Recently it has been discovered that lanthanum, yttrium, and other metal hy
dride films show dramatic changes in the optical properties at the metal-in
sulator transition. Such changes on a high-energy scale suggest the electro
nic structure is best described by a local model based on negatively charge
d hydrogen (H-) ions. We develop a many-body theory for the strong correlat
ion in a H- ion lattice. The metal hydride is described by a large U limit
of an Anderson lattice model. We use lanthanum hydride as a prototype of th
ese compounds, and find that LaH3 is an insulator with a substantial gap co
nsistent with experiments. It may be viewed either as a Kondo insulator or
a band insulator due to strong electron correlation. A H vacancy state in L
aH3 is found to be highly localized due to the strong bonding between the e
lectron orbitals of hydrogen and metal atoms. Unlike the impurity states in
the usual semiconductors, there is only weak internal optical transitions
within the vacancy. The metal-insulator transition takes place: in a band o
f these vacancy states.