Hawaii Falls Behind In Health Care Coverage

There was a time when Hawaii enjoyed a reputation as the nation’s health care leader. It was the only state that required employers to provide health benefits, and its uninsured rate was a mere 5 percent.

In addition to the employer mandate under the 1974 Prepaid Health Care Act, the state had the so-called QUEST program, a Medicaid-waiver project with a safety net for low-income people who don’t qualify for Medicaid.

The state’s progressive policies got a lot of attention, even drawing praise from then-First Lady Hillary Clinton in the early 1990s.

Today, however, Hawaii is struggling on the health coverage front. The uninsured rate has doubled to 10 percent, according to U.S. Census data, with some 120,000 residents lacking coverage. Hawaii is behind 11 other states, still performing better than the 14 percent nationwide average, but some health professionals believe it has more uninsured than the Census reflects. Despite the employer mandate, many of those lacking insurance do have jobs.

What went wrong? “People over the years have taken things for granted,” said state Rep. Dennis Arakaki, Democratic chairman of the state House Health Committee. Health coverage has been such fact of life that it’s barely an issue in union negotiations, he said. “But things have changed and it affects not only the insurers but it also effects the providers. Because everybody is impacted, people are starting to realize something has to give.”

Arakaki said premium costs rise in part because new medical technology costs more in an island environment. Many part time workers are going without benefits. The uninsured are flocking to community health centers and hospitals for primary care and those facilities are straining, he said. “All these things are coming to bear on the system and people are wondering what’s going to be the straw that breaks the camel’s back.”

Hawaii is not alone in its health coverage slide, with the recession economy taking a bite out of benefits. But Hawaii comes from a tradition of large plantations that provided hospitals and physician care for their vast workforces. As health care costs rose during the 1990s, the state’s tourism economy suffered non-stop hits from the Persian Gulf War, the Japanese and U.S. recessions, the Sept. 11 terror attacks and the SARS epidemic.

Concern about getting medical coverage back on track has sparked The Hawaii Uninsured Project. Part of the non-profit Hawaii Institute for Public Affairs, and funded by federal and foundation grants, the project involves government, civic, business and non-profit groups who are evaluating the current system and looking for new ways to promote full coverage in Hawaii.

“Times change and people change and economies change and environments change to respond to different pressures,” said Joan White, the project’s executive director. “We always need to be sensitive to those kinds of pressures to find solutions that work with people and not against them.”

The most common complaint is the 1974 mandate’s burden on small businesses. Half the state’s businesses employ fewer than four employees and 95 percent have fewer than 50. Employers must cover anyone who works at least 20 hours a week, and the coverage must meet minimum standards. The employer must pay at least half the premium cost. But the rising cost of premiums has increased the employers’ share because the law caps the employee’s payment at 1.5 percent of his or her wages.

In 1974, that 1.5 percent covered considerably more of the premium than it does today.

“So, for low wage earners you have the employer paying a disproportionate share of the premium,” said Gwen Ouye-Nakama, the project’s associate director.

“It’s having a terrible impact,” said Beverly Harbin, small business advocate at the Hawaii Chamber of Commerce. Minimum health coverage is tied by law to the standards of the largest insurance plan in the state, and smaller insurers have trouble competing, she said.

“The employers have no control over what benefits are offered. If they raise the premium, you have to pay or close up,” she said.

Analysts believe there is a transition to more part time workers, perhaps to avoid the 20 hour-cut off for health benefits. Many hold multiple jobs in Hawaii’s tourist-driven service economy.

“The problem for them is there is no one employer for whom they work more than 20 hours,” White said. Additionally, the self-employed have often do without coverage because of rising premiums, she said.

“We see evidence of avoidance of the law,” said Gerard Russo, a University of Hawaii economist who is working on the Hawaii Uninsured Project. He declined to elaborate, saying his study was not complete.

Exacerbating the problem is the QUEST program’s inability to accommodate everyone who meets its financial eligibility requirements. Ironically, 14,000 children, among 22,000 who lack coverage, are eligible under QUEST and Medicaid but have not applied, the project found.

Arakaki tried unsuccessfully this year to pass a controversial, single-payer system that would pool payments from all employers and plans to buy medical coverage for the whole state. He now plans to seek other solutions.

Honolulu-based writer Rita Beamish is a former White House reporter for The Associated Press.