HSAs in Hawaii

[Gary Lesser]

Can an employer make the same HDHP/HSA available to its employees in Hawaii as is available in other states?

Proposed Answer for Discussion and Comments (see below). Does everyone agree?

Generally no. The state of Hawaii has a unique exception from the preemption provision of ERISA that allows it to regulate directly the terms of ERISA health plans, including self-funded plans. ERISA § 514(b)(5). Hawaii’s Prepaid Health Care Act (“PHCA”) requires employers to provide health benefits to Hawaii-based employees who are employed at least 20 hours per week for 4 consecutive weeks. Haw. Rev. Stat. §§ 393-3(8), 393-4, 393-11. In addition, the PHCA also sets forth various requirements concerning plan benefits and cost-sharing. Haw. Rev. Stat., ch. 393. Accordingly, an HDHP offered by an employer in Hawaii, whether self-insured or insured, must satisfy the requirements of the PHCA.

An employer in Hawaii essentially has three options in deciding how to satisfy the PHCA's benefit requirements: (1) the employer may buy health insurance coverage that has already been pre-approved by Hawaii Department of Labor and Industrial Relations (“DLIR”); (2) the employer may seek DLIR approval for a health insurance policy not yet approved by DLIR; or (3) the employer may seek DLIR approval for self-funded plan coverage. At present, there are not yet any pre-approved HDHP/HSA products available on the Hawaii insurance market. If an employer offers a plan that has not been pre-approved by the DLIR, it must submit an application to the state and request approval. It appears, based on informal comments from the DLIR, that in order to view the HDHP as satisfying the requirements of the PHCA, the DLIR may require significant employer HSA contributions to ensure that most of the high deductible is covered by the employer, not the employee.

[GBurns]

Your analysis is as complete as it needs to be. There is not much that can be added.

This situation seems to be quite acceptable in the Hawaii market and seems to work well for them.

Hawaii's DOI does have a very good record regarding protecting the public from things that do not work well or which present questionable exposure or risk to its citizens. They have had only a few bad incidents so it would be hard to justify any change especially a change that has no proven track record of being better than what is already in place and well understood.

[Don Levit]

Gary:

Regarding numbers 2 and 3 in your question.

Would the difference in numbers 2 and 3 be for employer plans that are either fully insured or self insured?

In other words, in number 2, are you suggesting that an employer could request a specific policy to be sold by a commercial insurer?

Don Levit

[Gary Lesser]

In number 2, if there was such a policy (HDHP), the employer could buy it. I don't think such a policy currently exists in Hawaii; so option 3 (self-insured) seems to be the only option.

[Don Levit]

Gary:

My theory is that the ERISA plan sponsor has at least 3 options.

First, he can request approval from the department of insurance for an "amended" policy offered by an insurer that would qualify as an HSA/HDHP.

The policy could be issued by Hawaii as an "experimental plan," if approved by the insurance commissioner.

Every state insurance code I have reviewed allows for this option, although I have not reviewed Hawaii's code.

You seem to suggest that this option, number 2, is available in Hawaii.

Are you familiar with their insurance code regarding this option?

Second, would be the self funded single employer route.

I am not aware if Hawaii is allowed to regulate self funded ERISA plans, although from your post, you seem to infer that they can, for ERISA preemption does not seem to apply.

The third option is a self funded MEWA.

As you know, plan sponsors are free to design their plans virtually with any benefit design, other than the federal mandates, for self funded plans.

I believe that, even for fully insured plans, this freedom to design the plans still remains.

The inconvenience comes in, however, for the commercial insurer will need to get the commissioner's okay to offer the amended (experimental) plan.

Don Levit