The Hawaii health care has been facing threats by the federal health care overhaul. More than half the state's population is dependent on expansive, employer-provided coverage for medical benefits. Hawaii is known as the first state to introduce employer-mandated health care.

As per the 40-year-old law, employers are required to provide their employees with subsidized insurance plans, regardless of the number of employees. Those who breach the law have to shut their business. However, the federal Affordable Care Act will require nothing from employers, but large companies would have to eventually provide either insurance or pay a fine.

The Hawaii law is for people who work as few as 20 hours per week, compared to the federal law applicable for those working for 30 hours a week. Hawaii regulations are also stricter about the income that needs to be contributed by employees compared to federal requirements.

In a bid to keep on availing these benefits and support President Barack Obama, Hawaii officials resorted to come up with their own health care exchange and made the announcement about the same before any other state.
But there are problems with the Hawaii Health Connector, a federally mandated insurance marketplace that's losing money.

Now, Lawmakers are feeling the need of settling the issue on a long-term basis. Officials seem to have two options to choose from. They can either revive the failing system by increasing the burden on taxpayers, or giving the control to federal authorities, which has the implementation risk of the state's comprehensive Prepaid Health Care Act. State officials are of the view that a federal takeover will significantly reduce benefits.

"We don't know whether the federal government would accommodate in any way the Prepaid Health Care Act", said University of Hawaii law professor Hazel Bay.