Posted on: Friday, October 29, 2004

Firms face healthcare audits

By Deborah Adamson
Advertiser Staff Writer

The state plans to randomly audit companies in Hawai'i beginning as early as December to make sure they're providing healthcare insurance to all workers who qualify.

Hawai'i Labor Director Nelson Befitel said businesses randomly chosen by computer will be audited to ensure they comply with the state's Prepaid Health Care Act — which requires health insurance coverage for those working at least 20 hours a week.

The state also will look at companies' workers' compensation and temporary disability insurance coverage of employees, he said.

"We'll conduct random audits of companies to determine if they are in compliance," said Befitel. Previously, "inspections of companies were only triggered by complaints. ... We're looking at a more effective way that employees who are entitled to insurance are receiving it from their employers."

Details of how the audit will be conducted haven't yet been determined, he said.

The state's actions were spurred by a report by the Hawaii Institute for Public Affairs two weeks ago showing that a quarter of the state's uninsured are adults working more than 20 hours a week for one employer.

The nonpartisan think tank found that 31,000 out of the 120,000 people who are uninsured perhaps should be provided health insurance.

Under the state's Prepaid Health Care Act enacted in 1974, companies must provide health-care coverage for employees working at least 20 hours a week for four consecutive weeks. Union and government workers are exempt. The government arranges insurance for its own workers while unions negotiate coverage in labor contracts.

The penalty for not complying with the Act is a maximum of $1 per worker per day of violation, plus medical costs incurred by employees who should have been covered, according to the state Department of Labor and Industrial Relations.

Jim Tollefson, president of the Chamber of Commerce of Hawaii, said he feels it's too early to start inspecting businesses.

"I'd like to see some more study before they start auditing companies," he said.

Tollefson has seen the study and said he was surprised at the magnitude of working adults who aren't insured. But one possible explanation could be that these are sole proprietors who can't afford insurance themselves.

He said he doesn't know of any companies who are violating the Prepaid Health Care Act.

"Most people will be in compliance with it," Tollefson said. "I'm not aware of anyone who's circumventing the law."

Audits inconvenience companies, especially small businesses, who already have to deal with day-to-day challenges, he said.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.