Policy on health care has its downside


POSTED: Friday, June 12, 2009

Due to Hawaii's low uninsured rate of 9.6 percent, policymakers have been looking at our unique employer-mandated health insurance as a model to be followed at the state and even national level. Since 1974, Hawaii has implemented the Prepaid Health Care Act (PHCA), which contains two major directives: 1) That employers provide employees working 20 or more hours a week with health insurance; and 2) That any plan offered by insurers provide equal or better benefits offered by the plan with the most subscribers in the state.

For several reasons, expanding PHCA beyond Hawaii's borders would be a catastrophic mistake.

Fact: From a low of only 5 percent of uninsured residents in the 1980s, the number has nearly doubled to 10 percent today. According to the US Census Bureau, Hawaii's current uninsured rate is not statistically different from states like Minnesota, Wisconsin, Iowa, and Maine, none of which implement employer-mandated insurance.

Conclusion: A low uninsured rate cannot be solely attributed to employer-mandated insurance. Mandating that employers provide coverage does not tackle the underlying problem of skyrocketing health care costs.

Fact: Employers find ways to save on costs by manipulating employee work hours. Following PHCA, the number of employees in the state working between 20 and 35 hours per week decreased while utilization of both employees working less than 20 hours and employees working over 36 hours increased. Evidence supports the claim that employers also drop employees altogether to avoid providing coverage, thereby increasing the rate of unemployment as well.

Conclusion: Requiring employers to cover employees working 20 or more hours has not eliminated, but merely shifted, the burden of health insurance costs to businesses while contributing to the growing uninsured rate.

Fact: Hawaii Medical Service Association (HMSA) is by far the largest provider in the state with 68 percent of the private market and 701,527 members as of May 2008. Kaiser is the second largest with a 20 percent share — thus, HMSA and Kaiser control nearly 90 percent of the state's insurance marketplace.

Conclusion: By requiring insurers' health plans to provide equal or better benefits offered by the plan with the most subscribers, PHCA protects HMSA's and Kaiser's majority control of the market, leaving little room for other insurers to enter the market. Lifting this restriction would introduce badly needed competition, which would go a long way in driving down expenses.

Fact: The state government mandates a wide range of benefits, including expensive and questionably necessary services such as in vitro fertilization and drug and alcohol addiction treatment, which highly inflate the cost of coverage.

Conclusion: Granting consumers the freedom to customize their own plans free of costly state requirements would allow them to prioritize cheaper, preventive services such as cancer screening. This would lower the price of coverage, leading to a larger number of both covered and healthier residents.

PHCA has effectively eliminated health insurance competition in the state, beleaguering citizens with growing expenses and lack of freedom in choosing the health plan that best fits their needs. Opening up the market within and outside the state (much like how consumers can already shop for auto insurance across state lines), in addition to eliminating expensive mandated benefits, would go a long way in restoring the purchasing power and choices of Hawaii's residents regarding the most important aspect of their lives — their health.

Pearl Hahn is a policy analyst at the Grassroot Institute of Hawaii.


The full study “;Hawaii's Prepaid Health Care Act (PHCA) and Far-Reaching Costs”; can be accessed at: www.grassrootinstitute.org/Publications/INFO_publications.shtml