NCPA - National Center for Policy Analysis


June 21, 2007

Hawaii's rigid health insurance regulations are crippling the market and keeping employers and their workers from finding affordable insurance coverage, says Devon Herrick, senior fellow at the National Center for Policy Analysis.


  • All employer plans must be approved by the Prepaid Health Care Advisory Council and comply with the Hawaii Prepaid Health Care Act, the state law that regulates insurance.
  • As a result, new carriers are reluctant to enter the market; and when they do they face a myriad of costly benefits mandated by the legislature, including no limits on coverage of pre-existing conditions.
  • Compounding the problem is the fact that health plans in Hawaii tend to over-charge young people to subsidize the cost of older individuals -- a practice known as "community rating".

Consumer advocates often assume these regulations protect workers.  But experts don't necessarily agree, says Herrick.  Richard Rowland, president of the Grassroot Institute of Hawaii, says the Prepaid Health Care Act limits employers' ability to tailor health plans to the unique needs of workers.  As an example, he points to state regulations that prevent employers from offering Health Savings Accounts (HSAs) to most state residents.

Further, Rowland says employers have no flexibility in plan design even if employees want such.  Thus, a young employee who wants to warehouse money for future needs when he gets sick or old cannot do so via his employer HSA.  He is thus deprived of choice as is his employer.

Source: Devon Herrick, "Hawaii's Regulations Inhibit Growth of Consumer Driven Health Care," Hawaii Reporter, June 19, 2007.


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