REPORT TITLE:
Health fund (short form)


DESCRIPTION:
Effectuates purpose of title (short form).

 
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                                                        1872
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE PUBLIC EMPLOYEES HEALTH FUND.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that public employee
 
 2 healthcare costs is one of the fastest-growing areas of state
 
 3 spending.  Hawaii's public employee benefits represent thirty-
 
 4 five to forty per cent of state payroll costs.  In addition,
 
 5 health benefits are an increasingly significant component of the
 
 6 total compensation package for public employees and an
 
 7 increasingly significant cost to public employers.
 
 8      Currently, the Hawaii public employees health fund (fund)
 
 9 provides health and group life insurance benefits to eligible
 
10 active state and county employees, retirees, their dependents,
 
11 and reciprocal beneficiaries.  Hawaii is one of a few states that
 
12 pays for one hundred per cent of health benefits for state and
 
13 county retirees, as well as their spouses.
 
14      The legislature finds that a rapidly growing challenge to
 
15 state and county government is how to fairly meet the health
 
16 needs of public employees and retirees in a manner that is
 
17 affordable over the long-term and does not detract from the
 
18 ability to provide other government efforts.  To address these
 
19 concerns, in 1995, lawmakers partially redefined public employee
 
20 benefit plans.  Act 217, Session Laws of Hawaii 1995, reduced
 

 
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Page 2                                                     1872
                                     H.B. NO.           
                                                        
                                                        

 
 1 state and county contributions for retiree health benefit
 
 2 premiums for employees hired after July 1, 1996.  Although Act
 
 3 217 will somewhat address the health costs of future employees,
 
 4 it did not address the ability of the fund to pay for the health
 
 5 benefits of retirees and employees hired before July 1, 1996.
 
 6      According to a May 1999 report by the state auditor and
 
 7 Ernst & Young LLP, "Actuarial Study and Operational Audit of the
 
 8 Fund," the fund's cost to provide health benefits for active
 
 9 employees and retirees, as well as the post-retirement health
 
10 benefit liability, have increased dramatically over the past
 
11 decade.  The auditor estimates that as of July 1, 1998, the State
 
12 and counties' accrued unfunded liability for providing future
 
13 retiree health benefits under the current plans is $4.5 billion,
 
14 and the most likely estimate of that liability for the year 2013
 
15 is $11.4 billion.  In addition, the auditor's report indicated
 
16 that under the current system, the current employer cost for
 
17 retiree benefits of $127.4 million is expected to rise to $455.9
 
18 million, and the employer cost for active employees is expected
 
19 to grow from $138.7 million in 1998 to $493.2 million by 2013.
 
20      In sum, without any change in the current public health
 
21 benefit scheme, total state and county contributions for public
 
22 employee health benefits will increase from $266.1 million a year
 
23 currently to approximately $950 million a year in 2013.
 

 
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 1 Moreover, over the mid-term, according to the department of
 
 2 budget and finance, state general fund appropriations for health
 
 3 benefit premiums are anticipated to increase from $214 million in
 
 4 fiscal year 2000 to $347 million in fiscal year 2005, a sixty-two
 
 5 per cent increase in a five-year period.
 
 6      These factors, coupled with the large number of baby boomers
 
 7 approaching retirement, retirees' increased life expectancies,
 
 8 rising healthcare costs, and the utilization by more healthy
 
 9 employees of union health plans, necessitate that the Hawaii
 
10 public employee health fund and benefits be altered to ensure
 
11 their stability and the overall fiscal integrity of government.
 
12      The purpose of this Act is to effectuate the title of this
 
13 Act.
 
14      SECTION 2.  The Hawaii Revised Statutes is amended to
 
15 conform to the purpose of this Act.
 
16      SECTION 3.  This Act shall take effect upon its approval.
 
17 
 
18                        INTRODUCED BY: ___________________________
 
19 ___________________________           ___________________________
 
20 ___________________________           ___________________________
 
21 ___________________________           ___________________________
 
22 ___________________________           ___________________________
 

 
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