Hawaii Home Care Agencies: The Prepaid Health Care Act, the ACA, and Who Must Offer Coverage

The Prepaid Health Care Act comes first

Hawaii's Prepaid Health Care Act (since 1974) requires employers of any size to provide health coverage to employees working 20+ hours/week for four consecutive weeks who earn at least 86.67x the minimum hourly wage monthly; the employee's premium share is capped at 1.5% of wages. This binds home care agencies far below the ACA's 50-FTE/30-hour thresholds. labor.hawaii.gov ↗

Practical consequences for an agency: the 20-hour test means part-time caregivers the ACA would ignore must be offered coverage in Hawaii; the 1.5%-of-wages cap on the employee share is far stricter than the ACA's 9.96% affordability test, so a plan that is "affordable" federally can still violate state law; and Hawaii's Section 1332 waiver aligns the ACA with the PHCA, including waiving SHOP requirements. Treat the PHCA as the floor and the ACA as the overlay.

Is your agency an Applicable Large Employer?

Count full-time employees (30+ hours a week or 130+ a month) and add full-time equivalents from everyone else: total part-time hours in the month ÷ 120. Average the monthly totals over the prior calendar year.

Worked example. A Hawaii agency has 45 caregivers and office staff at 130+ hours a month, plus 30 part-time caregivers averaging 60 hours a month.

• Full-time employees: 45
• Part-time FTEs: 30 × 60 = 1,800 hours ÷ 120 = 15
• Total: 60 → the agency is an ALE.

Two home care specifics. Entities under common ownership are combined under the controlled-group rules, so multiple agency LLCs or franchise territories with the same owners count as one employer. And caregivers with variable hours can be classified using the IRS look-back measurement method (a 3–12 month measurement period followed by a stability period), which is how most agencies decide who must be offered coverage without re-running the math every month.

IRS, Identifying full-time employees ↗

What an ALE owes if it doesn't comply (2026 amounts)

• 4980H(a), no offer: if you don't offer minimum essential coverage to at least 95% of full-time employees and any one of them gets a subsidy on HealthCare.gov, you owe $3,340 per full-time employee minus the first 30. In the example above: (45 − 30) × $3,340 = $50,100 a year, triggered by a single subsidized caregiver.
• 4980H(b), unaffordable offer: if you offer coverage that's unaffordable or below minimum value, you owe $5,010 for each full-time employee who enrolls in a subsidized marketplace plan.

IRS Rev. Proc. 2025-26 ↗

Which Hawaii caregivers can actually trigger a penalty

Penalties are only triggered when a full-time employee actually receives a premium tax credit on the marketplace. Who can get one depends on income:

Hawaii expanded Medicaid (Med-QUEST); adults to 138% FPL qualify. Hawaii's higher poverty guideline makes the 2026 FPL affordability safe harbor about $149.31/month for Hawaii employees. kff.org ↗

Hawaii uses HealthCare.gov for individual coverage (its Health Connector was wound down); a Section 1332 waiver aligns the ACA with the Prepaid Health Care Act, including waiving SHOP requirements. healthcare.gov ↗

What counts as "affordable" for a Hawaii caregiver in 2026

Coverage is affordable if the caregiver's self-only contribution is no more than 9.96% of household income. Since you can't know household income, the IRS provides three safe harbors:

The Hawaii-specific point: because the state minimum wage is $16.00, the rate-of-pay safe harbor gives Hawaii agencies far more room than the $149.31 FPL figure most national guides quote. An agency paying $16.00 can charge up to $207.17 a month for self-only coverage and still be safe from the (b) penalty. Use each caregiver's actual lowest hourly rate; where local minimums are higher, the ceiling is higher still.

A CHOICE (formerly known as ICHRA) counts as an offer of coverage. It's affordable if the caregiver's cost for the lowest-cost self-only silver plan on HealthCare.gov for their rating area, minus your monthly allowance, stays within the 9.96% test.

IRS Rev. Proc. 2025-25 ↗ · IRS HRAs ↗ · minimum wage → see the Hawaii wage & hour page

2026 federal compliance calendar (Hawaii adds nothing to this list)

There is no Hawaii filing, no Hawaii furnishing deadline, and no Hawaii penalty. If you also employ caregivers who live in California, New Jersey, Massachusetts, Rhode Island, or DC under a self-insured plan, those states' reporting rules may apply to those employees; see the state-by-state ACA hub.

IRS, Information reporting by ALEs ↗

Other Hawaii mandates that touch home care agencies

These aren't ACA rules, but they land on the same desk.

• Temporary Disability Insurance. Hawaii requires employers to provide TDI (partial wage replacement for off-the-job illness/injury); there is no state paid family leave program. labor.hawaii.gov ↗
• Retirement savings program. Hawaii's Retirement Savings Program (converted from opt-in to automatic enrollment by SB 855, signed May 2025) joined the Connecticut-led multistate alliance in February 2026, with launch expected late 2026 or 2027; no employer registration mandate is in effect yet. cri.georgetown.edu ↗

Frequently asked questions

We have 12 caregivers who each work 25 hours a week. Do we have to offer health insurance in Hawaii?

Yes. The Prepaid Health Care Act applies to employers of any size and to employees working 20+ hours a week for four consecutive weeks. The ACA's 50-FTE test doesn't rescue small agencies in Hawaii.

We have 48 full-time caregivers and a handful of part-timers. Are we under the threshold?

Probably not. Add the part-timers' monthly hours and divide by 120. Two part-timers at 120 hours a month between them add one FTE, which puts you at 49; a third pushes you to 50 and ALE status the following year.

Does Hawaii require us to file anything about health coverage with the state?

No. Hawaii has no state individual mandate and no state 1095 reporting. Your only filing is federal (1094-C/1095-C) if you're an ALE.

Can a caregiver on Medicaid trigger a penalty against us?

No. Penalties are triggered only by full-time employees who receive a marketplace premium tax credit. Hawaii caregivers below 138% FPL qualify for Medicaid instead, so they can't trigger 4980H. Caregivers between 138% and 400% FPL can.

We pay the Hawaii minimum of $16.00. What's the most we can charge for self-only coverage?

Under the rate-of-pay safe harbor, $16.00 × 130 hours × 9.96% = $207.17 a month in 2026. That's well above the $149.31 FPL figure, so rate of pay is the better harbor for Hawaii agencies.

Does a CHOICE (ICHRA) count as offering coverage in Hawaii?

Yes. An affordable CHOICE (ICHRA) satisfies both the 4980H(a) offer requirement and the (b) affordability test, measured against the lowest-cost silver plan on HealthCare.gov for each caregiver's rating area.