Benefits Column

Lessons from the Aloha State

Hawaii has mandated healthcare coverage for the past 35 years and its experiences offer some insight into the debate about national healthcare reform. Although the state's residents are among the healthiest in the nation, costs continue to rise while restricting services remains a concern.

Monday, November 23, 2009
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Most people equate Hawaii with tropical breezes, surfing and volcanoes. Many don't realize that our 50th state is first in healthcare coverage. Hawaii has provided its workers with minimum healthcare benefits for the last 35 years.

The PrePaid Healthcare Act requires employers to provide healthcare coverage to employees who work at least 20 hours per week for four consecutive weeks and who earn 86.67 times the current Hawaii minimum wage a month ($7.25 x 86.67 = $628).

Companies may either pay the entire monthly premium or share the cost with their workers, but the employees' share cannot exceed the lesser of 50 percent of the premium cost or 1.5 percent of the employees' monthly gross earnings.

The PHC also compels companies to provide Hawaiian employees who experience a disability due to a non-work-related illness or injury with adequate medical coverage for that illness or injury, protecting them from the high cost of medical and hospital care.

The New York Times wrote about Hawaii's healthcare experience in an Oct. 16, 2009 article, but many in Hawaii, including the Pacific Business News, believed the Times sugarcoated the state's recent challenges with healthcare costs.

Bonnie Pang is a benefit consulting manager with the Atlas Insurance Agency in Honolulu. When I first started speaking and consulting in Hawaii six years ago, Bonnie was the person who explained the state benefit plans to me. She helped me out again for this column.

"For the first time in 15 years, I am seeing a lot of employers with one to four claims in a year at the $80,000 to $150,000 level," she says. (Realize that 95 percent of Hawaii's employers have fewer than 50 employees.) "There is a 9 percent increase in medical trends and employers are receiving premium increases of 11 to 60 percent."

As if to illustrate Pang's experience, Hawaii's two largest health plans, Hawaii Medical Service Association and Kaiser Permanente Hawaii, filed rate hikes with the state Insurance Division in early November.

This cost experience is occurring despite the nation-leading health statistics of Hawaii. According to the Gallup Well-Being Index, Hawaiians are first in the United States in emotional health and their life evaluation, third in physical health, and fourth in healthy behaviors. Hawaii ranks second only to Utah in its overall well-being score.

The rest of the country can learn from the experience in Hawaii, Pang says. Among her observations:

* Employers with a stable, low turnover workforce will see medical costs go up more quickly.

* Prevention efforts are good, but you "need to go deeper" and get people to appreciate that "healthcare is a privilege, not a right."

* We must set expectations that "we are allocating care." 

Several years ago, guidelines regarding the frequency of Pap smears led to a debate similar to the one the United States is now experiencing over the frequency of mammograms.

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If health-related examinations are aligned with evidence-based recommendations, "we could use the savings to fund other treatments that might be more critical for patients," Pang says. "But if [a health plan] stopped paying for annual Pap smears, there would be a revolt."

* Be careful not to expect quick returns from some of the proposed changes. "It took Kaiser Permanente Hawaii eight years to make electronic medical records work and other health plans are still struggling."

Pang also discussed several of the challenges that have evolved since the PrePaid Healthcare Act:

* While Hawaii placed high on the recently announced America's Health Rankings for "ready availability of primary care physicians," there are no orthopedists on the Big Island of Hawaii. Patients who need specialty care and live on the outer islands must fly to Oahu or the mainland for care.

* Most physicians are not satisfied with their reimbursement rates. As a result, 30 percent of Hawaiian-licensed physicians are not practicing in Hawaii, 30 percent of doctors are not taking Medicare and many physicians are not allowing new patients to come into their practice.

In response to these trends, Hawaii is expanding the definition of the services that nurses and other healthcare practitioners can provide, she says.

There are more lessons to be learned from our youngest, but most experienced state regarding healthcare. In my next column, I will highlight how Hawaii tackles prevention and treatment initiatives that impact large groups of people and their healthcare spend.

In the meantime, when it comes to healthcare benefits and costs, keep in mind what one of the local surfers told me six years ago, "Bend your knees, lean forward and enjoy the ride."

Carol Harnett is a highly respected consultant, speaker, writer and trendspotter in the fields of employee benefits, health and productivity management, health and performance innovation, and value-based health. Follow her on Twitter via @carolharnett.

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