Hawaii Has The Lowest Health Care Costs, Thanks To Strong State Laws

Costs of employee contributions to health plans are among the nation's lowest, according to a new report.

The costs of many goods and services in Hawaii, such as housing, energy and food staples like milk, are among the highest in the nation. But in at least one regard Hawaii residents are better off than people in every other state.

According to a study issued this month by Commonwealth Fund, a New York-based health care policy think tank, Hawaii residents participating in employer-sponsored health coverage plans pay the nation’s lowest costs. That includes the amounts spent on employee contributions and co-payments. The amounts spent as a percentage of income are also among the nation’s lowest.

“It might shock your readers because health insurance is expensive, no matter how you cut it,” said Lt. Gov. Josh Green, a former state senator and physician known for working on health policy.

“We tend to be the healthiest state in the nation because we have a much better foundation than any other state,” Green said

The organization’s “2019 Scorecard on State Health System Performance” bears out Green’s comment. The study measured all 50 states on 47 metrics related to access to health care, quality of care, service use and costs of care, and income-based health care disparities.

Hawaii leads the nation, the study found, trailed by Massachusetts, Minnesota, Washington, Connecticut and Vermont.

“It’s No. 1 overall in the scorecard,” said Sara Collins, the Commonwealth Fund’s vice for health coverage access.

Underpinning Hawaii’s performance, she said, is the state’s Prepaid Health Care Act, a 1974 law that among other things requires employers to provide health insurance coverage to employees working 20 hours or more per week.

One result is that Hawaii’s levels of uninsured persons did not decline as much as those of others states following the passage of the U.S. Affordable Care Act, also known as Obamacare, in 2013.

But Hawaii is still in an enviable position, Collins said, with just 5% of adults and 2% of children uninsured as of 2017. By contrast, in Texas 24% of adults and 11% of children had no health insurance.

With so many people paying premiums into the system, including young people who don’t need much care, the result is lower costs for everyone, Green said. Employee costs for premium contributions and deductibles were far lower than the national average in dollar terms and as a percentage of income.

Average employee contributions to premiums were less than half of the national average.

And employee deductibles were not only lower than the national average, but also dropping, while deductibles nationally went up.

Perhaps most notably, while spending per enrollee in most states rose, Hawaii’s declined by about 5% from 2013 to 2016. According to Green, that is in keeping with the principles of Hawaii’s system, which is not designed merely to spread costs and risk but also to provide better preventative care that reduces overall costs.

Increasing the availability of things like medication to control blood pressure can help prevent more costly problems like strokes and heart attacks down the line, Green said.

“This is an equation that works,” he said.

“Hawaii’s Changing Economy” series is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.