Hawaii Health Insurance Law Requirements for Employers

Hawaii’s health insurance law requirements for employers come from the Prepaid Health Care Act, which requires nearly every private employer in the state to offer an approved health plan to employees who work at least 20 hours a week and meet a monthly wage threshold. The mandate applies no matter how small the business. A sole proprietor with one qualifying employee is covered by it. The Department of Labor and Industrial Relations (DLIR), through its Disability Compensation Division, enforces the law and must approve every plan before an employer can use it to satisfy the mandate.¹

The Act is codified in Hawaii Revised Statutes Chapter 393.² Government employers are outside its scope; federal, state, and county workers are covered under separate systems.

Which Employees You Must Cover

An employee triggers the mandate when two things are true at once: they work at least 20 hours a week for four consecutive weeks, and they earn a monthly wage of at least 86.67 times Hawaii’s minimum hourly wage.³ With the state minimum wage at $16.00 per hour as of January 1, 2026, that comes to roughly $1,387 per month.⁴

Coverage has to start once the employee finishes those first four consecutive weeks, or on the earliest enrollment date under your plan (usually the first of the following month), whichever comes first.⁵ The 60- or 90-day waiting periods common on the mainland don’t fit within the law.

Workers Who Are Excluded

Several categories of workers sit outside the mandate under HRS § 393-5:⁶

Part-time workers who average fewer than 20 hours a week.
Seasonal agricultural laborers.
Insurance and real estate salespersons paid solely by commission.
Children under 21 working for a parent, and individuals working for a spouse, son, or daughter.

Employees With More Than One Job

If a worker holds multiple jobs, only the principal employer owes the coverage. The principal employer is the one paying the highest wages, and the employee identifies that employer by filing an HC-5 with each job. The designation binds for a year unless the employee changes jobs. There is one wrinkle: if a lower-paying employer works the employee at least 35 hours per week, the employee can choose which of the two is the principal.⁵

When an Employee Can Waive Your Coverage

An eligible employee can decline your plan only if they already have qualifying coverage elsewhere. The recognized categories are Medicare, Medicaid, or military-related medical benefits (including for dependents and retirees); coverage as a spouse or child under another qualified plan; public assistance or a state program such as QUEST Integration; and membership in a religious group that relies on prayer or spiritual means for healing.

Waivers only count when the employee files an HC-5 with you, which you then submit to the DLIR.⁷ Without the form on file, the obligation to offer coverage stays with you even if the employee qualifies for a waiver on paper. This is a common source of trouble in audits.

How Much You Can Charge the Employee

The employee’s share of the premium is capped at the lesser of 50% of the total premium or 1.5% of their monthly gross wages.⁵ For lower-wage workers, the 1.5% cap is almost always the binding number, which means you will typically pay more than half the premium.

Take a worker earning $2,500 a month. The most you can withhold is $37.50 (1.5% of gross wages), even if 50% of the premium would work out to $150. You pick up the remaining $262.50. You can deduct the employee’s share from each paycheck. The employee cannot agree to pay more than the statutory cap toward their own coverage, though they can pay extra to enroll dependents.

What the Plan Must Cover

You cannot pick just any health plan. Every plan used to satisfy the mandate must be reviewed by the seven-member Prepaid Health Care Advisory Council and approved by the DLIR Director before it can be marketed to employers.¹ Approved plans are labeled 7(a) or 7(b), and the difference matters for both benefits and dependent coverage.

7(a) Plans

A 7(a) plan must match or exceed the benefits of the “prevalent plan” in Hawaii, meaning the one with the largest number of subscribers. Because the benchmark is the most popular plan on the market, 7(a) coverage tends to carry lower deductibles and copayments. Most employees end up on this tier.

7(b) Plans

A 7(b) plan provides a baseline of hospital, surgical, and medical benefits but generally has higher deductibles, copayments, and out-of-pocket limits. There is a trade-off attached: if you use a 7(b) plan, you must also pay at least half the cost of dependent coverage. That obligation does not automatically apply to 7(a) plans.⁸

Minimum Benefits in Every Approved Plan

Whether the plan is 7(a) or 7(b), it must cover at least:

Inpatient hospital care for at least 120 days per calendar year.
Surgical services.
General medical care.
Diagnostic testing.
Maternity care.

A separate state law layered on top requires every health plan issued in Hawaii to cover mental health and substance use disorder treatment on par with medical and surgical benefits, with no more restrictive financial requirements or treatment limits.⁹

Keeping Coverage in Place When an Employee Gets Sick

If a covered employee is hospitalized or otherwise unable to work, you cannot drop their insurance right away. You must keep paying your share of the premium for up to three months after the month the employee became unable to work. The protection applies automatically. The employee does not have to elect it or pay anything extra, and it runs alongside, not through, federal COBRA.

Penalties If You Skip the Mandate

The penalty for failing to provide required coverage is $25, or $1 per employee, for every day the violation continues, whichever is greater.¹⁰ For a 50-person business, that runs $50 a day, or roughly $1,500 a month, and it keeps accruing until you fix the problem. The DLIR Director can reduce or waive the amount for good cause.

Other willful violations of the Act or its regulations can bring a fine of up to $200 per violation, whether committed by an employer, an employee, or a health plan contractor. Any violation without a specific penalty elsewhere in the statute can draw up to $250 per offense, but only after 21 days of written notice and an opportunity to be heard.¹¹

The heaviest tool is the injunction. If you go 30 days without providing required coverage, the state can ask a court to shut your business down until you comply.¹⁰ The attorney general or a county attorney brings the action at the DLIR Director’s request. Business closure for a health insurance violation is rare, but the remedy exists and it gives the DLIR real leverage in negotiating compliance.

1
State of Hawaii Disability Compensation Division. About Prepaid Health Care
2
Justia Law. Hawaii Revised Statutes Title 21 Chapter 393 – Prepaid Health Care Act
3
Justia. Hawaii Revised Statutes 393-11 – Coverage of Regular Employees by Group Prepaid Health Care Plan
4
State of Hawaii Department of Labor and Industrial Relations. Hawaiʻi’s Minimum Wage Increases to $16.00 on January 1
5
State of Hawaii Disability Compensation Division. Frequently Asked Questions About Prepaid Health Care
6
Justia. Hawaii Revised Statutes 393-5 – Excluded Services
7
State of Hawaii Department of Labor and Industrial Relations. HC-5 Employee Notification to Employer
8
State of Hawaii Department of Labor and Industrial Relations. Approved Health Care Plans
9
Justia. Hawaii Revised Statutes 431M-2 – Policy Coverage
10
Justia. Hawaii Revised Statutes 393-33 – Penalties; Injunction
11
Department of Labor and Industrial Relations. Hawaii Prepaid Health Care Law – Highlights