000 per year by 2020, according to a report by The Commonwealth Fund.

Hawaii governor hopefuls, Lt. Gov. Duke Aiona (R) and former U.S. Rep. Neil Abercrombie (D), discussed healthcare Thursday at a Sheraton Waikiki Hotel forum sponsored by Kaiser Permanente Hawaii.

Abercrombie believes that health insurance costs are too high and Hawaii should move towards insurance “pools” or a single-payer, government-run system like Medicaid.

“So it is quite clear, in terms of the Prepaid Healthcare Act, we may need to have a review and a revision of it likely,” Abercrombie says.

However, Hawaii’s Prepaid Healthcare Act is frozen in its 1974 form and the Legislature cannot make non-administrative changes without Congressional approval.

In 2014, the federal healthcare law will allow for the formation of state “exchanges” – state-based health insurance — for individuals who are unemployed or retired. That is the year health insurance will become mandatory.

Aiona says he will fight for the State to remain independent so that Hawaii’s citizens will retain current private health insurance benefits.

“I want to make sure that our people are covered that they have the benefits that they need, and if this health care act affects us, it is not going to bring benefits below the standards that we have right now,” Aiona says.

The federal law contains provisions for the uninsured in Hawaii, including subsidies for those who can’t afford coverage and assistance for Medicare beneficiaries who must pay the full cost of prescription drugs until they qualify for catastrophic coverage.

Provisions of the law that apply to health insurance companies in Hawaii this year include allowing young adults to remain on their parents’ insurance plans until the age of 26. Also, insurance companies cannot drop a client if they become ill.

Hirono says because of Hawaii’s exemption, it is up to the State Legislature if Hawaii wants to participate under the national health care act.

Hawaii’s hospitals and health funds bleeding red ink

Hawaii’s hospitals reported losses of more than $400 million over 2007 and 2008, attributed to low Medicaid reimbursements.

The low reimbursement rate for doctors means that Hawaii suffers from a shortage of both primary care physicians and specialists, especially on the neighbor islands.

Also, the high cost of premiums means increased costs to State government.

The Hawaii Employer-Union Health Benefits Trust Fund (EUTF) became officially insolvent last year with deficits of $110.6 million.

Chairman George Kahoohanonhano said the fund has enough cash to pay doctors and health insurance plans, but is unable to pay its future long term debts.

The fund subsidizes health insurance plans of more than 265,000 current and retired state and county workers.

Despite recommendations by the fund’s actuary that premium costs must be increased by 26.2 percent, union representatives on the board recently rejected an increase.

Administrators are uncertain what effect the inclusion of 15,000 teachers and retirees currently under the Voluntary Employees Beneficiary Association will be when they are added to the EUTF fund in December 2010.

Teachers have filed a class-action lawsuit to prevent the switch to EUTF. Paul Alston, attorney for the plaintiffs, believes that the transfer of teachers into the fund is designed to prop up it up.

Locally and Nationally, Republicans and Democrats differ on healthcare solutions

The GOP, in its “Pledge to America,” outlines the following goals to improve healthcare:

• Individuals will find it easier to find private insurance.
• Insurance may be purchased across state lines.
• Expansion of Medical Savings Accounts
• Tort reform

The Democratic Party solutions include:

• A goal of 85 percent of costs for healthcare versus administration
• Closing the “doughnut hole” for Medicaid beneficiaries who must pay the full cost of medications
• Contain healthcare costs in the future

Abercrombie suggests the creation of a Health Insurance Rate Authority to hold down health insurance costs.

However, according to national studies, holding down health insurance costs doesn’t mean the cost of care – the prices charged by doctors and hospitals – will decrease.

Laura Brown is a reporter for Hawaii Reporter. Reach her at LauraBrown@hawaii.rr.com

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