Kara Faleafine was troubled after receiving a notice in the mail saying the state was canceling the health insurance coverage she had for her two young girls at the end of June.

The Aliamanu mother of five, who works the overnight shift at Sack N Save, traveled with daughters Loghan, 3, and Kailey, 2, to the Department of Human Service’s Dillingham office Thursday to try to get the girls reinstated before a scheduled doctor’s appointment in August.

At least 4,582 Quest families received erroneous notices earlier this month saying their coverage would end Monday. Hundreds of Quest recipients have been flooding the state Medicaid offices for answers.

"I was worried. I thought I had to do the whole process (of applying) over again," Faleafine, 34, said. "It’s not a fun process to go through. You got to get all your paperwork, all your pay stubs, all your bank statements. It’s a lot of hassle."

DHS, which administers Quest — Hawaii’s version of Medicaid for low-income residents — said the error was an isolated incident and the fault of its mailing company, Cardinal Mailing Services Ltd. Cardinal executives didn’t return a call for comment. Cardinal is a direct marketing company based on Sand Island Access Road and was founded in 1947, according to its website. 

"The important message here is that nobody has lost insurance," said DHS Director Patricia McManaman in a phone interview with the Honolulu Star-Advertiser, adding, "To our knowledge this issue with our vendor hasn’t previously occurred."

This isn’t the first time DHS has had problems with erroneous mailings.

Last month DHS mistakenly notified 4,500 aged, blind or disabled individuals that their benefits would end. The notices were generated "as a result of adding new long-term care functionality" to DHS’ $95 million online eligibility system, known as Kolea, the department said.

A year ago the state sent 250,000 Quest members information about health insurance options in Hawaii but inadvertently left out Kaiser Permanente’s information. Correcting that mistake cost taxpayers $176,254.

McManaman said she didn’t know how many individuals were affected by the most recent error. The inaccurate letters were sent to families, many of whom have multiple members enrolled in Quest.

On Thursday shortly after noon, about 30 people were waiting in line at DHS’ small Dillingham office.

"It’s been standing room only for about a week and a half" because of the erroneous letters, said a DHS worker who was helping Medicaid clients.

Kalihi Valley resident Dac Escobar, 22, had her 3-year-old son, Davin, in tow Thursday as she tried to straighten out their eligibility after receiving cancellation notices.

"I called them, and they’re like passing me to different numbers so I got irritated," she said. "I need it because I pick up my pill every month, and my son is sick, too. I was worried at first ’cause, you know … I don’t know what’s going to happen."

DHS is spending $2,500 to send an apology letter Friday to the families informing them of the mistake, McManaman said.

"We apologize for any inconvenience this may have caused," the DHS letter says.

DHS oversees the $2 billion annual budget for Quest.

This year DHS is requiring roughly 200,000 Quest members — including 110,000 children — to fill out and return eligibility renewal forms or they will lose health insurance.

The first forms were mailed in March to roughly 33,000 Quest members. About one-third of those did not respond, and their coverage was canceled in April. The state is mailing renewal notices to about 33,000 members each month until all 200,000 have received forms.

The most recent problem occurred when renewal forms that were supposed to be mailed by Cardinal to 4,582 families in May were not sent. Instead, those families received cancellation notices even though they never got a renewal form.

"Earlier in June, you may have received a notice that your medical assistance would end June 30, 2014 because you ‘Did not return eligibility form,’" the apology letter being sent Friday said.

The letter went on to say that DHS will extend medical coverage through Aug. 31.

"We sent them (Cardinal) a complete file of the names and addresses for letters to be printed and mailed on May 9. They didn’t open and print the entire file, so it’s their error," McManaman said.

However, DHS workers who asked not to be identified said the error is the result of the Kolea system, which has been plagued by software problems since launching Oct. 1. 

McManaman said the problem was not due to Kolea.

"This is not about Kolea not generating a fully populated list," she said. "This is strictly a vendor error."