Why high-deductible health plans are least prevalent in Hawaii

On average, the percentage of U.S. private-sector employees enrolled in high-deductible health insurance plans in 2020 was 53 percent. But Hawaii boasts the lowest percentage in the nation, with less than 18 percent of employees enrolled in HDHPs.

HDHPs are defined as plans that meet the minimum deductible amount required for health savings account eligibility — $1,400 for an individual and $2,800 for a family in 2020.

Becker's asked the Hawaii Department of Commerce and Consumer Affairs Insurance Division why the state's HDHP enrollment is so low compared to all other states. For reference, no state besides Hawaii has a percentage below 34 percent. The state with the highest percentage, North Carolina, has 70 percent of private-sector employees enrolled in HDHPs.

According to Arlene Ige, a health branch administrator with the state department, a law passed in 1974 may be part of the reason there is a low percentage of HDHPs in Hawaii.

"Hawaii passed the Prepaid Health Care Act in 1974 that created an employer mandate for medical insurance coverage; and set a minimum standard for employee medical benefits," she said. "Hawaii's private employers are required to offer healthcare benefits meeting the prevalent plan standard which are robust. In terms of robustness, PHCA compliant plans are generally at an actuarial value of a platinum (90/10) or gold (80/20) metal level."

The 1974 state law can also block employer efforts to implement cost-reduction changes that include HDHPs.

Beyond requiring private employers to provide health coverage for all eligible employees, the PHCA caps employee contributions and requires minimum benefit levels. The state must approve all plans before employers can offer the coverage to employees or implement any plan changes, including deductibles and out-of-pocket maximums, according to asset management firm Mercer. 

Federal law requires high-deductible health plans to have deductibles and out-of-pocket maximums that are larger than Hawaii's benchmark plan — the HMSA Preferred Provider Plan 2010. The Hawaii plan imposes a $100 individual deductible for out-of-network provider care, none for in-network care, a $12 office visit copayment and a maximum $2,500 annual copayment for individual coverage. Because of Hawaii's lower cost-sharing requirements, employers looking to offer HDHPs to employees may find the option challenging or even impossible.

In 2017, Hawaii lawmakers approved legislation that would allow employers to offer employees an HDHP when paired with a health savings account. Before then, high-deductible plans weren't allowed in Hawaii's insurance market, according to the Honolulu Star-Advertiser.

As of 2019, payers are allowed to offer high-deductible health plans to Hawaii employers if the plan is sold with a prepaid group accident and health or sickness policy that is not an HDHP. No package can consist of an HDHP offered in conjunction with a health savings account unless the package is approved as a prepaid group healthcare plan. Payers also must file a report with the state that contains their educational information and marketing materials about any health plan and health savings account they offer.

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