HONOLULU -- Janice Nakamura knows the financial burden of going without health care, and she's thankful for the Hawaii law that strictly mandates expansive, employer-provided coverage for her and her family.
Without that, "it would be a choice between paying for medical coverage or eating," she said.
The Nakamuras are among the 763,000 Hawaii residents -- more than half the state's population -- who rely on a unique, longstanding system that has been jeopardized by the federal health care overhaul.
State officials are concerned that if they don't quickly find a solution, Hawaii will end up getting "punished for being too good," as University of Hawaii law professor Hazel Bay described.
The problem starts with the Hawaii Health Connector, a federally mandated insurance marketplace that's losing money. A temporary funding plan went into effect this month, but once that money runs out, lawmakers will need to settle on a long-term fix that officials characterize as a choice between propping up a failing system at the expense of taxpayers, or turning control over to federal authorities at the risk of unravelling the state's comprehensive Prepaid Health Care Act.
"That's the danger I've warned against," said Attorney General David Louie. "The benefits mandated by the state are superior. We don't want to lose that."
It's too early to guess how the Connector dilemma will play out. But as officials sort through the process of implementing the sweeping federal law, it's clear their key concern is finding a compromise that preserves Hawaii's high standards.
Hawaii was the first U.S. state to enact employer-mandated health care. The 40-year-old law requires employers, even those with only one worker, to provide subsidized insurance plans. Penalties for noncompliance go beyond fines -- those that flout the law face having their businesses shut down. The federal Affordable Care Act, by contrast, requires nothing of employers currently but will eventually require large companies to either provide insurance or pay a fine.
The Hawaii law extends to those working as few as 20 hours per week, whereas the federal law kicks in at 30 hours. And Hawaii regulations put a harder cap on how much income employees have to contribute in comparison to federal requirements.
To preserve these benefits and show support for President Barack Obama, who championed the law, Hawaii officials decided to build and operate their own health care exchange and announced those plans before any other state.
But the Connector has failed in several areas:
-- It enrolled just 10,800 people, far below the 100,000 that some supporters predicted. This was at least partially because so many residents already insured under Hawaii's law, officials say.
-- In its first six months, the Connector earned just $40,350 in revenue, falling short of the $320,000 expected.
-- Only two insurance companies have participated, and technical problems prompted some to bypass the exchange and seek coverage directly from insurance companies.
"Hawaii is in a different position than almost any place else in the country," said Michael Gold, the CEO of Hawaii Medical Services Association, the state's largest health insurer. The exchange "doesn't really fit Hawaii," he said.
Because of its unique position, state officials asked for exemptions under an innovation waiver. Federal officials, however, say such shelter won't be available until 2017.
Critics have argued state officials should have seen foreseen the problems, but the exchange's interim director, Tom Matsuda, said such foresight was impossible because "the federal rules changed frequently as we were building the system."
Hawaii's situation is similar to that of Massachusetts, the first state to require individuals to carry health insurance and the inspiration for the federal overhaul..
Massachusetts officials struggled to build an exchange, enrolling fewer than 32,000 people. They're considering spending $121 million fixing the troubled system or handing control over to federal authorities.
Hawaii hasn't received definitive guidance about what would happen in a federal takeover, but state officials fear it would erode benefits.
Officials at the federal Department of Health and Human Services would not comment on Hawaii's situation.
Experts have conflicting opinions.
"We don't know whether the federal government would accommodate in any way the Prepaid Health Care Act," said Bay, the University of Hawaii professor.
Dianne Winter Brookins, an attorney who specializes in health care law, was more optimistic, saying "employers will have to continue to comply with the Prepaid Health Care Act, even if the feds take over the exchange."
To get by, Hawaii lawmakers approved a $1.5 million funding patch to last through the end of the year, but exchange officials say it could cost from $4.5 to $15 million annually to operate.
Gold said Hawaii should shut the exchange down, but state officials see that as untenable.
"If the Connector is allowed to fail, we think that puts the Prepaid Health Care Act in jeopardy," Matsuda said.
Among those facing the most acute risk would be those working part-time for companies with fewer than 100 employees, such as Amber Lee, an assistant manager at a cosmetics store in Honolulu, who was recently spared the cost of a $70,000 surgery, thanks to the Hawaii law.
"I can't imagine not being covered, how much stress that would be," she said.