Hawaii has received a waiver from the federal government allowing it to stop offering Affordable Care Act health insurance policies for small businesses.

The U.S. Department of Health and Human Services notified the state Friday that it granted a State Innovation Waiver, freeing Hawaii from the federal requirement to operate a Small Business Health Options Program, or SHOP, in 2017. Businesses purchasing employee coverage through SHOP were able to obtain tax credits based on the premiums spent per employee.

Most Hawaii residents have health insurance through their employers under the 1974 Prepaid Health Care Act, which requires companies to offer coverage to employees working more than 20 hours per week and to pay most of the premium.

“This action acknowl­edges the success of the state’s Prepaid Health Care Act in providing insurance to a majority of Hawaii’s residents and the role it plays in the continued health of our citizens,” Gov. David Ige said in a news release. “These provisions offer Hawaii residents greater coverage than the ACA.”

As part of the waiver, the federal government will provide additional funds to the state to replace the small business tax credits that would otherwise have been provided under the Small Business Health Options Program, Ige said. In lieu of tax credits, small businesses can apply for subsidies from the state to lower the cost of employee health insurance.

Without the tax credits offered under SHOP, the cost of insurance for Nii Superette Inc.’s eight employees will roughly double, said owner Stephen Nii.

“If there is a replacement plan to get a subsidy, no one told us anything about it. When I got (notified of the change) I almost fell off my chair,” he said. “They haven’t said anything about what replaces the program, much like the way Republicans are acting with Obamacare itself.”

Nii said his annual employee health costs total about $50,000 to $60,000 a year, but the tax credits he receives under SHOP lower the costs to between $30,000 to $40,000.

“Pretty much anybody over 50 (years old) cost about $800 to $1,000 a month,” Nii said. “I love my employees. I want to give them health insurance as per the law of the state but if they don’t do anything to help me with the cost, then I can’t offer health insurance and I can’t offer full-time employment. I can only offer part-time employment. This creates an environment that pits business success against employees with full-time benefits. The state is forcing me to do this.”

SHOP provides health insurance for nearly 400 businesses that cover about 1,500 employees and their dependents. Kaiser Permanente Hawaii is the only health insurer that offers SHOP coverage.

The waiver does not apply to individuals and families who can still sign up for coverage through the federal health insurance exchange, healthcare.gov, until Jan. 31.