Hawaii Prepaid Health Care Act: 20 Hours a Week, $1,387 Monthly Wage Test, 4-Week Wait and the 1.5% Employee Cap
Hawaii Prepaid Health Care Act: 20 Hours a Week, $1,387 Monthly Wage Test, 4-Week Wait and the 1.5% Employee Cap
If you plan to hire in Hawaii, the Hawaii Prepaid Health Care Act is one of the first employment laws you need to understand. It requires many private employers to offer health coverage to eligible employees, and it affects your payroll budget from the first hire. This guide covers who qualifies, how the wait period and premium cap work, which plan types are allowed, how employees waive coverage, and what happens if you do not comply.
Disclaimer: This guide is informational content, not legal, tax, or benefits advice. Requirements can change, and the figures below should be confirmed with the Department of Labor and Industrial Relations (DLIR) before you rely on them. For complex situations, consult a qualified employment attorney or CPA.
What the Act Requires
The Prepaid Health Care Act is codified in Hawaii Revised Statutes (HRS) chapter 393. The Legislature enacted it in 1974. It was reinstated effective March 1, 1983, following federal preemption under the Employee Retirement Income Security Act (ERISA). The law is an employer mandate. If you have employees who meet the Act's tests, you must provide health coverage that meets its minimum standards. The employer decides whether to offer more generous coverage, but the statutory minimum is not optional.
Because the obligation attaches to the employer, forming an LLC or corporation does not change it. Registering your entity with the Business Registration Division (BREG) at cca.hawaii.gov/breg is a filing step, while the Prepaid Health Care Act is an employment obligation that applies once you have covered workers.
Who Must Be Covered: The Two Tests
An employee must meet both of the following tests for you to be required to provide coverage:
- The hours test: The employee works 20 or more hours a week.
- The wage test: The employee earns at least 86.67 times the state minimum wage each month. For 2026, that is $1,387.00 per month.
How the hours test works
The 20-hour threshold is the more common trigger for part-time staff. An employee scheduled for 18 hours a week does not meet the hours test, even if the pay is high. An employee who works 24 hours a week does meet it, but only if the monthly wage is also at least $1,387.00. Track actual weekly hours, not just the schedule you post, because a regular pattern of 20 or more hours can trigger coverage.
How the wage test works
The wage test is a monthly figure, and it is tied to the state minimum wage. The multiplier is 86.67, and the 2026 result is $1,387.00. If the minimum wage changes, the threshold changes with it. Confirm the current figure with DLIR each year before you set eligibility rules for new hires. For example, an employee who works 25 hours a week but earns $1,200 a month does not meet the wage test. An employee who works 25 hours a week and earns $1,500 a month meets both tests.
Who Is Excluded
The Act does not cover every worker. The following are excluded:
- Employees who work under 20 hours a week.
- Federal, state, and county government workers.
- Seasonal agricultural workers.
- Commission-only insurance and real estate salespeople.
- Family employees, meaning a worker's own spouse or children.
The family employee exclusion matters for many small Hawaii businesses. If your spouse or children work in the business, they are not counted for this purpose. Exclusions are narrow and fact-specific, so document why each worker falls outside the Act. Confirm any unusual arrangement, such as a commission-based role with a base salary, with DLIR or your attorney before you rely on the exclusion.
The Four-Week Wait and Enrollment Dates
Coverage does not start on the first day of work. Under the Act, an eligible employee's coverage starts after four consecutive weeks, at the plan's next enrollment date. Your plan documents or insurer should spell out how enrollment periods are scheduled, so you can tell a new hire exactly when coverage begins.
Build this timeline into onboarding. Give new hires written notice of their eligibility status, the waiting period, and the enrollment date that applies to them. A new employee who starts in the middle of an enrollment cycle may wait longer than four weeks in practice. Confirm the mechanics with your insurer or plan administrator before you make promises to applicants.
Premium Shares: Half From the Employer, Capped From the Employee
The premium split is set by the Act. The employer must pay at least half of the premium. The employee's share cannot exceed 1.5% of monthly wages. You may pay more than half, but you cannot shift a larger share onto the employee than the cap allows.
The cap is easy to calculate. An employee earning $3,000 a month can be charged no more than $45 per month toward the premium. An employee earning the $1,387.00 threshold can be charged no more than about $20.81 per month. Set your payroll deductions against these caps, and do not assume the cap only applies to the lowest-paid staff. It applies to every covered employee.
| Monthly wages | Maximum employee share (1.5%) |
|---|---|
| $1,387.00 (2026 threshold) | About $20.81 |
| $2,000.00 | $30.00 |
| $3,000.00 | $45.00 |
| $4,000.00 | $60.00 |
Approved Plan Types
The Act allows coverage through one of three arrangements:
- An approved insurer plan. You buy a plan from an insurer that the state recognizes for this purpose.
- An approved self-insured plan. You fund the benefits yourself under a plan approved by the state, using Form HC-61.
- A collective bargaining plan. Coverage is provided under a collective bargaining agreement.
For most new businesses, an approved insurer plan is the practical choice because it avoids the approval and funding work of a self-insured arrangement. Ask any broker or insurer to confirm in writing that the plan meets the Act's requirements before you enroll employees. Self-insured plans require state approval, so do not assume a plan qualifies until DLIR has confirmed it.
Employee Waivers: Form HC-5
An eligible employee may decline coverage, but only by signing an employee waiver on Form HC-5. Keep signed copies in your personnel file. The waiver must be renewed each year by December 31, so calendar that date and send renewal forms to waiving employees in advance. Do not treat a verbal refusal as a waiver. An unsigned or expired form leaves you exposed if the employee later says they were never offered coverage.
Penalties for Noncompliance
The Act sets penalties for employers who fail to comply. The stated minimum is $25 or $1 per employee per day. In addition, closure of the business is possible after 30 days. The exact enforcement steps and how penalties are assessed are handled by DLIR, so confirm the current process with the agency rather than relying on a summary. The practical lesson is simple: a missed enrollment or an unsigned waiver can cost far more than the premium you were trying to avoid.
Practical Steps for a New Hawaii Business
- Map your workforce before the first hire. Estimate weekly hours and monthly wages for every role, and flag anyone near the 20-hour or $1,387.00 thresholds.
- Decide on a plan type early. Get written confirmation from an insurer or broker, or start the approval process if you are considering a self-insured plan.
- Write eligibility rules into your onboarding packet. Explain the hours test, the wage test, the four-week wait, and the enrollment dates.
- Set payroll deductions within the cap. Confirm that employee premium shares never exceed 1.5% of monthly wages.
- Collect and renew Form HC-5 waivers. Keep signed copies, and calendar December 31 each year.
- Complete your other registrations. Your business still needs its entity filing and the one-time $20 General Excise Tax (GET) license, administered by the Hawaii Department of Taxation at tax.hawaii.gov.
Key Figures at a Glance
| Item | Figure or rule |
|---|---|
| Hours threshold | 20 or more hours a week |
| Wage threshold (2026) | $1,387.00 per month (86.67 times the state minimum wage) |
| Waiting period | Four consecutive weeks, then the plan's next enrollment date |
| Employer premium share | At least half of the premium |
| Employee premium share | Capped at 1.5% of monthly wages |
| Employee waiver | Form HC-5, renewed each December 31 |
| Self-insured plan | Form HC-61, with state approval |
| Penalty | At least $25 or $1 per employee per day; closure possible after 30 days |
When to Get Professional Help
Small employers often handle the basics themselves, but this Act has enough moving parts that a single error can be costly. Consult a qualified employment attorney if you are considering a self-insured plan, you have a mix of contractors and employees, or you need to exclude a worker who does not clearly fit an exemption. A CPA can help you model the payroll cost of the employer share, the employee cap, and your General Excise Tax obligations together.
Free guidance is also available. The Hawaii Small Business Development Center (Hawaii SBDC) at hisbdc.org advises small businesses on planning and compliance. Use it to build your hiring plan, then confirm the final health coverage requirements directly with DLIR before you make your first offer.
Disclaimer: This article is informational only and is not legal, tax, or benefits advice. Hawaii requirements, thresholds, and forms can change. Verify every figure with the responsible agency and a qualified professional before making decisions for your business.