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Hawaii Association of Health Plans

The Hawaii Association of Health Plans

HAHP provides valuable information to Hawaii health care consumers, legislators, and the media, including contact information for HAHP's member organizations and information on current health care issues.


Hawaii Healthcare Reform Timeline

No one sees the direct results of the Patient Protection and Affordable Care Act  (PPACA) like the health insurance professionals who work directly with American  employers and individual consumers looking for affordable healthcare coverage.


Provisions That Will Impact Individuals & Employers

“It is essential that [policymakers] recognize and protect the indispensable role that licensed insurance professionals play in serving consumers.”

- National Association of Insurance Commissioners



• Select small businesses became eligible for phase one of the small business premium tax credit. Effective January 1, 2014, employers may only use this credit to purchase coverage through a state-based health insurance exchange.

• Employers that provide a Medicare Part D subsidy to retirees had to account for the future loss of the deductibility of this subsidy beginning in 2010 on liability and income statements, although the elimination of the deductibility did not take effect until 2013.

• The Pre-Existing Condition Insurance Plan (PCIP), or temporary high-risk pool program, covers people who cannot obtain individual health insurance coverage due to preexisting conditions began. Employers are prohibited from sending individuals to the high-risk pool, with associated fines. On February 16, 2013, the Department of Health and Human Services (HHS) announced that PCIP would cease accepting new applications for coverage, but would continue to cover existing enrollees until health insurance exchanges become operational on January 1, 2014.

• The federal web health insurance information portal created.

• Insured group plans were required to comply with the Internal Revenue Section 105(h) rules that prohibit discrimination in favor of highly compensated individuals. However, the IRS announced it would not enforce this provision until the release of further guidance about how these provisions would apply to insured group health plans and no guidance has been issued yet.

• Lifetime limits on the dollar value of essential health benefits for any participant or beneficiary for all group and individual plans were prohibited.

• Annual limits on essential health benefits are only allowed through plan years beginning prior to January 1, 2014, and only with certain limits. HHS issued rules to allow for temporary waivers from the annual limit requirements if it was found that compliance would result in a significant decrease in access to benefits or a significant increase in premiums. The waiver application period closed in September of 2011. All waivers expire as of plan years beginning January 1, 2014 and later.

• All group and individual plans had to begin covering dependents to age 26. Dependents can be married and also be eligible for the group health insurance income tax exclusion.

• Health coverage rescissions were prohibited for all health insurance markets except for cases of fraud or intentional misrepresentation.

• If an individual or group health plan provides any benefits with respect to services in an emergency department of a hospital, the plan must cover out-of-network emergency services as if they were in-network. Plans must also allow enrollees to designate any in-network doctor as their primary care physician and have a coverage appeal process.

• Group and individual plans had to begin covering specific preventive care services with no cost-sharing.

• The federal grant program for small employers providing wellness programs to their employees was to begin. However, funds were never appropriated for this program, and applications are not currently being accepted.



• Health plans were subjected to medical loss ratio (MLR) requirements. Individual and small-group insurers must adhere to an 80% MLR and large-group insurers must adhere to an 85% MLR. Plans that do not meet this requirement each year have to pay policy holders rebates by August of the following year. Rules proposed in January 2013 would change the rebate due date to September 30 effective with 2014 MLR reporting.

• The tax penalty on distributions from Health Savings Accounts (HSAs) that are not used for qualified medical expenses increased from 10% to 20%.

• Reimbursements for over-the-counter drugs under HSAs, medical flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and Archer MSAs (formerly known as medical savings accounts) were prohibited without a prescription.

• Small employers were allowed to adopt new “simple cafeteria plans.”

• HHS determined that it could not meet the fiscal sustainability requirements in the law relative to the Class Act public long term care program. This provision was repealed as a part of the “fiscal cliff” legislation enacted in December 2012.

• HHS, in conjunction with the Department of Labor (DOL), issued a study on the large-group market, using data collected from Form 5500.

• The Medicare Part D “donut hole” begins closing in a phased approach.


• Employers filing 250 or more W-2 Forms in 2012 had to include the cost of employer-sponsored health coverage for informational purposes on the forms beginning in the tax year reported in 2013.

• Group and individual health insurers had to provide a summary of benefits and coverage (SBC) that meets specified criteria to all enrollees and applicants when they apply, enroll or reenroll, when a policy is delivered and when a material change is made outside a policy renewal period.

• Group insurers were scheduled to begin submitting quality reports to HHS. These reports must state whether or not the benefits provided under their plans meet criteria established by HHS on improving health outcomes, preventing hospital readmissions, improving patient safety and reducing medical errors. HHS has yet to issue regulations on this reporting requirement.

• Group or individual health insurance coverage must provide coverage for specified women’s preventive care service without any cost-sharing requirements, including contraceptives.

• Patient-centered outcomes research institute fee on group health plans to fund comparative effectiveness research program begins (insurance companies pay the fees and pass them on to employers).



• FSA contributions for medical expenses are limited to $2,500 per year, with the cap annually indexed for inflation. IRS guidance issued in June 2012 clarified that the cap applies on a plan year basis beginning after December 31, 2012.

• A Medicare payroll tax increase of 0.9% goes into effect for individual filers with incomes over $200,000 and joint filers with incomes over $250,000. In addition, there is a new 3.8% Medicare contribution on certain unearned income from high income individuals.

• For those who itemize their federal income taxes, the threshold for deducting unreimbursed medical expenses increases from 7.5% of adjusted gross income (AGI) to 10% of AGI. The increase is waived for those 65 years and older through 2016.

• By October 1, all employers are required to provide notices to their employees informing them of the existence of the state-based exchanges.



• The individual mandate tax penalty takes effect. There are specified exceptions, and violators will be subject to a phased in excise tax penalty for noncompliance of either a flat-dollar amount per person or a percentage of the individual’s income.

• States are required to have health benefit exchanges up and running to serve their individual and small-employer markets. If a state fails to create a federally certified exchange, HHS will step in and operate an exchange for the state. HHS will also allow a state to elect a hybrid state/federal partnership model overseen by HHS.  Hawaii is operating its own exchange, known as the Hawaii Health Connector.

• Exchanges will offer “metal” levels, meaning plans will be categorized as platinum, gold, silver and bronze.  A platinum plan reimburses an average of 90% of all essential health benefits, after considering deductibles, out-of-pocket limits, coinsurance and co-payments.  Gold plans reimburse 80%, silver 70% and bronze 60%.  It is unlikely that silver and bronze plans will meet the requirements of the Prepaid Health Care Act; however, they should be available to individuals.

• In addition to licensed insurance agents, Navigators will be available to assist individuals in enrolling for coverage through the exchange

• Significant insurance market reforms for all individual market and fully insured group market policies take effect. All plans must be offered on a guaranteed-issue basis, annual and lifetime limits will be prohibited on essential health benefits and the size of a small-employer group will be redefined to one to 100 employees (although states may elect to keep the size of a small groups at 50 employees until 2016, as Hawaii has done). In addition, all fully insured individual and small groups up to 100 employees (although states may elect to keep the size of small groups at 50 employees until 2016) will have to abide by strict modified community rating standards with premium variations only allowed for age (3:1), tobacco use (1.5:1), family composition and geographic regions, to be defined by the states, and experience rating will be prohibited for small groups.

• Standards for qualified coverage, which will apply to small group and individual products to be sold both inside and outside the exchanges, begin. These include the essential health benefits standards that will cover specific mandated benefits.

• Cooperative plans are allowed to be sold through state-based health insurance exchanges. Multistate national plans may be offered to individuals and small employers through state exchanges, although these will be phased in.

• Premium assistance tax credits (subsidies) for individuals and families making between 100-400% of the federal poverty level (FPL) begin. These refundable and advanceable subsidies will be available only for people who qualify to purchase individual coverage through an exchange.

• Reinsurance contributions fee on group health plans to offset the cost of adverse selection for insurers in exchanges begins (insurance companies pay the fees and pass them on to employers).

• A national premium tax on most private health insurers based on premium volume takes effect, which can be passed directly to fully insured plan consumers.

• Employer-sponsored wellness program rules can increase the value of workplace wellness incentives. There will be a pilot expansion of wellness programs to individual market consumers in 10 to-be-selected states.



• The employer responsibility requirements take effect for companies that employ 50 or more full-time equivalents. Employers who do not offer coverage to full-time employees (as defined under federal regulations) and their dependent children and have employees who obtain subsidized coverage though the exchanges will be fined.  This will impose new recordkeeping requirements on employers in Hawaii, and will result in some people obtaining coverage for months that the Prepaid Health Care Act would not have required coverage.

• Extensive reporting requirements for employers begin.

• The federal Children’s Health Insurance Program must be reauthorized.



• For those 65 years and older who itemize their federal income taxes, the threshold for deducting unreimbursed medical expenses increases from 7.5% of AGI to 10% of AGI.

• States that limited size of employers who could join exchanges must raise limit to 100 employees.


• States may elect to allow large employers to purchase coverage through exchanges. If they do so, the market reform provisions—like modified community rating and others that apply to individual and small-group policies—will be applied to all insured plans offered in the state regardless of group size or place of purchase inside or outside the exchange.

• States may elect to opt out of health care reform if they receive approval to pursue an alternative that would cover at least as many people at no more cost to individuals, without increasing the federal deficit.


• The “Cadillac tax,” a 40% excise tax on high-cost plans, goes into effect for all group plans. The tax is paid by the insurer but is passed on directly to the employer. The value of stand-alone vision and dental plans are excluded, and the tax does not apply to accident, disability, long-term care, and after-tax indemnity or specified disease coverage. The amount of a high-cost plan for purposes of the tax is indexed for inflation and will vary annually. The excise tax will apply to plans with values that exceed $10,200 for individual coverage and $27,500 for family coverage, with higher thresholds for retirees over age 55 and employees in certain high-risk professions.



• The Medicare Part D “donut hole” will be closed.

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