Hawaii Prepaid Health Care Act (HPHCA) employer requirements
This article is for employers with employees in Hawaii.
The Hawaii Prepaid Health Care Act (HPHCA), passed in 1974 and reenacted in 1981, sets the minimum standards for health care benefits for employees in Hawaii. These rules apply to all employers with at least one Hawaii resident employee who works an average of 20 hours per week in a 4-week period. The HPHCA is exempt from the Employee Retirement Income Security Act (ERISA).
HPHCA regulations are stricter than the Affordable Care Act (ACA) employer mandate and most other states’ requirements. Make sure you understand and follow these rules.
If you employ Hawaii residents who work 20 or more hours a week, you must comply with these HPHCA requirements or face penalties.
Key HPHCA thresholds at a glance:
Eligibility threshold: 20 or more hours per week
Maximum waiting period: 4 weeks
Maximum employee premium contribution: 1.5% of monthly wages
Minimum employer premium contribution: 50% of the employee-only premium
To meet HPHCA employer requirements:
HPHCA offer mandate: You must offer medical benefits to Hawaii residents who work 20 or more hours a week.
This is stricter than the ACA, which only requires that employers with 50 or more full-time employees offer health insurance.
Plan standards: The plan you offer to Hawaii resident employees needs approval from the Hawaii Department of Labor and Industrial Relations (DLIR).
Hawaii’s DLIR only approves plans that meet its minimum standards. In the small-group, fully insured market, the carrier must get this approval. If a plan is self-funded, the plan sponsor must seek and receive approval. We only broker fully-insured plans at this time.
Employee eligibility: Hawaii residents who work 20 or more hours a week must be eligible for medical benefits.
This is stricter than the ACA, which considers an employee full-time only after they work 30 or more hours a week.
Waiting period: The waiting period cannot be longer than 4 weeks for Hawaii residents.
If an employee works 20 or more hours per week for at least 4 weeks, they’re eligible and must be offered insurance within that 4-week waiting period, with specific exceptions.
This is stricter than the ACA, which allows a waiting period of up to 90 days from hire, uses different measurement periods to determine if someone works full-time, and exempts seasonal or temporary employees from being considered full-time.
Contribution requirements: Hawaii residents cannot pay more than 1.5% of their monthly wages toward their employee-only medical premium. You need to cover at least 50% of the employee-only premium.
For example, if an employee’s monthly wages are $4,000, they can only contribute up to $60 toward their employee-only premium. If the monthly employee-only premium is $100, you pay $50 (50%), and the employee pays $50. If the monthly employee-only premium is $500, the employee still pays only $60, and you cover the rest.
In contrast, the ACA requires employees to pay less than 9.96% of their monthly wages toward the employee-only premium (in 2026).
Valid waiver reasons: Employees in these categories can waive coverage:
Employees covered by a federally established health insurance or prepaid health care plan, like Medicare, Medicaid, or medical care benefits provided for military dependents, military retirees, and their dependents
Employees covered as dependents under a qualified health care plan
Employees who get public assistance or are covered by a state-legislated health care plan governing medical assistance
Employees who follow religious groups that depend on prayer or other spiritual means for healing
Waiver form requirements: Hawaii residents who waive coverage must fill out Form HC-5.
Keep the form for two years and give a copy to employees for their records.
File Form HC-5 if the employee selects waiver reason #4 or if the Director requests it. Send the form to the address listed at the top of the form. The exemption or waiver is binding for one year and needs to be renewed by December 31 each year.
Hawaii’s DLIR may apply these HPHCA penalties if you do not meet requirements:
For every day you do not comply, Hawaii’s DLIR may fine you $1 per employee or $25 per day, whichever is greater. If the failure to comply lasts 30 or more days, Hawaii may close your business or ban you from operating in Hawaii for as long as the failure continues.
In addition to the daily penalty, any employer, health care contractor, or employee who willfully fails to comply may face a $200 fine per violation. This may include employees who refuse to enroll in the approved Hawaii plan or provide false information on the waiver.
You may need to pay for all health costs an eligible employee incurs during the period you fail to provide the right coverage.
Any person (employer or employee, depending on the violation) who gets written notice of non-compliance, and, after a hearing with the state department director, is found to have violated this law, will face a fine of up to $250 per offense. This applies 21 days after the person gets written notice.
If you employ Hawaii residents, you may need to start offering compliant benefits as soon as possible. If you do not yet employ Hawaii residents, review the HPHCA to determine which plans you need to offer and budget for the stricter contribution requirements.
What if I do not yet offer HPHCA-compliant benefits?
To get started:
If you have or may hire employees who live in Hawaii, review the HPHCA requirements.
Connect with your HR professional or legal counsel to determine what steps you need to take to comply. You may need to start offering benefits to those employees as soon as possible.
If you already offer benefits through Gusto, contact us to set up compliant plans for your team. To contact us, sign in to your Gusto account and click the help icon
in the top-right corner of the page. If you do not currently offer benefits through Gusto, you can find quotes and schedule a call from the Benefits section of your account.
Are my current plans HPHCA-compliant?
If you offer health benefits through Gusto, our licensed advisors are here to help. If you offer health benefits through another broker, contact your broker directly to determine next steps.
To check or establish compliance:
If you have or may hire employees who live in Hawaii, review the HPHCA requirements.
Contact us if you want to confirm that your current Gusto-brokered plans are compliant. To contact us, sign in to your Gusto account and click the help icon
in the top-right corner of the page. One of our licensed advisors will review your current plans and recommend next steps. Broker of record changes: If you transfer your benefits to Gusto, our advisors will review your compliance as part of the broker change process. If you need to make changes, we’ll let you know and recommend compliant plans and updates.
Renewals: Our advisors will review your compliance during the annual renewal process. If you need to make changes, we’ll let you know and recommend compliant plans and updates.
Mid-year changes: If you hire a Hawaii employee, reach out to our advisors. They’ll review your compliance and, if you need to make changes, let you know and recommend compliant plans and updates.
What do I need to do during a Gusto open enrollment?
After our licensed advisors help you choose compliant plans and company contributions, here’s what to expect during open enrollment.
To complete open enrollment:
When open enrollment begins, let your Hawaii resident employees know which plan is compliant with the HPHCA.
Employees can enroll in or waive coverage from their Gusto account.
If a Hawaii employee waives coverage, we’ll send you Form HC-5, and you must have them complete it.
Learn more about Form HC-5 employer requirements.
If the employee waives coverage due to “other coverage” (reason #4 on Form HC-5), you’re responsible for filing the form with the state.
You’ll need to keep a copy of the form for two years. You can either store it manually or upload it to Gusto.
Form HC-5 is part of Hawaii’s Prepaid Health Care Act (HPHCA) compliance. For more information on the HPHCA and your responsibilities as an employer, visit the Hawaii Department of Labor and Industrial Relations (DLIR) website.
Form HC-5, also called the “Employee Notification to Employer” form, is how employees tell you they want to enroll in or waive your health care plan.
Employees must submit Form HC-5 in these situations:
Annually: Employees who waive coverage must resubmit the form by December 31.
Within 30 days: If an employee enrolls in coverage but later gets other health coverage and wants to waive it, they need to submit the form within 30 days of the change.
New hires: New employees who want to waive coverage need to complete Form HC-5 at the time of hire.
Employees in these categories can claim an HPHCA exemption from coverage:
Federally Established Health Insurance: Employees covered by Medicare, Medicaid, or medical care benefits for military dependents and retirees
Dependent Coverage: Employees covered as dependents under a qualified health care plan
Public Assistance: Employees who get public assistance or are covered by a state-legislated health care plan for medical assistance
Religious Groups: Employees who follow religious groups that rely on prayer or other spiritual means for healing
Employees who claim an exemption or individual waiver need to complete and submit Form HC-5 to you. As the employer, you need to:
Distribute Form HC-5: Give the form to all eligible employees during onboarding and to employees who waive coverage each year.
Collect completed forms: Make sure all employees who waive coverage return their completed forms to you.
Maintain records: Keep completed forms for two years and give employees a copy upon request. Hawaii’s DLIR may request these forms to verify compliance.
Provide help: Help employees understand their options and how to fill out the form correctly.
Submit to the DLIR: Send a copy of Form HC-5 to Hawaii’s DLIR only when an employee selects exemption #4 (religious groups) or when the DLIR requests it.
Renew annually: Make sure employees renew their exemption or waiver by December 31 each year.
To help employees complete Form HC-5:
Provide the form: Download Form HC-5 and give a copy to your employees.
Fill out personal information: The employee fills in their name, Social Security number, and address.
Indicate coverage election: The employee indicates whether they’re enrolling in or waiving coverage.
Enrolling: Check the box and provide the date.
Waiving: Provide the name of the insurance company, policy number, and policyholder name.
Provide proof of alternate coverage: If waiving, the employee must provide proof of other health coverage, like a copy of an insurance card.
Sign and date: The employee signs and dates the form.
Submit the form: The employee returns the completed form to you.