HONOLULU – Hawaii’s decades-old law aimed at increasing health coverage by requiring companies to provide insurance to their workers has brought something less than universal health care to the 50th state.
The experience in President Barack Obama’s home state poses some cautionary realities as Congress considers a similar federal requirement that businesses provide health insurance to their employees in any sweeping overhaul of the nation’s health care system.
Since its passage 35 years ago, the percent of uninsured in Hawaii has fallen to lower levels than nearly every other state, but the system left coverage gaps. And cost-conscious business owners have found an easy way to avoid the law by hiring more part-time workers who aren’t required to be covered.
“If it weren’t for that law, medical benefits are one area we would look to cut because of this recession,” said Debi Halcro, president of Valenti Print Group, which publishes everything from brochures to coffee table books. “It hurts the business. You can’t pass it on to customers in this economy.”
Like many Hawaii bosses, Halcro is careful to limit the hours of her three part-time employees so she doesn’t have to pay for their health insurance. In all, the company has 43 workers.
Similar loopholes could be exploited under vague language in legislation pending before Congress. The House bill doesn’t clarify who is a full-time employee, and the Senate measure only fully covers employees working at least 35 hours a week.
“An employer mandate is not an effective means for achieving universal coverage,” according to an analysis published by the Federal Reserve Bank last month. “Although overall insurance coverage rates are unusually high in Hawaii, a substantial number of people remain uninsured, suggesting a need for alternative approaches if universal coverage is the ultimate goal.”
Since Democrat-controlled Hawaii passed its employer health insurance mandate, it has consistently had one of the lowest rates of uninsured in the nation, at about 8 percent in 2007, according to the Henry J. Kaiser Foundation. A federal survey showed Massachusetts had even fewer uninsured, at about 3 percent. The national average is 15 percent.
Massachusetts approved a broad health care reform measure in 2006 that requires near-universal coverage and penalizes individuals who refuse to get coverage. Massachusetts is also different from Hawaii in that it has had some of the highest health costs in the country, while Hawaii has the lowest.
Because Hawaii’s law only covers those who work more than 20 hours per week, some companies have changed their hiring practices so they can save money.
“Naturally, everybody tries to keep their workers as part-time,” said Jack Schneider, president of J.S. Services, which handles human resources and mandated benefits for about 200 Hawaii companies. “If you create a law, people find ways to get around it.”
Hawaii has the highest percentage of private-sector part-time employees without employer-sponsored insurance in the country, according to a University of Hawaii study of the law’s impacts.
But the study also shows that Hawaii ranks in the middle nationally in the percentage of employees working 19 hours or fewer per week, which negates the idea that businesses have significantly switched to part-time workers to dodge health insurance costs, said economics professor Gerard Russo, the report’s researcher and co-author.
Low-hour employees make up only about 3 percent to 6 percent of the overall Hawaii work force, according to the Federal Reserve Bank report.
About 17 percent of Hawaii residents lacked insurance that would cover both doctor visits and hospital bills in when the law was passed in 1974, and that figure dropped to around 5 percent in the early 1980s, according to the Hawaii Uninsured Project.
Russo said the climb to 8 percent uninsured by 2007 was caused by a combination of factors: the number of uninsured grew as the unemployment rate rose, health care costs increased across the country and some businesses hired more part-time workers to avoid the law’s reach.
Supporters of the employer-paid health insurance program credit it for making Hawaii the “Health State.”
Hawaii leads the nation with the lowest death rate, longest life expectancy, lowest frequency of emergency room visits and second-fewest deaths due to heart disease, according to Kaiser Foundation data.
While not immune to skyrocketing health costs, Hawaii residents have the most affordable health insurance in the nation, with average family coverage costing 9,426 annually for employer-based health insurance in 2006. Nationwide, the average was 11,381.
“It has worked here. It’s a cost of doing business for folks in Hawaii, and it has provided stable health insurance for most people here,” said state Insurance Commissioner J.P. Schmidt. “But we have not been immune to increases in health care costs, and the premiums have continued to rise.”
Hawaii’s good health coverage is a result of a long history of employer-provided health care, from plantation owners a century ago to the 1974 law covering all businesses, said Cliff Cisco, senior vice president for Hawaii Medical Service Association, the state’s largest health insurer.
“Generations of people who were born here in Hawaii … have always enjoyed from birth a very high level of coverage,” Cisco said. “It shows what can happen with an employer mandate, and it contributes a lot to the discussion nationally.”
Hawaii’s law is hindered by its inflexibility, which limits worker health insurance contributions to a maximum of 1.5 percent of the worker’s wage. The law was permitted under an exemption to the 1974 federal Employee Retirement Income Security Act, with the condition that it couldn’t be changed.
Attempts to modify the law so that the costs were more evenly split between employer and employee failed because of fears that the entire program would be discarded. For a minimum wage worker, employers’ share of health care premiums jumped 2,529 percent between 1974 and 2008, while maximum employee costs only went up 263 percent, according to HMSA.
Despite drawbacks to employers, Big Island emergency room Dr. Josh Green, who is also a Democrat in the state Senate, urged the U.S. Congress to follow Hawaii’s example.
“It’s important to take this leap of faith,” said Green, who works at Kohala Hospital. “Fortunately for Washington, there is a model here in Hawaii, and on a whole it has proved to create a very healthy society.”
On the Net:
Kaiser State Health Facts: http://statehealthfacts.org/