Hawaii Payroll Information

About Prepaid Healthcare

What will change starting January 1, 2014:
• Most people must have health insurance coverage or pay a fine.
• You won’t be denied coverage even if you have a serious health condition.
• Insurance premiums won’t be based on your health status anymore. They’ll be based on your age and rates may be adjusted based on tobacco use (for people who get coverage through a small business with up to 50 employees or an individual plan.)
• Health plans must cover 10 essential health benefits (for people who get coverage through a small business with up to 50 full-time employees or through an individual plan.)

For Small Businesses
A small business is defined as a company that has up to 50 full-time employees.

Options to buy coverage
Starting October 1, 2013, small businesses with up to 50 full-time employees will have two options to buy employee health plans.
They can work directly with a healthcare provider or use the Hawaii Health Connector, an online state health marketplace.

Tax credits available
Businesses that use the Hawaii Health Connector may qualify for a tax credit of up to 50 percent if they have an equivalent of up to 25 full-time employees with average wages of less than $50,000.
There’s a lot of paperwork to fill out, so check with your tax adviser.

Not sure if you qualify for the health insurance tax credit?
Premiums are changing.
Starting in 2014, health plan premiums will be based on your employees’ age.
Health plans for older employees may cost more than plans for younger employees.
Also, the federal government will pay for health care reform changes with new fees and taxes imposed on health insurers nationwide.
This will add costs to health plan premiums.

Benefits are changing
Starting in 2014, your employees’ health plans will include these 10 essential health benefits:

1. Prescription drugs
2. Ambulance service
3. Emergency care
4. Hospitalization
5. Laboratory services
6. Maternity and newborn care
7. Mental health and substance use services
8. Pediatric oral and vision services
9. Rehabilitation and habilitative services
10. Services for preventive care, wellness, and chronic disease management

Your part-time employees will need coverage
You are not required to offer health care coverage to your part-time employees who work less than 20 hours a week.
However, they’ll need coverage by January 1, 2014, or will have to pay a fine to the Internal Revenue Service. Those employees can buy an individual health plan directly from a healthcare provider or in the Hawaii Health Connector, the state’s online health insurance marketplace.
Depending on their income, they could be eligible for financial help to pay for health insurance if they buy it in the Connector.

To-do Checklist for Employers
Health care reform requires you to:

• Inform your employees about the Hawaii Health Connector, the state online health insurance marketplace by October 1, 2013.
• Report the value of your employees’ benefits on their annual W-2 form beginning with the 2012 forms. Some employers are exempt from this requirement for now, including employers who file less than 250 W-2s, multi-employer plans, health retirement account plans, and self-insured plans not subject to COBRA rules.
• Starting in 2014, report your employees’ minimum essential coverage annually to the Internal Revenue Service. Large employers with at least 50 full-time equivalent employees must file additional information about fulfilling their responsibilities.

Dependent coverage
Do you offer your employees a B status plan under Hawaii’s Prepaid Health Care Act?
If you do, state law requires you to provide coverage to your employees’ dependents and pay at least half of that coverage.
If you don’t offer a B status plan, you’re not required to offer dependent coverage.
They can still get coverage by contacting your healthcare provider.
They can also buy a plan in the Hawaii Health Connector, the state’s online health insurance marketplace.
Depending on their income, they could be eligible for financial help to pay for health insurance if they buy it in the Connector.
If you offer your employees family coverage, their dependents up to age 26 could get coverage under the family plan.
Remind your employees that health care reform requires almost everyone to get coverage by January 1, 2014, or pay a fine to the Internal Revenue Service.
And no one will be turned down for coverage even if they have a serious health condition.
So it’s important that everyone has coverage.
Hawaii businesses must still comply with the state’s Prepaid Health Care Act.
This 1974 law requires employers to provide health insurance for employees who work 20 hours or more a week for four weeks in a row (with some exceptions).
Employers must contribute at least half of the employee’s premiums for single coverage.
The employee contributes the rest, but no more than 1.5 percent of their wages.

What is the state marketplace?
The state marketplace is an online marketplace where people can buy health insurance. It’s called the Hawaii Health Connector and available starting October 1, 2013.

Who can use the marketplace?
Small businesses with up to 50 full-time employees and people who buy individual health plans on their own can use the marketplace.

What’s the benefit of buying a health plan in the marketplace?
Small businesses that use the marketplace may qualify for a tax credit of up to 50 percent for two years starting in 2014. To qualify, you must have an equivalent of up to 25 full-time employees with average wages of less than $50,000. You’ll need to fill out a lot of paper work, so check with your tax adviser. Also, the marketplace will send employers one consolidated bill for employee health plans.

For Large Employers:

Marketplace
On October 1, 2013, the state launched the Hawaii Health Connector, an online health insurance marketplace. Employers can continue to get employee health plans directly from their healthcare provider. The state will decide later if businesses with more than 100 employees can use the marketplace starting in 2017.

Only small businesses and people who have individual health plans can use the marketplace. The state’s definition of a small business in Hawaii is:
1 to 50 full-time employees for 2014 and 2015.
1 to 100 full-time employees starting in 2016.

Part-time employees who don’t have coverage
Starting in 2014, people who don’t have health insurance could pay a fine to the federal government. Part-time employees who don’t have coverage through their job can buy a health plan directly from a healthcare provider, or in the marketplace. Depending on their income, they could be eligible for financial help in the marketplace to pay for health insurance.

Essential Health Benefits
If large businesses offer any essential health benefits (EHBs), those benefits’ out-of-pocket limits are $6,350 for individuals and $12,700 for a family in 2014. EHBs are:
1. Prescription drugs
2. Ambulance service
3. Emergency care
4. Hospitalization
5. Laboratory services
6. Maternity and newborn care
7. Mental health and substance use services
8. Pediatric oral and vision services
9. Rehabilitation and habilitative services
10. Services for preventive care, wellness, and chronic disease management

Only health plans for small businesses with up to 50 full-time employees and people who buy individual health plan coverage on their own are required to include EHBs.

Hawaii’s Prepaid Health Care Act
Hawaii businesses must still comply with the state’s Prepaid Health Care Act. This 1974 law requires employers to provide health insurance for employees who work 20 hours or more a week for four weeks in a row (with some exceptions). Employers must contribute at least half of the employee’s premiums for single coverage. The employee contributes the rest, but no more than 1.5 percent of their wages.

New fees and taxes
To pay for health care reform changes, the federal government will impose new fees and taxes on health plans nationwide. This will increase premiums.

To-do Checklist for Employers
Health care reform requires you to:

• Inform your employees about the Hawaii Health Connector, the state online health insurance marketplace by October 1, 2013.
• Report the value of your employees’ benefits on their annual W-2 form beginning with the 2012 forms. Some employers are exempt from this requirement for now, including employers who file less than 250 W-2s, multi-employer plans, health retirement account plans, and self-insured plans not subject to COBRA rules.
• Starting in 2014, report your employees’ minimum essential coverage annually to the Internal Revenue Service. Large employers with at least 50 full-time equivalent employees must file additional information about fulfilling their responsibilities.

Do I still need to provide health coverage for my employees?
Yes. Hawaii businesses must still comply with the state’s Prepaid Health Care Act.
This law requires employers to provide health insurance for employees who work 20 hours or more a week for four weeks in a row (with some exceptions).
Employers must contribute at least half of the employee’s premiums for single coverage. The employee contributes the rest, but no more than 1.5 percent of their wages.
The state health marketplace is an online marketplace where individuals can go to buy health coverage.
Large businesses that have employees who do not qualify for employee-sponsored health plans can send those employees to the state health marketplace or to your healthcare provider where they may sign up for an individual health plan.
Here in Hawaii, the marketplace is called the Hawaii Health Connector.
The state health marketplace opened on October 1, 2013.

Can my part-time employees qualify for financial help if they go through the marketplace?
Maybe. Part-time employees who are not offered health coverage through your group plan may qualify for financial help based on their income.

Will large businesses eventually be able to go to the marketplace?
The state has the option of expanding eligibility of the marketplace to large employer groups in 2017.

About Hawaii’s Prepaid Health Care Act
Originally enacted in 1974, the Hawaii PHC Act was the first in the nation to set minimum standards of health care benefits for workers. Employers, excluding Federal, State and City government and other categories specifically excluded by the law (sections 393-3, 393-5 and 393-6) are required to provide Hawaii employees, who suffer a disability due to non-work related illness or injury, with adequate medical coverage for non-work related illness or injury, protecting them from the high cost of medical and hospital care.

Employers must provide health care coverage to employees who work at least twenty (20) hours per week and earn 86.67 times the current Hawaii minimum wage a month ($7.25 x 86.67 = $629). Coverage commences after four (4) consecutive weeks of employment or the earliest time thereafter at which coverage can be provided by the health care plan contractor, which is usually the first of the month.

Employers can choose one of the following three ways to provide the mandated coverage to their employees.

•Purchase an approved plan. In Hawaii, insurance companies, mutual benefit societies and health maintenance organizations can sell health care plans to Hawaii employers directly. These plans must be reviewed by the PHC Advisory Council and approved by the Director of the Department of Labor and Industrial Relations (DLIR) before they can be marketed to employers.

•Purchase an insured plan of employers’ choice. Some employers with corporate officers located outside of Hawaii purchase a health care plan and offer such plan to their employees on a nationwide basis. Employers that choose this option must submit their plan to DLIR for review by the PHC Advisory Council and approval by the Director to ensure the benefits are comparable to plans sold in Hawaii.

•Provide a health care plan that is funded by the employer. As a self-insurer, the employer must show proof of financial solvency and ability to pay benefits by furnishing DLIR with the latest audited financial statements for review. Following the initial approval, the audited financial statements must be filed annually for continued approval. Employers choosing this option must complete an application for self-insurance (Form HC-61) as well as submit a copy of their health care plan to DLIR for review by the PHC Advisory Council and approval by the Director to ensure the benefits are comparable to plans sold in Hawaii.

All health care plans, whether sold by health care contractors or submitted by employers, must be approved by DLIR as meeting the prescribed minimum standards. Such determination is made by the Director under the advisement of a seven-member PHC Advisory Council consisting of representatives from the medical and public health care professions, from consumer interests, and from the prepaid health care protection industry. Upon approval, plans are designated as a 7(a) or 7(b) plan. Plans designated as 7(a) are equal to or better than the benefits offered by the plan with the largest number of subscribers (also known as the prevalent plan) in the State of Hawaii. (See the summary of benefits offered by the PPO and HMO prevalent plans.) Plans designated as 7(b) provide for sound basic hospital, surgical, medical, and other health care benefits; however, plan’s benefits, such as, the deductible, out of pocket limit, lifetime maximum benefit, benefit level and copayments, may be more limited than the benefits provided by plans qualifying as 7(a). Plans qualifying as 7(b) require the employer to pay one-half of the cost for dependents’ coverage.

Employers may elect to pay the entire monthly premium or share the cost with their employees. Employers must pay at least 50% of the premium cost, but the employees’ share cannot exceed the lesser of 50% of the premium cost or 1.5% of the employees’ monthly gross earnings. Cost sharing for dependents is determined by plan type. If employers purchase an approved plan, the health care contractor is responsible for informing the employers whether they are responsible for contributing toward dependents’ coverage. If employers submit a plan for approval, DLIR is responsible for informing the employers of their plan approval designation and whether they are responsible for contributing toward dependents’ coverage.

There are situations where employees can waive the mandated coverage. These include being covered by a federally established health insurance, such as, Medicare and Medicaid, covered as a dependent under a qualified plan, recipient of public assistance and covered by state-legislated health plan, covered under their own personal health insurance policy or a follower of a religious group who depends for healing upon prayer or other spiritual means. Employees are required to complete “Employee Notification to Employer” (Form HC-5) every calendar year to validate the exemption so that employers are relieved of the responsibility for providing the mandated health care coverage.

Unless specifically excluded under the law or a Notice to Employer to waive coverage is filed with the employers, all employees who meet the eligibility requirements are entitled to health care coverage through employer-based group policies. Complaints (Form DC-54) related to non-coverage by employers can be filed with our Investigation Section in Honolulu or on the neighbor-island, the Department of Labor and Industrial Relations District Office nearest the complainant for assistance. Complaints related to benefits of the plan are usually filed directly with the health care contractors who are regulated by the Department of Commerece and Consumer Affairs, Insurance Division.


Cost of Employer-Sponsored Group Health Plan Coverage

The costof employer-sponsored group health plan coverage is required under S6051(a)(14) of the Code, applicable beginning with 2012 forms W-2.  Employers are not required to report the cost of health coverage on any forms required to be furnished to employees prior to January 2013.

In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee.  The reporting is inbox12on the W-2 form using Code DD of the cost of employer-sponsored health coverage, and is for information only.  The amount reported with Code DD is not taxable.

Smaller employers that are required to file fewer than 250 2011 forms W-2 will not be subject to the reporting requirements.  This relief will continue until the issuance of further guidance from the Treasury Dept. and the IRS.


Job Costing Now Has GL Sub Numbering

For those of you who have requested it, we now have GL sub code numbering on your Job Cost payrolls.  You will see the column on your timesheet window.


Use Our PayPro Home Page Notes Feature

We have added reminder notes to the sidebar of the PayPro Home Page.  With these notes you can enter a future reminder of a repeating reminder.  Try it out, those that are using it have commented very favorably about their convenience.