Small businesses in Hawaii will benefit from today’s initial implementation of the federal Affordable Care Act. Larger steps will be taken in four years to put into effect the important requirement that all Americans have health insurance. Of continuing concern is the possibility that Hawaii’s landmark 1974 health care law will be set aside.
The Hawaii law requires all employers to provide most of the insurance coverage for their employees who work more than 20 hours a week. The federal law signed by President Barack Obama last March will provide a tax credit of 35 percent of those premiums for businesses with 10 or fewer employees.
The tax credit is intended as an incentive for small businesses to provide insurance to their employees, since the new federal law will not require it of any company. Unlike most other states, Hawaii does require all businesses to provide health insurance, so the tax credit essentially is an economic stimulus for, by White House estimates, 18,600 small businesses in the islands.
Other elements that take effect at today’s six-month step prohibit excluding insurance coverage for children because of pre-existing health problems and allowing coverage through parents’ insurance plans for offspring through age 25; the Obama administration estimates that will benefit 2,550 young adults in Hawaii.
Hawaii’s state law requires that all employers help provide health insurance to workers, while no business is required by the federal reform to offer coverage to employees. In 2014, the federal law will require businesses with 50 or more employees pay a fee of as much as $2,000 per full-time employees if they choose not to provide health insurance coverage. That’s fine, but Hawaii’s stronger requirement is better, and deserves to prevail.
Questions remain about a clause of Hawaii’s Prepaid Health Care Act stating that the law "shall terminate … upon the effective date of federal legislation" for mandatory prepaid health care.
State Attorney General Mark Bennett has said he can foresee a legal challenge to Hawaii’s law "only once the requirements of the national health care plan take effect and start to affect island residents."
That mandate, requiring all citizens to have health insurance, will take effect in 2014.
The termination clause was added to the state health care law after Standard Oil won a court ruling that it violated the federal Employee Income Security Act, also enacted in 1974, which superseded all state laws relating to employee benefits. Hawaii’s congressional delegation responded by securing an exemption from ERISA.
The state Legislature also approved the termination clause as an amendment to the state law to placate opponents who had pointed out that a broad federal health insurance mandate proposed by then-President Richard Nixon seemed imminent, according to Dr. Lawrence Milke, the state health director in the Cayetano administration, in a 1993 report to Congress.
U.S. Rep. Mazie Hirono took measures to assure that Hawaii would be exempt from the federal law in areas where the state law is stronger. However, further congressional action may be needed to change the ERISA exemption and allow the Hawaii Legislature to eliminate the termination clause from the state law. State and U.S. legislators should take the necessary action before 2014 arrives.