Hawaii ICHRA Compliance — Internal CSM Talking Points

Why ICHRA Is Not Recommended in Hawaii

Hawaii's PHCA is more restrictive than ACA affordability rules and sits outside the standard ICHRA compliance framework.
Per July 2026 guidance from Nick Welle, the head of Hawaii's PHC Advisory Council was clear that ICHRA cannot currently be used to satisfy PHCA “at least at this time, without special approval,” and Hawaii's regulatory department confirmed the same position.
A post-tax stipend workaround (e.g., “just pay the employee more”) likely does not satisfy PHCA either, and can expose the employer to monetary penalties and risk to its Hawaii business permit or registration.
This guidance supersedes earlier operational discussions about Hawaii default classing and contribution modeling — those address contribution amounts, not the underlying compliance question.
Continue using ICHRA for employees in all non-Hawaii locations.
For Hawaii-based employees, coordinate a separate Hawaii-approved group policy (commonly Kaiser or HMSA) — even for groups with only one to four Hawaii employees.
Confirm the employer also has Hawaii Temporary Disability Insurance (TDI) in place. This comes up in the same onboarding conversations and the broker will need to quote it separately.
Don't tell an employer or agent that a standard ICHRA contribution satisfies PHCA.
Don't recommend a post-tax “pay the employee more” workaround as a compliance fix.
Don't rely on Hawaii-specific ICHRA classing alone to resolve this — classing controls contribution amounts, not legal compliance.
Flag any employee with a Hawaii residence, worksite, or base-of-operation — including split-location employees — for compliance review before modeling contributions or enrolling.
If a client insists on proceeding with a standard ICHRA anyway, document that the regulatory risk was disclosed and that the client accepted it, in writing, before proceeding.
Route escalations to compliance/leadership. The July 2026 Nick Welle guidance is currently the highest-authority internal source on this topic.
“Hawaii has its own health coverage law (the Prepaid Health Care Act) that's separate from, and stricter than, the ACA — so we handle Hawaii employees a little differently than employees in other states.”
“We'd recommend a Hawaii-approved group plan for your Hawaii employee(s) rather than the ICHRA reimbursement model, even if it's just one person.”

Hawaii PHCA Requirements at a Glance

Requirement	Detail
Employee eligibility	20+ hours/week for 4 consecutive weeks, earning at least 86.67x Hawaii's current minimum hourly wage.
Coverage start	Generally the first of the month following 4 consecutive weeks of eligible employment.
Employer contribution	At least 50% of the employee-only premium.
Employee contribution cap	Cannot exceed 1.5% of the employee's monthly gross wages. Where 1.5% is less than half the premium, the employer owes the remainder.
Plan approval	Plan must be DLIR/PHC Advisory Council-approved, not just ACA-compliant. Current benchmark carrier is HMSA; Kaiser is also commonly used.
Hourly / commissioned employees	Because the 1.5% cap is wage-based, required contributions may need to be recalculated month to month.

Recommended Path What Not to Do Case-by-Case Exception: Medicare-Eligible Employees

A Hawaii employee who is Medicare-eligible (65+, enrolled in Parts A and B) may be a different situation — Medicare coverage can change the PHCA risk picture, and ICHRA paired with a Medicare-focused contribution strategy has been used in at least one internal case. Treat this as a case-specific call made in partnership with compliance, not as a general exception to the guidance above.

Escalation Protocol Talking Points for Client Conversations