REPORT TITLE: 
Captive Insurance

DESCRIPTION:
Establishes a plan for the formation and implementation of a
captive insurance facility to effectively manage the
administration and financing of the current and potential future
employee benefit obligations of the state and county
governments.  Replaces the Hawaii Public Employees Health Fund
with the Hawaii Insurance Exchange to provide employee benefits.  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        3009
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO THE HAWAII INSURANCE EXCHANGE.



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

 1      SECTION 1.  The purpose of this Act is to establish a plan
 
 2 for the formation and implementation of a captive insurance
 
 3 facility to effectively manage the administration and financing
 
 4 of the current and potential future employee benefit obligations
 
 5 of the state and county governments as may be imposed by
 
 6 collectively bargained agreements or other circumstances.  These
 
 7 obligations are currently addressed through chapter 87, Hawaii
 
 8 Revised Statutes, "Hawaii Public Employees Health Fund" (Fund).
 
 9 This Act is not intended to reduce any benefits presently
 
10 provided under chapter 87.
 
11      The benefits of this Act are many, including:
 
12      (1)  The proposed captive insurance facility will provide
 
13           the exchange with direct control over approximately
 
14           $384 million in premiums that are currently paid to
 
15           third party health plans and insurers and the reserves
 
16           held by them;
 
17      (2)  It will also afford an effective means of addressing
 
18           certain concerns noted in the State Auditors report
 
19           entitled "Financial Audit of the Hawaii Public
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           Employees Health Fund" issued in April, 1999 (Report
 
 2           No. 99-18), including the financial accounting and
 
 3           internal control deficiencies, and the estimated
 
 4           accrued liability of $4,500,000,000 (as of July 1,
 
 5           1998) of the State and counties to provide future
 
 6           retiree health benefits;
 
 7      (3)  This Act establishes a distinct legal entity in a
 
 8           regulated insurance industry;
 
 9      (4)  The facility will have the flexibility to utilize
 
10           health insurance companies, health care providers, and
 
11           other related health services;
 
12      (5)  The nature and dynamics of the large public employee
 
13           group facilitates the spreading of risk and minimizes
 
14           the potential for adverse selection;
 
15      (6)  As a legal entity, the exchange will be able to
 
16           directly access reinsurance and capital market products
 
17           and services, for example, the issuance of bonds and
 
18           other debt instruments to maximize revenues; and
 
19      (7)  Further, profits may be utilized to fund vested retiree
 
20           health benefits, which are currently unfunded.
 
21      The proposed facility is organized as a "reciprocal
 
22 insurance exchange", pursuant to article 19, chapter 431, Hawaii
 
23 Revised Statutes, where the state and county governments are its
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 underlying "subscribers".  Anticipated funding is comprised of
 
 2 initial surplus contribution of approximately $86,000,000 that
 
 3 will be obtained from "Rate Stabilization Reserves" currently
 
 4 being held by various health insurers and $13,000,000 in surplus
 
 5 employee contributions held by the Fund.  Anticipated annual
 
 6 premium is approximately $298,000,000 for benefits identical to
 
 7 those currently provided through the Fund.  The proposed captive
 
 8 facility will be known as the "Hawaii Insurance Exchange"
 
 9 (exchange).
 
10      Oversight of the exchange's policies and operations are
 
11 governed by a "subscribers' committee" that is appointed by the
 
12 subscribers and the governor.  The committee shall appoint an
 
13 attorney-in-fact to implement its requirements, including
 
14 obtaining services from independent third party providers, and
 
15 providing for the ongoing management and administration of the
 
16 exchange including accounting and financial reporting, insurance
 
17 and other regulatory compliance, as well as, coordination of
 
18 claims adjusting, treasury and investment management, insurance
 
19 and reinsurance administration, and safety and informational
 
20 services for employees.  
 
21                              PART I 
 
22      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
23 a new chapter to be appropriately designated and to read as
 
24 follows:
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1                           "CHAPTER 435
 
 2                   THE HAWAII INSURANCE EXCHANGE
 
 3                  ARTICLE 1:  GENERAL PROVISIONS
 
 4      §   1:101  Establishment of the exchange.(a)  There shall
 
 5 be an insurance exchange, established pursuant to article 19 of
 
 6 chapter 431, to be known as the "Hawaii Insurance Exchange".
 
 7      (b)  The exchange shall be funded by surplus contributions,
 
 8 premiums, interest and investment income, refunds, rate credits,
 
 9 and other returns, and shall consist of a subscribers' committee,
 
10 and attorney-in-fact.
 
11      (c)  The exchange shall be under the control of the
 
12 subscribers' committee pursuant to part II of article 2.
 
13      § 1:102  Purposes.(a)  The primary purpose of the
 
14 exchange is to:
 
15      (1)  Provide its various subscribers with an effective means
 
16           of financing and managing their current and potential
 
17           future liabilities arising from contractual and or
 
18           other obligations to provide health, group life and
 
19           other benefits to its respective employees; and
 
20      (2)  Provide other insurance coverage and other risk
 
21           financing plans as may be determined by the
 
22           subscribers' committee.
 

 
 
 
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 1      (b)  The exchange may implement other plans or programs as
 
 2 may be allowed, pursuant to article 19 of chapter 431, for the
 
 3 benefit of the subscribers.
 
 4      § 1:103  Definitions.  For the purposes of this chapter:
 
 5      "Attorney-in-fact" means an individual, partnership, or
 
 6 corporation designated and appointed by the subscribers'
 
 7 committee to act for and bind the subscribers in all transactions
 
 8 relating to and arising from the operations of the exchange
 
 9 pursuant to part III of article 2.  The principle offices of the
 
10 attorney-in-fact shall be located in any state of the United
 
11 States.
 
12      "Commissioner" means the Insurance Commissioner of the State
 
13 of Hawaii.
 
14      "Employee" means both any employee of the State or any of
 
15 its political subdivisions or any instrumentality of the State or
 
16 its political subdivisions.
 
17      "Employee-beneficiary" means the same as defined in chapter
 
18 87.
 
19      "Employer" means the State, the judiciary, the respective
 
20 counties of Honolulu, Hawaii, Maui, and Kauai, the department of
 
21 education, the University of Hawaii, and any instrumentality of
 
22 the State or its political subdivisions. 
 

 
 
 
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 1      "Exchange" means the Hawaii Insurance Exchange as described
 
 2 in section    1:101.
 
 3      "Health benefits plan" means the same as the term is defined
 
 4 in chapter 87.
 
 5      "Life insurance plan" means the same as the term is defined
 
 6 in chapter 87.
 
 7      "Long-term care plan" means the same as the term is defined
 
 8 in chapter 87.
 
 9      "Public employee" means the same as the term is defined in
 
10 chapter 87.
 
11      "Public employee-beneficiary" means the same as the term is
 
12 defined in chapter 87.
 
13      "Power of attorney" means the document executed by the
 
14 subscriber, which designates and appoints the attorney-in-fact
 
15 and spells out the duties of the attorney-in-fact for the
 
16 exchange, including but not limited to those outlined in part III
 
17 of article 2.
 
18      "Subscriber" means an employer or a public employee
 
19 organization who has become a member of the exchange through the
 
20 execution of a power of attorney pursuant to part II of article
 
21 2.
 
22      "Subscribers' committee" means that body of the exchange
 
23 which oversees the operations of the attorney-in-fact of the
 

 
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 1 exchange, pursuant to part II of article 2, to such an extent as
 
 2 may be necessary to assure conformity with this chapter or power
 
 3 of attorney for the benefit of the exchange.
 
 4      "Subscriber's savings account" means that account
 
 5 established within the exchange to which funds, which may be
 
 6 assigned to an individual subscriber, may be deposited or
 
 7 withdrawn by the subscriber pursuant to section    2:406.
 
 8      "Unassigned surplus account" means that account established
 
 9 within the exchange to which a portion of the net profits of the
 
10 exchange may be deposited pursuant to section    2:406.
 
11      § 1:104  Conflicts with insurance code.  Where the
 
12 provisions of this chapter and those of chapter 431 conflict,
 
13 those provisions of chapter 431 are controlling.
 
14      § 1:105  Construction.(a)  The subscribers committee and
 
15 the attorney-in-fact shall be exempt:
 
16      (1)  From chapters 37, 46, 76, 77, 78, 87, and 92; and
 
17      (2)  From any requirement of law for competitive bidding for
 
18           agreements or contracts for goods or services,
 
19           including lease and sublease agreements.
 
20      (b)  The subscribers' committee shall prepare reports as
 
21 required by section 37-47, but shall be otherwise exempt from the
 
22 requirements of chapter 37.
 

 
 
 
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 1            ARTICLE 2:  ADMINISTRATION OF THE EXCHANGE
 
 2         PART I:  ADMINISTRATION OF THE EXCHANGE GENERALLY
 
 3      § 2:101  Administration of the exchange.(a)  The
 
 4 subscribers' committee shall be the governing body of the
 
 5 exchange pursuant to part II.
 
 6      (b)  The attorney-in-fact shall be the administrator of the
 
 7 exchange pursuant to part III and shall be appointed by the
 
 8 subscribers' committee.
 
 9      § 2:102  Fiscal year.  The exchange's accounting shall be
 
10 conducted on a fiscal year beginning July 1 of each year and
 
11 ending the following June 30.
 
12      § 2:103  Reports to the legislature.  The subscribers'
 
13 committee shall also prepare reports in accordance with the
 
14 requirements of section 37-47, but shall otherwise be exempt from
 
15 the requirements of chapter 37.
 
16               PART II:  THE SUBSCRIBERS' COMMITTEE
 
17      § 2:201  Composition of the subscribers' committee.(a)
 
18 The subscribers' committee shall be comprised of members
 
19 appointed by the subscribers and the governor pursuant to
 
20 subsection (c).
 
21      (b)  New subscribers may be admitted to the exchange and
 
22 shall sit on the subscribers' committee and exercise full
 
23 authority as such once the following requirements are met:
 

 
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 1      (1)  Two-thirds of the existing subscribers vote in favor of
 
 2           the admission of the new subscriber in a meeting
 
 3           called, pursuant to section    2:206(a); and
 
 4      (2)  The new subscriber executes a power of attorney
 
 5           granting authority to the attorney-in-fact appointed
 
 6           pursuant to    2:202(2), to the same extent as the
 
 7           existing subscribers.
 
 8      (c)  Each county subscriber shall appoint a person to sit on
 
 9 the subscribers' committee. The governor shall appoint three
 
10 persons from the remaining employer subscribers to the
 
11 subscribers' committee for a term of two years, who may be
 
12 removed by the governor for good cause.  A vacancy of a position
 
13 in the subscribers' committee previously held by a person
 
14 appointed by the governor shall be filled by appointment of the
 
15 governor.  The person appointed to fill a vacancy shall serve for
 
16 the remainder of the term of the person's predecessor.  If by the
 
17 end of the term of a person appointed by the governor such
 
18 person's appointment is not renewed or if the person's successor
 
19 is not appointed, then the person shall serve until the person's
 
20 successor is appointed.
 
21      The five largest public employee organization subscribers
 
22 based on contributions to the exchange shall each appoint a
 
23 person to sit on the subscribers' committee. The governor shall
 

 
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 1 appoint one person from one of the remaining public employee
 
 2 organization subscribers to the subscribers' committee for a term
 
 3 of two years, who may be removed by the governor for good cause.
 
 4 A vacancy of a position in the subscribers' committee previously
 
 5 held by a person appointed by the governor shall be filled by
 
 6 appointment of the governor.  The person appointed to fill a
 
 7 vacancy shall serve for the remainder of the term of the person's
 
 8 predecessor.  If by the end of the term of a person appointed by
 
 9 the governor such person's appointment is not renewed or if the
 
10 person's successor is not appointed, then the person shall serve
 
11 until the person's successor is appointed.
 
12      (d)  All subscribers who do not have a representative on the
 
13 subscribers' committee by their respective appointment or by
 
14 appointment by the governor, shall each appoint one person to the
 
15 board of advisors provided for in part III.
 
16      § 2:202  Powers and duties of the subscribers' committee.
 
17 The subscribers' committee shall:
 
18      (1)  Establish a reciprocal captive insurance company
 
19           pursuant to article 19 of chapter 431, and the
 
20           provisions of this chapter to administer and carryout
 
21           the purposes of this chapter;
 
22      (2)  Appoint an attorney-in-fact to carry out the day-to-day
 
23           administration of the exchange pursuant to part III;
 

 
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 1      (3)  Supervise the finances of the exchange;
 
 2      (4)  Supervise the exchange's operations to assure
 
 3           conformity with the insurance and reinsurance policies
 
 4           issued through the exchange and with the standards
 
 5           established by this chapter;
 
 6      (5)  Procure the audit of accounts and records of the
 
 7           exchange, at the exchanges expense;
 
 8      (6)  Adopt rules as may be necessary for the purpose of this
 
 9           chapter pursuant to chapter 91;
 
10      (7)  Approve the selection of the third party service
 
11           providers to which certain duties of the attorney-in-
 
12           fact may be delegated; and
 
13      (8)  Have such additional powers and functions as provided
 
14           by the power of attorney executed by the subscribers or
 
15           rules adopted by the exchange.
 
16      § 2:203  Participation in subscribers' committee
 
17 compulsory.  The decisions of the subscribers' committee shall be
 
18 binding upon all of the subscribers except where applicable law
 
19 or rules adopted by the exchange requires a vote by all the
 
20 subscribers.
 
21      § 2:204  Chairperson and secretary.(a)  The members of
 
22 the subscribers' committee shall select one of their members to
 
23 serve as a chairperson and one to serve as secretary of the
 

 
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 1 subscribers' committee.  The secretary shall keep minutes of the
 
 2 meetings of the subscribers' committee.
 
 3      (b)  The secretary, upon the approval of the subscribers'
 
 4 committee pursuant to section    2:206, may delegate duties to an
 
 5 appropriate third-party professional services provider.
 
 6      § 2:205  Compensation and expenses of the subscribers'
 
 7 committee.  Each member of the subscribers' committee shall serve
 
 8 without compensation, but an advisor may be reimbursed from the
 
 9 exchange for any necessary and reasonable expense made in the
 
10 execution of the member's duties.
 
11      § 2:206  Meetings.(a)  The subscribers' committee shall
 
12 meet July 15, October 15, January 15, and April 15, of each
 
13 fiscal year to further the purposes of this chapter.  If such
 
14 date should fall on a Saturday, Sunday, or state holiday,
 
15 recognized pursuant to chapter 8, then the subscribers' committee
 
16 shall meet on the first Monday following those dates.
 
17      (b)  A majority of the members may call a meeting of the
 
18 subscribers' committee by giving at least ten days written notice
 
19 of the time and place to all other members. 
 
20      (c)  All minutes and records relating to subscribers'
 
21 committee meetings shall be made available to the board of
 
22 advisors.  The subscribers' committee may upon a majority vote,
 
23 and at its sole discretion, allow board of advisors members to
 

 
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 1 participate in subscribers' committee meetings, except that
 
 2 subscribers shall not allow any person other than a member of the
 
 3 subscribers' committee to vote on issues properly before the
 
 4 committee.
 
 5      (c)  Each member of the subscribers' committee shall have
 
 6 one vote.  Any action shall be taken by a simple majority of the
 
 7 members present at a meeting.  A majority of members present at a
 
 8 meeting shall constitute a quorum to transact business.
 
 9                 PART III:  THE BOARD OF ADVISORS
 
10      §    2:301  Composition of board of advisors.  The board of
 
11 advisors shall consist of one representative from each employer
 
12 subscriber and public employee organization subscriber who does
 
13 not have a representative appointed to the subscribers' committee
 
14 pursuant to section    2:201.
 
15      §    2:302  Powers and duties of the board of advisors.  The
 
16 board of advisors shall:
 
17      (1)  Review all appropriate reports and records as may be
 
18           necessary to corroborate the ability of the exchange in
 
19           effectively providing for required benefits to public
 
20           employee beneficiaries; and
 
21      (2)  Make recommendations to the subscribers' committee
 
22           regarding any findings made as a result of their
 
23           review.
 

 
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 1      §    2:303  Chairman and secretary-treasurer.  The advisors
 
 2 shall select one of their members to serve as a chairperson and
 
 3 one to serve as secretary-treasurer of the board of advisors.
 
 4      §    2:304  Compensation and expenses of the board of
 
 5 advisors.  Each advisor shall serve without compensation, but an
 
 6 advisor may be reimbursed from the exchange for any necessary and
 
 7 reasonable expense made in the execution of the advisor's duties.
 
 8      §    2:305  Meetings.  (a)  The board of advisors shall meet
 
 9 September 15, December 15, March 15, and June 15 of each fiscal
 
10 year to further the purposes of this chapter.  If such date
 
11 should fall on a Saturday, Sunday, or state holiday recognized
 
12 pursuant to chapter 8, then such meeting shall be held on the
 
13 first Monday following those dates.
 
14      (b)  A majority of advisors may call a special meeting of
 
15 the board of advisors by giving at least ten days written notice
 
16 of the time and place to all other advisors.
 
17      (c)  Each advisor shall have one vote.  Any action shall be
 
18 taken by a simple majority of the advisors present at a meeting.
 
19 A majority of advisors shall constitute a quorum to transact
 
20 business.
 
21      §    2:306  Construction.  Board of advisors meetings and
 
22 records are subject to chapter 92.
 
23      §    2:307  Legal advisor.  The attorney general shall serve
 
24 as legal advisor to the board of advisors.
 

 
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 1                  PART IV:  THE ATTORNEY-IN-FACT
 
 2      § 2:401  Powers and duties of attorney-in-fact.(a)  The
 
 3 attorney-in-fact shall:
 
 4      (1)  Exchange reciprocal insurance or reinsurance contracts
 
 5           on behalf of the subscribers of the exchange;
 
 6      (2)  Solicit, receive, and accept or reject applications for
 
 7           insurance or reinsurance to be issued by the exchange;
 
 8      (3)  Investigate and pass upon the desirability of risks
 
 9           involved in the applications for insurance or
 
10           reinsurance;
 
11      (4)  Underwrite, classify, rate, and issue policies and
 
12           binders of insurance or reinsurance for the exchange,
 
13           which are actuarially sound and in accordance with
 
14           prudent insurance practices, and modify or cancel such
 
15           policies in accordance with the terms of those
 
16           policies;
 
17      (5)  Establish and maintain for the exchange and as the
 
18           exchange's property, complete and accurate records of
 
19           all policies written by the exchange;
 
20      (6)  Collect, receive, and account for all surplus
 
21           contributions and premiums paid for insurance issued or
 
22           reinsurance assumed, and deposit all of said surplus
 
23           and premiums in a bank or banks to the account of the
 

 
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 1           exchange as soon as practicable, and pay therefrom the
 
 2           expenses of the exchange;
 
 3      (7)  Establish and maintain for the exchange and as the
 
 4           property of the exchange, all records required by law
 
 5           and prudent insurance and accounting practices, and
 
 6           prepare all reports required by governmental and non-
 
 7           governmental regulatory and supervisory authorities,
 
 8           including applicable income tax returns;
 
 9      (8)  Obtain such reinsurance, or other appropriate risk
 
10           financing products as may be dictated by law, prudent
 
11           insurance and business practices, and maintain
 
12           necessary records for the exchange in connection
 
13           therewith;
 
14      (9)  Handle and reserve for insurance claims and losses for
 
15           the exchange in accordance with reasonable standards
 
16           approved by the subscribers' committee consistent with
 
17           generally accepted insurance principles;
 
18     (10)  Investigate and defend or settle all losses and claims
 
19           under the policies of the exchange, appoint and engage
 
20           attorneys to defend against claims, and promptly
 
21           recover all reinsurance due on claims paid;
 
22     (11)  Make all delinquent premium installment payments due
 
23           from any subscriber to the exchange by deducting the
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           necessary amounts from any of the subscriber's accounts
 
 2           or surplus contributions or any other amounts due the
 
 3           subscriber from the exchange;
 
 4     (12)  Arrange for payment from the exchange's accounts of all
 
 5           expenses of the exchange operation, including, in
 
 6           addition to losses, expenses relating to the
 
 7           underwriting, claim management and investment
 
 8           activities of the exchange;
 
 9     (13)  Make available to each public employee-beneficiary
 
10           information which will help each public employee-
 
11           beneficiary exercise an informed choice among the
 
12           approved health benefits plans;
 
13     (14)  Establish conditions under which employee beneficiaries
 
14           may transfer enrollment from one health benefits plan
 
15           to another;
 
16     (15)  Those duties as outlined in chapter 87; and
 
17     (16)  Do any and all other things necessary to carry out the
 
18           foregoing.
 
19      (b)  There shall be no capital or stock in the exchange.
 
20 The attorney-in-fact shall maintain separate, identifiable
 
21 accounts for each subscriber open to inspection during reasonable
 
22 business hours.  All funds shall be deposited or invested by the
 
23 attorney-in-fact in its sole discretion with the attorney-in-fact
 
24 acting as trustee.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (c)  The attorney-in-fact shall pay out of a subscriber's
 
 2 accounts in the exchange, the subscriber's proportionate share of
 
 3 any outlay for the payment and adjustment of losses, attorney
 
 4 fees, costs and expenses of lawsuits, reinsurance and excess
 
 5 insurance, taxes, insurance department fees and expenses, and
 
 6 fees of the attorney-in-fact.  
 
 7      (d)  All disbursements shall be paid by the attorney-in-fact
 
 8 out of the exchange accounts, subject to the approval of the
 
 9 subscribers' committee.
 
10      § 2:402  Delegation of duties.  Subject to any notice
 
11 requirement or approval under the laws of the State, or to the
 
12 extent applicable, of any other jurisdiction, the attorney-in-
 
13 fact may delegate some or all of its duties hereunder to an
 
14 appropriate third party, and may pay compensation and make
 
15 reimbursement of cost to such third party for services rendered
 
16 on behalf of the exchange, subject to the approval of the
 
17 subscribers' committee.
 
18      § 2:403  Payments to the attorney-in-fact.  The
 
19 compensation to be paid to the attorney-in-fact from time to time
 
20 shall be approved by the subscribers' committee.  Unless
 
21 otherwise determined by the subscribers' committee, the attorney-
 
22 in-fact shall be paid its actual costs, including its costs
 
23 pursuant to section    2:402. 
 

 
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 1      § 2:404  Contributions of surplus.(a)  The attorney-in-
 
 2 fact shall issue a certificate of membership to each subscriber
 
 3 in receipt and as evidence for all paid-in surplus contributed to
 
 4 the exchange.  
 
 5      (b)  The required paid-in contribution shall be as
 
 6 determined by the attorney-in-fact upon notice to the subscriber
 
 7 paid by July 1 of each fiscal year.  
 
 8      § 2:405  Computation of net profits and losses.  On or
 
 9 before September 15 of each year, the attorney-in-fact shall have
 
10 computed the net profit or loss from the underwriting and
 
11 investment activities of the exchange during the fiscal year
 
12 immediately preceding, and allocate any net profits or losses
 
13 pursuant to section    2:406.
 
14      § 2:406  Distribution of net profits or losses.(a)  The
 
15 attorney-in-fact, may, in its sole discretion, allocate all or a
 
16 portion of net profits into an unassigned surplus account.  All
 
17 earnings in the unassigned surplus account shall accumulate
 
18 therein to the benefit of the exchange.
 
19      (b)  No subscriber shall have a vested right or interest in
 
20 any of the unassigned surplus account funds until the same have
 
21 been transferred to a subscriber's savings account, pursuant to
 
22 subsection (c).
 

 
 
 
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 1      (c)  After having first made the deductions, if any,
 
 2 provided for in subsection (a), but in no case later than
 
 3 September 15 following the fiscal year in question, the attorney-
 
 4 in-fact may also, in its sole discretion, assign funds from the
 
 5 unassigned surplus account to the individual subscriber's savings
 
 6 accounts.  Each subscriber's savings account shall be established
 
 7 by the subscribers who were members of the exchange during the
 
 8 fiscal year designated.  The amount to be allocated to or
 
 9 deducted from each subscriber's savings account shall be
 
10 determined according to an allocation methodology to be adopted,
 
11 and amended from time to time by the subscribers' committee.
 
12      (d)  The attorney-in-fact shall designate whether any such
 
13 allocations to the subscriber's savings accounts relate to the
 
14 year actually credited or to the prior fiscal year.  In the
 
15 absence of such designation, any allocations made from July 1 to
 
16 September 15 shall be presumed to relate to the prior fiscal
 
17 year.
 
18      (e)  On or before September 15 of the fiscal year subsequent
 
19 to the fiscal year to which the credits to the subscriber's
 
20 savings accounts relate, the attorney-in-fact shall mail to each
 
21 subscriber written notification of:
 
22      (1)  The amount credited to the subscriber's savings account
 
23           for the fiscal year;
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (2)  The date on which the amount was credited; and
 
 2      (3)  The date on which the subscriber's right to the amounts
 
 3           would have become fixed if the subscriber has
 
 4           terminated its contract at the close of the exchange's
 
 5           fiscal year.
 
 6      § 2:407  Distribution of dividends.  The attorney-in-fact
 
 7 shall in its sole discretion determine if and in what amount cash
 
 8 dividends shall be paid upon each year's funds on hand in the
 
 9 subscriber's savings accounts, subject to the requirements of
 
10 article 19 of chapter 431. 
 
11      § 2:408  Authorized agent for service of process.(a)
 
12 The attorney-in-fact shall have the authority to act as an agent
 
13 for service of process upon the exchange. 
 
14      (b)  The attorney-in-fact shall have the authority to
 
15 appoint the commissioner as an agent for service of process upon
 
16 the exchange.
 
17      § 2:409  Exempt from chapter 92 requirements.  Disclosure
 
18 of records and meetings of the attorney-in-fact shall be exempt
 
19 from the requirements of chapter 92.
 
20               ARTICLE 3: CONTRIBUTIONS AND PREMIUMS
 
21           PART I: CONTRIBUTIONS AND PREMIUMS GENERALLY
 
22      § 3:101  Authority to require surplus contribution.(a)
 
23 The subscribers' committee in its sole discretion shall require
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 each subscriber to make a surplus contribution to the account of
 
 2 the exchange.  The amount of the contribution shall be
 
 3 established by the committee by a majority pursuant to section
 
 4    2:206.
 
 5      (b)  Neither the attorney-in-fact nor any individual
 
 6 subscriber shall have the authority to increase the subscriber's
 
 7 liability as set by the subscribers' committee.
 
 8      § 3:102  Subscribers not jointly liable.  The attorney-in-
 
 9 fact shall have no authority to bind the subscribers jointly, but
 
10 shall have the authority to bind each subscriber severally and
 
11 alone on any one contract during any one year to the extent of
 
12 the subject subscriber's:
 
13      (1)  Paid-in surplus accounts as set forth in part IV of
 
14           article 2;
 
15      (2)  The subscribers accounts as set forth in part IV of
 
16           article 2; and
 
17      (3)  The total amount of annual premium on the subject
 
18           subscribers policies.
 
19      § 3:103  Premiums paid from the exchange prohibited.
 
20 Notwithstanding any provisions to the contrary, no funds of the
 
21 exchange's unassigned surplus account, established pursuant to
 
22 section    2:306, shall be used to finance a subscriber's
 
23 premiums.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      § 3:104  Premium payments; deadline.  Each subscriber
 
 2 shall advance premium payments to the exchange on or before the
 
 3 first day of each month, or other payment schedule as may be
 
 4 adopted by the subscribers' committee.
 
 5             ARTICLE 4:  INSURANCE PLANS AND BENEFITS
 
 6          PART I:  INSURANCE PLANS AND BENEFITS GENERALLY
 
 7      § 4:101  Compliance with state insurance code.  All
 
 8 insurance plans provided by the exchange shall comply with the
 
 9 provisions of chapters 431 and 432E."
 
10                              PART II
 
11      SECTION 3.  The Hawaii Revised Statutes, is amended by
 
12 adding a new chapter to be appropriately designated and to read
 
13 as follows:
 
14           "CHAPTER 87 PUBLIC EMPLOYEES HEALTH BENEFITS
 
15                        PART I:  IN GENERAL
 
16      §87-A  Employers governed.  This chapter applies to the
 
17 State, the judiciary, the respective counties of Honolulu,
 
18 Hawaii, Maui, and Kauai, the department of education, the
 
19 University of Hawaii, and any instrumentality of the State or its
 
20 political subdivisions in their respective roles as employer.
 
21      §87-B  Benefits to be provided through the Hawaii insurance
 
22 exchange.  All benefits which are mandated by this chapter shall
 
23 be provided by the Hawaii insurance exchange established in
 
24 section    1:101.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      §87-C  Minimum Benefits.(a)  Public employees are entitled
 
 2 to health benefits pursuant to this chapter as a term of their
 
 3 employment.
 
 4      (b)  An employer governed by this chapter shall provide the
 
 5 following benefits to its employees subject to the requirements
 
 6 of this chapter:
 
 7      (1)  A health benefits plan;
 
 8      (2)  A group life benefits plan; and
 
 9      (3)  A long-term care benefits plan.
 
10      §87-D  Definitions.  For the purposes of this chapter:
 
11      "Commissioner" means the Insurance Commissioner of the State
 
12 of Hawaii.
 
13      "Dependent-beneficiary" means a public employee-
 
14 beneficiary's spouse and any unmarried child, including an
 
15 adopted child, stepchild, foster child, or recognized natural
 
16 child who lives with the public employee-beneficiary, deemed
 
17 eligible by the subscribers' committee to receive health or
 
18 dental services of a health benefits plan.
 
19      "Employee-beneficiary" means an employee or the beneficiary
 
20 of an employee.
 
21      "Employer" means the State, the judiciary, the respective
 
22 counties of Honolulu, Hawaii, Maui, and Kauai, the department of
 
23 education, the University of Hawaii, and any instrumentality of
 
24 the State or its political subdivisions.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      "Exchange" means the Hawaii insurance exchange as described
 
 2 in section    1:101.
 
 3      "Health benefits plan" means a schedule of benefits
 
 4 established by the subscribers' committee to provide, pay for,
 
 5 arrange for, or reimburse the cost of medical, hospital,
 
 6 surgical, prescription drugs, vision, or dental services to be
 
 7 provided through the exchange.
 
 8      "Life insurance plan" means a schedule of benefits
 
 9 established by the subscribers' committee to provide life
 
10 insurance through the exchange.
 
11      "Long-term care plan" means a schedule of benefits
 
12 established by the subscribers' committee to reimburse the cost
 
13 of long-term care benefits to be provided through the exchange.
 
14      "Part-time, temporary, and seasonal or casual public
 
15 employee" means a person employed by the state or county
 
16 government or the legislature for less than three months or whose
 
17 employment is less than one-half of a full-time equivalent
 
18 position.
 
19      "Public employee" means an employee or officer of the state
 
20 or county government or the legislature:
 
21      (1)  Including:
 
22           (A)  An elective officer or a person who has served as
 
23                a member of the legislature for at least ten
 
24                years;
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           (B)  A per diem employee;
 
 2           (C)  An officer or employee under an authorized leave
 
 3                of absence;
 
 4           (D)  An employee of the Hawaii national guard although
 
 5                paid from federal funds;
 
 6           (E)  A retired member of the employees' retirement
 
 7                system, the county pension system, or the police,
 
 8                firefighters, or bandsmen pension system of the
 
 9                State or county;
 
10           (F)  A salaried and full-time member of a board,
 
11                commission, or agency appointed by the governor or
 
12                the mayor of a county; and
 
13           (G)  A person employed by contract for a period not
 
14                exceeding one year, where the director of human
 
15                resources development, personnel services, or
 
16                civil service has certified that the service is
 
17                essential or needed in the public interest and
 
18                that, because of circumstances surrounding its
 
19                fulfillment, personnel to perform the service
 
20                cannot be obtained through normal civil service
 
21                recruitment procedures;
 
22      (2)  But excluding:
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           (A)  A designated beneficiary of a retired member of
 
 2                the employees' retirement system, the county
 
 3                pension system, or the police, firefighters, or
 
 4                bandsmen pension systems of the State or county;
 
 5           (B)  Except as allowed under subsection (1)(G), a
 
 6                person employed temporarily on a fee or contract
 
 7                basis; and
 
 8           (C)  A person employed for less than three months and
 
 9                whose employment is less than one-half of a full-
 
10                time equivalent position.
 
11      "Public employee-beneficiary" means:
 
12      (1)  A public employee;
 
13      (2)  The beneficiary of a public employee who is killed in
 
14           the performance of the public employee's duty;
 
15      (3)  A public employee who retired prior to the
 
16           establishment of the Fund; or
 
17      (4)  The beneficiary of a retired member of the public
 
18           employees' retirement system, a county pension system,
 
19           or a police, firefighters, or bandsmen pension system
 
20           of the State or county, upon;
 
21           (A)  The death of the retired member; and
 
22           (B)  Does not marry or remarry;
 
23 provided that for the purposes of this paragraph, "family member"
 
24 means:
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (1)  The deceased retired member's or employee's spouse;
 
 2      (2)  Unmarried child under the age of nineteen years
 
 3           (including a legally adopted child and a stepchild or
 
 4           recognized natural child who lives with the deceased
 
 5           retired member or employee in a regular parent-child
 
 6           relationship); or
 
 7      (3)  Unmarried child regardless of age who is incapable of
 
 8           self-support because of a mental or physical incapacity
 
 9           which existed prior to the unmarried child's reaching
 
10           the age of nineteen years.  Provided further that the
 
11           public employee, the public employee's beneficiary, or
 
12           the beneficiary of the deceased retired member is
 
13           deemed eligible by the subscribers' committee to
 
14           receive health or dental services of a health benefits
 
15           plan or a long-term care benefits plan.
 
16      "Premium" means the same as the term is defined in chapter
 
17 435.
 
18      "Subscriber" means the same as the term is defined in
 
19 chapter 435  .
 
20      "Subscribers' committee" means the same as the term is
 
21 defined in chapter 435  .
 
22      "Qualified-beneficiary" means, for purposes of the long-term
 
23 care benefits plan, a former public employee or a public employee
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 who is not eligible for benefits due to a reduction in work hours
 
 2 including the employee's spouse or a divorced spouse of an
 
 3 employee or retiree provided the person was enrolled in the plan
 
 4 prior to loss of benefits.
 
 5      §87-E  Attorney-in-fact to prepare reports.  The attorney-
 
 6 in-fact of the exchange shall prepare and provide reports and
 
 7 other information as may be necessary detailing projected costs
 
 8 with respect to the benefits to be provided pursuant to this
 
 9 chapter at the request of parties to collective bargaining,
 
10 mediation, or arbitration procedures held to reconcile issues or
 
11 resolve an impasse or as defined by chapter 89; provided that all
 
12 parties to the procedure:
 
13      (1)  Each agree to place a single formal request to the
 
14           attorney-in-fact; and
 
15      (2)  Provide detailed factors for analysis.
 
16                   PART II:  FINANCING AND COSTS
 
17      §87-F  Premium payments by subscribers; public employees
 
18 generally.  Each subscriber shall pay to the exchange a monthly
 
19 premium equal to the amount established under chapter 89C or
 
20 specified in the applicable public sector collective bargaining
 
21 agreement, whichever is appropriate:
 
22      (1)  For each of their respective public employee-
 
23           beneficiaries and public employee-beneficiaries with
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           dependant-beneficiaries, which shall be used toward
 
 2           payment of costs of a health benefits plan;
 
 3      (2)  For each child who has not attained the age of nineteen
 
 4           of all their respective public employee-beneficiaries
 
 5           who are enrolled for dental benefits.  The premiums
 
 6           shall be used towards the payment of costs of dental
 
 7           benefits of a health benefits plan; and
 
 8      (3)  To be used towards the payment of costs of group life
 
 9           insurance benefits for each of their respective public
 
10           employee-beneficiary.
 
11      §87-G  Premium payments by subscribers; retired public
 
12 employees with fewer than ten years of service.(a)  This
 
13 section shall apply to premium payments by subscribers to the
 
14 exchange for their respective public employees, retired members
 
15 of the employees retirement system, the county pension system, or
 
16 the police, firefighters, or bandsmen pension system of the State
 
17 or county, except those public employees hired after June 30,
 
18 1996, under section 87-I, who retire after June 30, 1984, with
 
19 fewer than ten years of credited service, excluding sick leave.
 
20      (b)  Each subscriber shall pay to the exchange a monthly
 
21 premium equal to one-half each of their respective retired public
 
22 employee's monthly medicare or nonmedicare premium:
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (1)  For hospital, medical, and surgical benefits of a
 
 2           health benefits plan for each of their respective
 
 3           public employee-beneficiaries or their respective
 
 4           public employee-beneficiaries and their dependent-
 
 5           beneficiaries enrolled under this section;
 
 6      (2)  For prescription drug benefits of a health benefits
 
 7           plan for each of their respective public employee-
 
 8           beneficiaries or their respective public employee-
 
 9           beneficiaries and their dependent-beneficiaries
 
10           enrolled under this section;
 
11      (3)  For vision care benefits of a health benefits plan for
 
12           each of their respective public employee-beneficiaries
 
13           or their respective public employee-beneficiaries and
 
14           their dependent-beneficiaries enrolled under this
 
15           section; and
 
16      (4)  For adult dental benefits of a health benefits plan for
 
17           each of their respective public employee-beneficiaries
 
18           or their respective public employee-beneficiaries and
 
19           their spouses enrolled under this section.
 
20      (c)  Each subscriber shall pay to the exchange a monthly
 
21 premium equal to the total monthly premium for each child who has
 
22 not attained the age of nineteen of all employee-beneficiaries
 
23 who are enrolled in the exchange's dental plan for children under
 
24 this section.
 

 
Page 32                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (d)  Each subscriber shall pay to the exchange a monthly
 
 2 premium equal to the total monthly premium for each retired
 
 3 public employee enrolled in the exchange's group life insurance
 
 4 benefits plan under this section.
 
 5      §87-H  Premium payments by subscribers; public employees
 
 6 hired after June 30, 1996, and retired with fewer than twenty-
 
 7 five years of service.(a)  This section shall apply to premiums
 
 8 paid by subscribers to the exchange for public employees who:
 
 9      (1)  Were hired after June 30, 1996; and
 
10      (2)  Retired with fewer than twenty-five years of credited
 
11           service, excluding sick leave;
 
12 provided that this section shall not apply to a public employee
 
13 who:
 
14      (1)  Was hired prior to July 1, 1996, and transferred
 
15           employment after June 30, 1996; or
 
16      (2)  Has at least ten years of credited service and who has
 
17           suffered a break in service.
 
18 For purposes of this section "transfer" means to leave state or
 
19 county employment and return to state or county employment within
 
20 ninety calendar days.
 
21      (b)  For purposes of this section, if a public employee left
 
22 state or county employment and returned to state or county
 
23 employment after June 30, 1996, when the employee retires, the
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 employee's years of service shall be computed in the same manner
 
 2 as set forth in chapter 88. 
 
 3      (c)  Each subscriber shall pay to the exchange a monthly
 
 4 premium equal to:
 
 5      (1)  One-half of the retired public employee's monthly
 
 6           medicare or nonmedicare premium for the benefits in
 
 7           subsection (d) for retired public employees with ten or
 
 8           more years but fewer than fifteen years of service; or
 
 9      (2)  Seventy-five per cent of the retired employee's monthly
 
10           medicare or nonmedicare premium for the benefits in
 
11           subsection (d) for retired employees with at least
 
12           fifteen but fewer than twenty-five years of service:
 
13      (d)  The following benefits shall be established by the
 
14 subscribers' committee for:
 
15      (1)  Hospital, medical, and surgical benefits of a health
 
16           benefits plan for each of their respective public
 
17           employee-beneficiaries or their respective public
 
18           employee-beneficiaries and their dependent-
 
19           beneficiaries enrolled under this section;
 
20      (2)  Prescription drug benefits of a health benefits plan
 
21           for each of their respective public employee-
 
22           beneficiaries or their respective public employee-
 
23           beneficiaries and their dependent-beneficiaries
 
24           enrolled under this section;
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (3)  Vision care benefits of a health benefits plan for each
 
 2           of their respective public employee-beneficiaries or
 
 3           their respective public employee-beneficiaries and
 
 4           their dependent-beneficiaries enrolled under this
 
 5           section; and
 
 6      (4)  Adult dental benefits of a health benefits plan for
 
 7           each of their respective public employee-beneficiaries
 
 8           or their respective public employee-beneficiaries and
 
 9           their spouses enrolled under this section. 
 
10      (e)  Each subscriber, after an employee's retirement
 
11 pursuant to this section, shall pay to the exchange a monthly
 
12 contribution equal to the total monthly premium for each child
 
13 who has not attained the age of nineteen of their respective
 
14 public employee-beneficiaries who are enrolled in the exchange's
 
15 dental plan for children under this section.
 
16      (f)  Each subscriber shall pay to the exchange a monthly
 
17 premium for each retired public employee enrolled in the
 
18 exchange's group life insurance benefits plan under this section. 
 
19      §87-I  Contributions to be paid by public employee-
 
20 beneficiaries and retirees.(a)  Each public employee-
 
21 beneficiary or retiree shall pay a monthly contribution to their
 
22 respective subscriber equal to the amount established under
 
23 chapter 89C, or other applicable statute or rule, or specified in
 

 
Page 35                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 the applicable public sector collective bargaining agreement,
 
 2 whichever is appropriate for their respective subscriber's
 
 3 health, long-term and life insurance plans.
 
 4      (b)  During the period the health, long-term care or life
 
 5 benefits plan selected by a public employee-beneficiary is in
 
 6 effect, the public employee-beneficiary shall authorize the
 
 7 public employee-beneficiary's contribution to be withheld and
 
 8 transmitted to the exchange, through the respective subscriber,
 
 9 monthly by the comptroller or finance officer who disburses the
 
10 public employee-beneficiary's compensation, pension, or
 
11 retirement pay. 
 
12      (c)  During the period the health, long-term care or life
 
13 benefits plan selected by a retiree is in effect, the retiree
 
14 shall authorize the contribution to be withheld and transmitted
 
15 to the exchange, through the respective subscriber, monthly by
 
16 the comptroller or finance officer who disburses the public
 
17 employee-beneficiary's compensation, pension, or retirement pay.
 
18      (d)  If, however, a public employee-beneficiary or retiree
 
19 contribution to the exchange is not withheld and transmitted to
 
20 the exchange pursuant to subsection (b) or (c), the public
 
21 employee-beneficiary or retiree shall pay the monthly
 
22 contribution to the respective finance officer from whom the
 
23 public employee-beneficiary normally receives compensation for
 
24 transmittal to the exchange by the first day of each month. 
 

 
Page 36                                                    
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 1      §87-J  Contributions to be paid by public employees; long-
 
 2 term care benefits plan.(a)  During the period a long-term care
 
 3 benefits plan is in effect, the public employee-beneficiary shall
 
 4 authorize, if otherwise allowed by law, the public employee-
 
 5 beneficiary's premiums to be withheld and transmitted to the
 
 6 exchange, through the respective subscriber, monthly by the
 
 7 comptroller or finance officer who disburses the employee-
 
 8 beneficiary's compensation, pension, or retirement pay.  
 
 9      (b)  If, however, a public employee-beneficiary's monthly
 
10 contribution to the fund is not withheld and transmitted to the
 
11 exchange, the public employee-beneficiary shall pay the monthly
 
12 contribution to the comptroller or finance officer who disburses
 
13 the employee-beneficiary's compensation, pension, or retirement
 
14 pay, who shall transmit the contribution to the exchange through
 
15 the respective subscriber by the first day of each month.
 
16      (c)  Qualified-beneficiaries shall pay monthly contributions
 
17 to the comptroller or finance officer who disburses the employee-
 
18 beneficiary's compensation, pension, or retirement pay, who shall
 
19 transmit the contribution to the exchange through the respective
 
20 subscriber by the first day of each month.
 
21      §87-K  Public employees exempt from contribution
 
22 requirement.(a)  Notwithstanding any other law to the contrary,
 
23 the following persons shall not be required to pay a monthly
 
24 premium:
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (1)  The beneficiary of a public employee who is killed in
 
 2           the performance of duty;
 
 3      (2)  A public employee-beneficiary who retired after June
 
 4           30, 1984, due to a disability as defined in sections
 
 5           88-79 and 88-285;
 
 6      (3)  A public employee-beneficiary who retired before July
 
 7           1, 1984;
 
 8      (4)  A public employee-beneficiary who:
 
 9           (A)  Was hired before July 1, 1996;
 
10           (B)  Retired after June 30, 1984; and
 
11           (C)  Who had ten years or more of credited service,
 
12                excluding sick leave;
 
13      (5)  A public employee-beneficiary who was hired after June
 
14           30, 1996, and who retired with twenty-five or more
 
15           years of credited service, excluding sick leave;
 
16      (6)  Upon the death of the public employee beneficiary,
 
17           their dependant-beneficiary, including public employees
 
18           who retired prior to the establishment of the exchange;
 
19           or
 
20      (7)  The beneficiary of any public employee-beneficiary, who
 
21           is a salaried and full-time member of a board,
 
22           commission, or agency appointed by the governor or the
 
23           mayor of a county. 
 

 
Page 38                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (b)  The monthly premium of the persons identified in this
 
 2 section shall be financed by the respective subscriber for each
 
 3 of their respective public employee beneficiaries.
 
 4      §87-L  Earnings from public employee-beneficiary and
 
 5 retirees contributions.(a)  The attorney-in-fact shall assign
 
 6 public employee-beneficiary and retiree contributions and surplus
 
 7 public employee-beneficiary and retiree contributions to separate
 
 8 accounts.   
 
 9      (b)  Any earnings, interest or investment income derived
 
10 from the accounts established by the attorney-in-fact, pursuant
 
11 to subsection (a),  shall be used to stabilize the health
 
12 benefits plans or long-term care benefits plan rates.
 
13      §87-M  No vested rights to premiums paid.  Premiums paid by
 
14 subscribers shall not be considered as wages or salary of an
 
15 employee-beneficiary, and no employee-beneficiary shall have any
 
16 vested right in or be entitled to receive any part of any premium
 
17 paid to the exchange.
 
18                    PART III:  MINIMUM BENEFITS
 
19      §87-N  Plans and benefits; public employees generally.(a)
 
20 The subscribers' committee shall establish health benefits plans
 
21 and the requirements for eligibility under the health benefits
 
22 plans for public employees generally.  The health benefits plan
 
23 or plans shall provide, pay for, arrange for, or reimburse the
 

 
Page 39                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 cost of hospitalization, surgery, medical, dental treatment, and
 
 2 care, and may include prescribed drugs, medicines, prosthetic
 
 3 appliances, hospital in-patient and out-patient service benefits,
 
 4 vision treatment and care, medical, and dental benefits.
 
 5      (b)  The subscribers' committee shall establish a dental
 
 6 plan and eligibility requirements for such benefits to the
 
 7 children of employee-beneficiaries who have not attained the age
 
 8 of nineteen based upon a monthly public employee-beneficiary
 
 9 premium.
 
10      (c)  The subscribers' committee shall provide benefits under
 
11 a group life benefit program or group life insurance program to
 
12 public employees based upon the premium paid per public employee
 
13 pursuant to part II.
 
14      (d)  The subscribers' committee shall determine the long-
 
15 term care benefits plan for public employee beneficiaries, their
 
16 spouses or reciprocal beneficiaries, as well as their parents and
 
17 grandparents, and in-law parents and grandparents and other
 
18 qualified beneficiaries.
 
19      §87-0  Health benefits for part-time, temporary, seasonal,
 
20 or casual employees.(a)  The health, life and long- term care
 
21 plans shall be made available to part-time, temporary, seasonal,
 
22 or casual public employees on par with the terms of chapter 89C
 
23 and at no cost to the subscribers.
 

 
Page 40                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (b)  Each part-time, temporary and seasonal or casual public
 
 2 employee enrolled in the health benefits plan shall pay monthly
 
 3 premiums directly to the exchange.
 
 4      §87-P  Supplemental plan to federal Medicare.(a)  Any
 
 5 health, life, or long-term benefit plan provided by the exchange
 
 6 shall take into account benefits available to a public employee-
 
 7 beneficiary and spouse under the federal Medicare plan, subject
 
 8 to the following conditions:
 
 9      (1)  The plan so established by the exchange shall be
 
10           supplemental to the federal Medicare plan so that there
 
11           shall be no duplication of benefits payable under
 
12           federal Medicare; and
 
13      (2)  The premium paid for voluntary medical insurance
 
14           coverage under federal Medicare may be paid by the
 
15           exchange, in such manner as the subscribers' committee
 
16           shall specify.
 
17      (b)  The benefits available under the plan, when taken
 
18 together with the benefits available under the federal Medicare
 
19 plan shall, as nearly as is possible, approximate the benefits
 
20 available under the plans set forth in section 87-N. If, for any
 
21 reason, a situation develops where the benefits available under
 
22 the supplemental plan and the federal Medicare plan substantially
 
23 differ from those that would otherwise be available, the
 

 
Page 41                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 subscribers' committee is authorized to correct this inequity to
 
 2 assure substantial equality of benefits.
 
 3      (c)  Notwithstanding any other law to the contrary, all
 
 4 public employee-beneficiaries or dependent-beneficiaries who are
 
 5 eligible to enroll in the federal Medicare part B medical
 
 6 insurance plan shall enroll in that federal plan as a requirement
 
 7 to participate in the public employee benefit plans provided by
 
 8 the exchange.  This paragraph shall pertain to retired public
 
 9 employees and their spouses and the surviving spouses of deceased
 
10 retirees and employees killed in the performance of duty.
 
11      §87-Q  Determination of eligibility of employee, dependent,
 
12 or person.(a)  The subscribers' committee shall establish and
 
13 adopt eligibility requirements to determine which employee,
 
14 dependent, or person may qualify as an employee-beneficiary,
 
15 dependent-beneficiary, or qualified- beneficiary, respectively;
 
16 provided that a retired member of the employees' retirement
 
17 system, a county pension system, or a police, firefighters, and
 
18 bandsmen pension system of the State or county, or the retired
 
19 member's dependent shall be eligible to qualify as a public
 
20 employee-beneficiary or dependent-beneficiary, whether or not the
 
21 retired member was actively employed by the State or county at
 
22 the time of the retired member's retirement and whether or not
 
23 the employee retired before or after the establishing of the
 
24 exchange.
 

 
Page 42                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (b)  Employees who retired prior to the establishing of the
 
 2 exchange shall be treated as if they were members of the system
 
 3 during their period of employment with the State or county and
 
 4 receive the same benefits as other members.  Only an employee-
 
 5 beneficiary or dependent or person satisfying the eligibility
 
 6 requirements may qualify as an employee-beneficiary, dependent-
 
 7 beneficiary, or qualified-beneficiary.
 
 8      (c)  Disputes regarding the eligibility of an employee,
 
 9 dependent, or person for health, life and long-term benefit plans
 
10 shall be arbitrated by the commissioner.  The commissioner shall
 
11 determine the eligibility of the employee, dependent, or person
 
12 pursuant to the terms established by:
 
13      (1)  Chapter 89C or applicable public sector collective
 
14           bargaining agreement, whichever is appropriate;
 
15      (2)  This chapter and other applicable state or federal law;
 
16           and
 
17      (3)  Other eligibility requirements adopted by the
 
18           subscribers' committee pursuant to this section."
 
19                             PART III
 
20      SECTION 4.  Section 41D-2, Hawaii Revised Statutes, is
 
21 amended by amending subsection (a) to read as follows:
 
22      "(a) The comptroller, through the risk manager, shall:
 

 
 
 
Page 43                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (1)  Have discretion to purchase casualty insurance for the
 
 2           State or state agencies, including those employees of
 
 3           the State who, in the comptroller's discretion, may be
 
 4           at risk and shall be responsible for the acquisition of
 
 5           all casualty insurance;
 
 6      (2)  Have discretion to purchase property insurance for the
 
 7           State or state agencies and shall acquire all property
 
 8           insurance;
 
 9      (3)  Direct and manage all risk management and insurance
 
10           programs of the State, except for employee benefits
 
11           insurance and workers' compensation insurance programs
 
12           or as otherwise provided in chapters 87, 88, 383 to
 
13           386A, 392, [and] 393, and 435;
 
14      (4)  Consult with state agencies to determine what property,
 
15           casualty, and other insurance policies are presently in
 
16           force or are sought by the state agencies and to make
 
17           determinations about whether to continue subscribing to
 
18           insurance policies. In the event that the risk
 
19           manager's determination is not satisfactory to the
 
20           state agency, the state agency may have the risk
 
21           manager's decision reviewed by the comptroller. In this
 
22           case, the comptroller's decision shall be final;
 

 
 
 
Page 44                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (5)  Consolidate and combine state insurance coverages, and
 
 2           purchase excess insurance when, in the comptroller's
 
 3           discretion, it is appropriate to do so;
 
 4      (6)  Acquire risk management, investigative, claims
 
 5           adjustment, actuarial, and other services, except
 
 6           attorney's services, as may be required for the sound
 
 7           administration of this chapter;
 
 8      (7)  Gather from all state agencies and maintain data
 
 9           regarding the State's risks and casualty, property, and
 
10           fidelity losses;
 
11      (8)  In conjunction with the attorney general and as
 
12           otherwise provided by this chapter, compromise or
 
13           settle claims cognizable under chapter 662;
 
14      (9)  Provide technical services in risk management and
 
15           insurance to state agencies; and
 
16     (10)  Do all other things appropriate to the development of
 
17           sound risk management practices and policies for the
 
18           State."
 
19      SECTION 5.  Section 88-95, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "§88-95  Withholding of dues and insurance premiums.  (a)  A
 
22 retired member, if the retired member requests in writing, may
 
23 have withheld from the retired member's pension, annuity, or
 

 
Page 45                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 retirement allowance, payments to the Hawaii public employees
 
 2 health fund and employee organizations for dues and insurance
 
 3 premiums.
 
 4      (b)  A retired member shall request to have withheld from
 
 5 the retired member's pension, the retired member's monthly
 
 6 contributions to the retired member's respective subscriber for
 
 7 benefits from the Hawaii insurance exchange pursuant to section
 
 8 87-I."
 
 9      SECTION 6.  Section 88-103.5, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§88-103.5  Disclosure of information.(a)  The employees'
 
12 retirement system shall:
 
13      (1)  Disclose to the [Hawaii public employees health fund]
 
14           subscribers' committee of the Hawaii insurance exchange
 
15           established by section    1:101 and employee
 
16           organizations information related to the administration
 
17           of pension, annuity, or retirement allowance
 
18           deductions, as follows:  name, social security number,
 
19           amounts and dates of both voluntary and mandatory
 
20           deductions remitted to the recipient; and
 
21      (2)  Release the records of its retirants and beneficiaries
 
22           to the [Hawaii public employees health fund]
 
23           subscribers' committee of the Hawaii insurance exchange
 

 
Page 46                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1           established by section    1:101 for the disbursement of
 
 2           payments authorized under [section 87-27] chapter 87.
 
 3      (b)  Any government agency, or the subscribers' committee or
 
 4 attorney-in-fact of the Hawaii insurance exchange established by
 
 5 section    1:101 or employee organization receiving government
 
 6 records pursuant to this section shall be subject to the same
 
 7 restrictions on disclosure of the records as the originating
 
 8 agency."
 
 9      SECTION 7.  Section 89-2, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§89-2 Definitions.  As used in this chapter:
 
12      "Appropriate bargaining unit" means the unit designated to
 
13 be appropriate for the purpose of collective bargaining pursuant
 
14 to section 89-6.
 
15      "Arbitration" means the procedure whereby parties involved
 
16 in an impasse mutually agree to submit their differences to a
 
17 third party for a final and binding decision.
 
18      "Board" means the Hawaii labor relations board created
 
19 pursuant to section 89-5.
 
20      "Certification" means official recognition by the board that
 
21 the employee organization is, and shall remain, the exclusive
 
22 representative for all of the employees in an appropriate
 
23 bargaining unit for the purpose of collective bargaining, until
 

 
Page 47                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 it is replaced by another employee organization, decertified, or
 
 2 dissolved.
 
 3      "Collective bargaining" means the performance of the mutual
 
 4 obligations of the public employer and the exclusive
 
 5 representative to meet at reasonable times, to confer and
 
 6 negotiate in good faith, and to execute a written agreement with
 
 7 respect to wages, hours, amounts of contributions by the State
 
 8 and counties [to the Hawaii public employees health fund] as
 
 9 subscribers of the Hawaii insurance exchange for the direct
 
10 benefit of public employees pursuant to chapter 87, and other
 
11 terms and conditions of employment, except that by any such
 
12 obligation neither party shall be compelled to agree to a
 
13 proposal, or be required to make a concession.
 
14      "Cost items" includes wages, hours, amounts of contributions
 
15 by the State and counties [to the Hawaii public employees health
 
16 fund] as subscribers of the Hawaii insurance exchange for the
 
17 benefit of public employees pursuant to chapter 87, and other
 
18 terms and conditions of employment, the implementation of which
 
19 requires an appropriation by a legislative body.
 
20      "Employee" or "public employee" means any person employed by
 
21 a public employer except elected and appointed officials and such
 
22 other employees as may be excluded from coverage in section
 
23 89-6(c).
 

 
Page 48                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      "Employee organization" means any organization of any kind
 
 2 in which public employees participate and which exists for the
 
 3 primary purpose of dealing with public employers concerning
 
 4 grievances, labor disputes, wages, hours, amounts of
 
 5 contributions by the State and counties [to the Hawaii public
 
 6 employees health fund] as subscribers of the Hawaii insurance
 
 7 exchange for the benefit of public employees pursuant to chapter
 
 8 87, and other terms and conditions of employment of public
 
 9 employees.
 
10      "Employer" or "public employer" means the governor in the
 
11 case of the State, the respective mayors in the case of the city
 
12 and county of Honolulu and the counties of Hawaii, Maui, and
 
13 Kauai, the board of education in the case of the department of
 
14 education, and the board of regents in the case of the University
 
15 of Hawaii, and any individual who represents one of these
 
16 employers or acts in their interest in dealing with public
 
17 employees.  In the case of the judiciary, the governor shall be
 
18 the employer for the purposes of this chapter.
 
19      "Essential employee" means an employee designated by the
 
20 public employer to fill an essential position.
 
21      "Essential position" means any position designated by the
 
22 board as necessary to be worked in order to avoid or remove any
 
23 imminent or present danger to the public health or safety, which
 
24 position shall be filled by the public employer.
 

 
Page 49                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      "Exclusive representative" means the employee organization,
 
 2 which as a result of certification by the board, has the right to
 
 3 be the collective bargaining agent of all employees in an
 
 4 appropriate bargaining unit without discrimination and without
 
 5 regard to employee organization membership.
 
 6      "Fact-finding" means identification of the major issues in a
 
 7 particular impasse, review of the positions of the parties and
 
 8 resolution of factual differences by one or more impartial fact-
 
 9 finders, and the making of recommendations for settlement of the
 
10 impasse.
 
11      "Impasse" means failure of a public employer and an
 
12 exclusive representative to achieve agreement in the course of
 
13 negotiations.
 
14      "Legislative body" means the legislature in the case of the
 
15 State, the city council in the case of the city and county of
 
16 Honolulu, and the respective county councils in the case of the
 
17 counties of Hawaii, Maui, and Kauai.
 
18      "Mediation" means assistance by an impartial third party to
 
19 reconcile an impasse between the public employer and the
 
20 exclusive representative regarding wages, hours, amounts of
 
21 contributions by the State and counties [to the Hawaii public
 
22 employees health fund] as subscribers of the Hawaii insurance
 
23 exchange for the benefit of public employees pursuant to chapter
 

 
Page 50                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 87, and other terms and conditions of employment through
 
 2 interpretation, suggestion, and advice to resolve the impasse.
 
 3      "Professional employee" includes [(A) any]:
 
 4      (1)  Any employee engaged in work [(i) predominantly];
 
 5           (A)  Predominantly intellectual and varied in character
 
 6                as opposed to routine mental, manual, mechanical,
 
 7                or physical work[, (ii) involving];
 
 8           (B)  Involving the consistent exercise of discretion
 
 9                and judgment in its performance[, (iii) of];
 
10           (C)  Of such a character that the output produced or
 
11                the result accomplished cannot be standardized in
 
12                relation to a given period of time[, (iv)
 
13                requiring]; and
 
14           (D)  Requiring knowledge of an advanced type in a field
 
15                of science or learning customarily acquired by a
 
16                prolonged course of specialized intellectual
 
17                instruction and study in an institution of higher
 
18                learning or a hospital, as distinguished from a
 
19                general academic education or from an
 
20                apprenticeship or from training in the performance
 
21                of routine mental, manual, or physical processes;
 
22           or [(B) any]
 

 
 
 
Page 51                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (2)  Any employee, who [(i) has];
 
 2           (A)  Has completed the courses of specialized
 
 3                intellectual instruction and study described in
 
 4                clause [(A)(iv),] (1)(D); and [(ii) is]
 
 5           (B)  Is performing related work under the supervision
 
 6                of a professional employee as defined in [(A)]
 
 7                (1).
 
 8      "Strike" means a public employee's refusal, in concerted
 
 9 action with others, to report for duty, or the employee's wilful
 
10 absence from the employee's position, or the employee's stoppage
 
11 of work, or the employee's abstinence in whole or in part from
 
12 the full, faithful, and proper performance of the duties of
 
13 employment, for the purpose of inducing, influencing, or coercing
 
14 a change in the conditions, compensation, rights, privileges, or
 
15 obligations of public employment; and except in the case of
 
16 absences authorized by public employers, includes such refusal,
 
17 absence, stoppage, or abstinence by any public employee out of
 
18 sympathy or support for any other public employee who is on
 
19 strike or because of the presence of any picket line maintained
 
20 by any other public employee; provided that nothing herein shall
 
21 limit or impair the right of any public employee to express or
 
22 communicate a complaint or opinion on any matter related to the
 
23 conditions of employment.
 

 
Page 52                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      "Supervisory employee" means any individual having authority
 
 2 in the interest of the employer, to hire, transfer, suspend,
 
 3 layoff, recall, promote, discharge, assign, reward, or discipline
 
 4 other employees, or the responsibility to assign work to and
 
 5 direct them, or to adjust their grievances, or effectively to
 
 6 recommend such action, if, in connection with the foregoing, the
 
 7 exercise of such authority is not of a merely routine or clerical
 
 8 nature, but requires the use of independent judgment."
 
 9      SECTION 8.  Section 89-9, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§89-9 Scope of negotiations.(a)  The employer and the
 
12 exclusive representative shall meet at reasonable times,
 
13 including meetings in advance of the employer's budget-making
 
14 process, and shall negotiate in good faith with respect to wages,
 
15 hours, the number of incremental and longevity steps and movement
 
16 between steps within the salary range, the amounts of
 
17 contributions by the State and respective counties [to the Hawaii
 
18 public employees health fund] as subscribers of the Hawaii
 
19 insurance exchange for the benefit of public employees pursuant
 
20 to chapter 87 to the extent allowed in subsection (e), and other
 
21 terms and conditions of employment which are subject to
 
22 negotiations under this chapter and which are to be embodied in a
 
23 written agreement, or any question arising thereunder, but such
 

 
Page 53                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 obligation does not compel either party to agree to a proposal or
 
 2 make a concession; provided that the parties may not negotiate
 
 3 with respect to cost items as defined by section 89-2 for the
 
 4 biennium 1999 to 2001, and the cost items of employees in
 
 5 bargaining units under section 89-6 in effect on June 30, 1999,
 
 6 shall remain in effect until July 1, 2001.
 
 7      (b)  The employer or the exclusive representative desiring
 
 8 to initiate negotiations shall notify the other in writing,
 
 9 setting forth the time and place of the meeting desired and
 
10 generally the nature of the business to be discussed, and shall
 
11 mail the notice by certified mail to the last known address of
 
12 the other party sufficiently in advance of the meeting.
 
13      (c)  Except as otherwise provided herein, all matters
 
14 affecting employee relations, including those that are, or may
 
15 be, the subject of a regulation promulgated by the employer or
 
16 any personnel director, are subject to consultation with the
 
17 exclusive representatives of the employees concerned.  The
 
18 employer shall make every reasonable effort to consult with the
 
19 exclusive representatives prior to effecting changes in any major
 
20 policy affecting employee relations.
 
21      (d)  Excluded from the subjects of negotiations are matters
 
22 of classification and reclassification, benefits [of but not
 
23 contributions to the Hawaii public employees health fund]
 

 
Page 54                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 provided by but not contributions to subscribers or premiums paid
 
 2 to the Hawaii insurance exchange for the benefit of public
 
 3 employees pursuant to chapter 87, retirement benefits except as
 
 4 provided in section 88-8(h), and the salary ranges now provided
 
 5 by law; provided that the number of incremental and longevity
 
 6 steps, the amount of wages to be paid in each range and step, and
 
 7 movement between steps within the salary range shall be
 
 8 negotiable.  The employer and the exclusive representative shall
 
 9 not agree to any proposal which would be inconsistent with merit
 
10 principles or the principle of equal pay for equal work pursuant
 
11 to sections 76-1, 76-2, 77-31, and 77-33, or which would
 
12 interfere with the rights of a public employer to:
 
13      (1)  [direct] Direct employees;
 
14      (2)  [determine] Determine qualification, standards for
 
15           work, the nature and contents of examinations, hire,
 
16           promote, transfer, assign, and retain employees in
 
17           positions and suspend, demote, discharge, or take other
 
18           disciplinary action against employees for proper cause;
 
19      (3)  [relieve] Relieve an employee from duties because of
 
20           lack of work or other legitimate reason;
 
21      (4)  [maintain] Maintain efficiency of government
 
22           operations; and
 

 
 
 
Page 55                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (5)  [determine] Determine methods, means, and personnel by
 
 2           which the employer's operations are to be conducted;
 
 3 and take such actions as may be necessary to carry out the
 
 4 missions of the employer in cases of emergencies; provided that
 
 5 the employer and the exclusive representative may negotiate
 
 6 procedures governing the promotion and transfer of employees to
 
 7 positions within a bargaining unit, procedures governing the
 
 8 suspension, demotion, discharge or other disciplinary actions
 
 9 taken against employees, and procedures governing the layoff of
 
10 employees; provided further that violations of the procedures so
 
11 negotiated may be the subject of a grievance process agreed to by
 
12 the employer and the exclusive representative.
 
13      (e)  Negotiations relating to contributions [to the Hawaii
 
14 public employees health fund] to subscribers and premiums paid to
 
15 the Hawaii insurance exchange for the benefit of public employees
 
16 pursuant to chapter 87 shall be for the purpose of agreeing upon
 
17 the amounts which the State and counties shall contribute [under
 
18 section 87-4, toward the payment of the costs for a health
 
19 benefits plan, as defined in section 87-1(8), and group life
 
20 insurance benefits] towards premiums paid to the Hawaii insurance
 
21 exchange for the benefits of public employees pursuant to chapter
 
22 87, and the parties shall not be bound by the amounts contributed
 
23 under prior agreements; provided that section 89-11 for the
 

 
Page 56                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 resolution of disputes by way of fact-finding or arbitration
 
 2 shall not be available to resolve impasses or disputes relating
 
 3 to the amounts the State and counties shall contribute [to the
 
 4 Hawaii public employees health fund] towards premiums paid to the
 
 5 Hawaii insurance exchange for the benefits of public employees
 
 6 pursuant to chapter 87."
 
 7      SECTION 9.  Section 89-11, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (d) to read as follows:
 
 9      "(d)  If a dispute between a public employer and the
 
10 exclusive representative of appropriate bargaining unit (2),
 
11 supervisory employees in blue collar positions; appropriate
 
12 bargaining unit (3), nonsupervisory employees in white collar
 
13 positions; appropriate bargaining unit (4), supervisory employees
 
14 in white collar positions; appropriate bargaining unit (6),
 
15 educational officers and other personnel of the department of
 
16 education under the same salary schedule; appropriate bargaining
 
17 unit (8), personnel of the University of Hawaii and the community
 
18 college system, other than faculty; optional appropriate
 
19 bargaining unit (9), registered professional nurses; optional
 
20 appropriate bargaining unit (10), institutional, health, and
 
21 correctional workers; optional appropriate bargaining unit (11),
 
22 firefighters; optional appropriate bargaining unit (12), police
 
23 officers; or optional appropriate bargaining unit (13),
 

 
Page 57                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 professional and scientific employees, other than registered
 
 2 professional nurses, exists over the terms of an initial or
 
 3 renewed agreement more than ninety working days after written
 
 4 notification by either party to initiate negotiations, either
 
 5 party may give written notice to the board that an impasse exists
 
 6 and the board shall assist in the voluntary resolution of the
 
 7 impasse by appointing a mediator within three days after the date
 
 8 of impasse.  If the dispute continues to exist fifteen working
 
 9 days after the date of impasse, the dispute shall be submitted to
 
10 arbitration proceedings as provided herein.
 
11      The board shall immediately determine whether the parties to
 
12 the dispute have mutually agreed upon an arbitration procedure
 
13 and whether the parties have agreed upon a person or persons whom
 
14 the parties desire to be appointed as the arbitrator or as a
 
15 panel of arbitrators, as the case may be.
 
16      If the board determines that an arbitration procedure
 
17 mutually agreed upon by the parties will result in a final and
 
18 binding decision, and that an arbitrator or arbitration panel has
 
19 been mutually agreed upon, it shall appoint such arbitrator or
 
20 arbitration panel and permit the parties to proceed with the
 
21 arbitration procedure mutually agreed upon.
 
22      If, after eighteen working days from the date of impasse,
 
23 the parties have not mutually agreed upon an arbitration
 

 
Page 58                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 procedure and an arbitrator or arbitration panel, the board shall
 
 2 immediately notify the employer and the exclusive representative
 
 3 that the issues in dispute shall be submitted to a three-member
 
 4 arbitration panel who shall follow the arbitration procedure
 
 5 provided herein.
 
 6      Within twenty-one working days from the date of impasse, two
 
 7 members of the arbitration panel shall be selected by the
 
 8 parties; one shall be selected by the employer and one shall be
 
 9 selected by the exclusive representative.  The impartial third
 
10 member of the arbitration panel shall be selected by the two
 
11 previously selected panel members and shall chair the arbitration
 
12 panel.
 
13      In the event that the two previously selected arbitration
 
14 panel members fail to select an impartial third arbitrator within
 
15 twenty-four working days from the date of impasse, the board
 
16 shall request the American Arbitration Association, or its
 
17 successor in function, to furnish a list of five qualified
 
18 arbitrators from which the impartial arbitrator shall be
 
19 selected.  Within five calendar days after receipt of such list,
 
20 the parties shall alternately strike names therefrom until a
 
21 single name is left, who shall be immediately appointed by the
 
22 board as the impartial arbitrator and chairperson of the
 
23 arbitration panel.
 

 
Page 59                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      Upon the selection and appointment of the arbitration panel,
 
 2 each party shall submit to the panel, in writing, with copy to
 
 3 the other party, a final offer which shall include all provisions
 
 4 in any existing collective bargaining agreement not being
 
 5 modified, all provisions already agreed to in negotiations, and
 
 6 all further provisions other than those relating to
 
 7 [contributions by the State and respective counties to the Hawaii
 
 8 public employees health fund] contributions to subscribers and
 
 9 premiums paid to the Hawaii insurance exchange for the benefit of
 
10 public employees pursuant to chapter 87, which each party is
 
11 proposing for inclusion in the final agreement.
 
12      Within twenty calendar days of its appointment, the
 
13 arbitration panel shall commence a hearing at which time the
 
14 parties may submit either in writing or through oral testimony,
 
15 all information or data supporting their respective final offers.
 
16 Nothing in this section shall be construed to prohibit the
 
17 parties from reaching a voluntary settlement on the unresolved
 
18 issues, with or without the assistance of a mediator, at any time
 
19 prior to the conclusion of the hearing conducted by the
 
20 arbitration panel.
 
21      Within thirty calendar days after the conclusion of the
 
22 hearing, a majority of the arbitration panel shall issue a final
 
23 and binding decision.
 

 
Page 60                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      In reaching a decision, the arbitration panel shall give
 
 2 weight to the factors listed below and shall include in a written
 
 3 opinion an explanation of how the factors were taken into account
 
 4 in reaching the decision:
 
 5      (1)  The lawful authority of the employer[.];
 
 6      (2)  Stipulations of the parties[.];
 
 7      (3)  The interests and welfare of the public[.];
 
 8      (4)  The financial ability of the employer to meet these
 
 9           costs[.];
 
10      (5)  The present and future general economic condition of
 
11           the counties and the State[.];
 
12      (6)  Comparison of wages, hours, and conditions of
 
13           employment of the employees involved in the arbitration
 
14           proceeding with the wages, hours, and conditions of
 
15           employment of other persons performing similar
 
16           services, and of other state and county employees in
 
17           Hawaii[.];
 
18      (7)  The average consumer prices for goods or services,
 
19           commonly known as the cost of living[.];
 
20      (8)  The overall compensation presently received by the
 
21           employees, including direct wage compensation,
 
22           vacation, holidays and excused time, insurance and
 
23           pensions, medical and hospitalization benefits, the
 

 
Page 61                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1           continuity and stability of employment, and all other
 
 2           benefits received[.];
 
 3      (9)  Changes in any of the foregoing circumstances during
 
 4           the pendency of the arbitration proceedings[.]; and
 
 5     (10)  Such other factors, not confined to the foregoing,
 
 6           which are normally or traditionally taken into
 
 7           consideration in the determination of wages, hours, and
 
 8           conditions of employment through voluntary collective
 
 9           bargaining, mediation, fact-finding, arbitration, or
 
10           otherwise between the parties, in the public service or
 
11           in private employment.
 
12      The decision of the arbitration panel shall be final and
 
13 binding upon the parties on all provisions submitted to the
 
14 arbitration panel.  If the parties have reached agreement with
 
15 respect to the amounts of contributions by the State and counties
 
16 [to the Hawaii public employees health fund] as subscribers to
 
17 the Hawaii insurance exchange, for the benefit of public
 
18 employees pursuant to chapter 87, by the tenth working day after
 
19 the arbitration panel issues its decision, the final and binding
 
20 agreement of the parties on all provisions shall consist of the
 
21 panel's decision and the amounts of contributions agreed to by
 
22 the parties.  If the parties have not reached agreement with
 
23 respect to the amounts of contributions [by the State and
 

 
Page 62                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 counties to the Hawaii public employees health fund] to
 
 2 subscribers and premiums paid to the Hawaii insurance exchange
 
 3 for the benefit of public employees pursuant to chapter 87, by
 
 4 the close of business on the tenth working day after the
 
 5 arbitration panel issues its decision, the parties shall have
 
 6 five days to submit their respective recommendations for such
 
 7 contributions and premiums to the legislature, if it is in
 
 8 session, and if the legislature is not in session, the parties
 
 9 shall submit their respective recommendations for such
 
10 contributions to the legislature during the next session of the
 
11 legislature.  In such event, the final and binding agreement of
 
12 the parties on all provisions shall consist of the panel's
 
13 decision and the amounts of contributions established by the
 
14 legislature by enactment, after the legislature has considered
 
15 the recommendations for such contributions by the parties.  It is
 
16 strictly understood that no member of a bargaining unit subject
 
17 to this subsection shall be allowed to participate in a strike on
 
18 the issue of the amounts of contributions [by the State and
 
19 counties to the Hawaii public employees health fund] to
 
20 subscribers and premiums paid to the Hawaii insurance exchange
 
21 for the benefit of public employees pursuant to chapter 87.  The
 
22 parties shall take whatever action is necessary to carry out and
 
23 effectuate the final and binding agreement.  The parties may, at
 

 
Page 63                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1 any time and by mutual agreement, amend or modify the panel's
 
 2 decision.
 
 3      Agreements reached pursuant to the decision of an
 
 4 arbitration panel and the amounts of contributions [by the State
 
 5 and counties to the Hawaii public employees health fund] to
 
 6 subscribers and premiums paid to the Hawaii insurance exchange
 
 7 for the benefit of public employees pursuant to chapter 87, as
 
 8 provided herein, shall not be subject to ratification by the
 
 9 employees concerned.  All items requiring any moneys for
 
10 implementation shall be subject to appropriations by the
 
11 appropriate legislative bodies and the employer shall submit all
 
12 such items within ten days after the date on which the agreement
 
13 is entered into as provided herein, to the appropriate
 
14 legislative bodies.
 
15      The costs for mediation shall be borne by the board.  All
 
16 other costs incurred by either party in complying with these
 
17 provisions, including the costs of its selected member on the
 
18 arbitration panel, shall be borne by the party incurring them,
 
19 except that all costs and expenses of the impartial arbitrator
 
20 shall be borne equally by the parties."
 
21      SECTION 10.  Section 89C-1, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 

 
 
 
Page 64                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      "§89C-1 Purpose.  The legislature finds that existing
 
 2 statutes do not permit the chief executives of the State and
 
 3 counties, the board of education, the board of regents, the
 
 4 auditor, the director of the legislative reference bureau, the
 
 5 ombudsman, and the chief justice of the supreme court sufficient
 
 6 flexibility to make appropriate and timely adjustments in the
 
 7 compensation, hours, terms, and conditions of employment, amounts
 
 8 of contributions [by the State and respective counties to the
 
 9 Hawaii public employees health fund] to subscribers and premiums
 
10 paid to the Hawaii insurance exchange for the benefit of public
 
11 employees pursuant to chapter 87, and other benefits for public
 
12 officers and employees who are excluded from collective
 
13 bargaining coverage under  chapter 89.  To this end, the
 
14 legislature grants to the respective chief executives, the board
 
15 of education, the board of regents, the auditor, the director of
 
16 the legislative reference bureau, the ombudsman, and the chief
 
17 justice, the authority to make such adjustments for officers and
 
18 employees excluded from collective bargaining in conformance with
 
19 this chapter.
 
20      Nothing in this chapter shall be construed to interfere with
 
21 or diminish any authority already provided by statutes to the
 
22 chief executives, the board of education, the board of regents,
 
23 the auditor, the director of the legislative reference bureau,
 
24 the ombudsman, or the chief justice."
 

 
Page 65                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 11.  Section 89C-2, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§89C-2 Adjustments authorized; limitations, restrictions.
 
 4 Any provision of law to the contrary notwithstanding, the
 
 5 compensation, hours, terms, and conditions of employment, amounts
 
 6 of contributions [by the State and respective counties to the
 
 7 Hawaii public employees health fund] to subscribers and premiums
 
 8 paid to the Hawaii insurance exchange for the benefit of public
 
 9 employees pursuant to chapter 87, and other benefits for public
 
10 officers and employees who are excluded from collective
 
11 bargaining shall be adjusted by the chief executives of the State
 
12 or counties, the board of education, the board of regents, the
 
13 auditor, the director of the legislative reference bureau, the
 
14 ombudsman, or the chief justice, as applicable.  The chief
 
15 executives, the board of education, the board of regents, the
 
16 auditor, the director of the legislative reference bureau, the
 
17 ombudsman, and the chief justice, or their designated
 
18 representatives, shall determine the adjustments to be made and
 
19 which excluded officers or employees are to be granted
 
20 adjustments under this chapter, in accordance with the following
 
21 guidelines and limitations:
 
22      (1)  For excluded officers and employees under the same
 
23           compensation plans as officers and employees within
 

 
Page 66                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1           collective bargaining units, such adjustments shall be
 
 2           not less than those provided under collective
 
 3           bargaining agreements for officers and employees hired
 
 4           on a comparable basis[.];
 
 5      (2)  For excluded officers and employees in the excluded
 
 6           managerial compensation plan, such adjustments shall be
 
 7           not less than those provided under collective
 
 8           bargaining to officers and employees in the
 
 9           professional and scientific employees bargaining unit.
 
10           Alternate adjustments may be granted to officers and
 
11           employees whose work is related to that of officers and
 
12           employees in the other optional bargaining units in
 
13           order to maintain appropriate pay relationships with
 
14           such officers and employees[.];
 
15      (3)  No adjustment in compensation, hours, terms, and
 
16           conditions of employment, amounts of contributions [by
 
17           the State and respective counties to the Hawaii public
 
18           employees health fund] to subscribers and premiums paid
 
19           to the Hawaii insurance exchange for the benefit of
 
20           public employees pursuant to chapter 87, or other
 
21           benefits shall be established which is in conflict with
 
22           the system of personnel administration based on merit
 
23           principles and scientific methods governing the
 

 
Page 67                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1           classification of positions and the employment conduct,
 
 2           movement, and separation of public officers and
 
 3           employees[.];
 
 4      (4)  The compensation of officers or employees whose
 
 5           salaries presently are limited or fixed by legislative
 
 6           enactment shall not be adjusted under this chapter, but
 
 7           shall continue to be adjusted by the appointing
 
 8           authority within limits established by law or by
 
 9           legislative enactment[.];
 
10      (5)  The compensation of officers or employees, who are not
 
11           covered under the same compensation plans as officers
 
12           and employees within collective bargaining units and
 
13           whose salaries presently are authorized to be fixed by
 
14           the appointing authority, need not be adjusted under
 
15           this chapter.  The appointing authority may continue to
 
16           make specific adjustments in the salaries of individual
 
17           officers or employees from available funds
 
18           appropriated[.]; and
 
19      (6)  Adjustments to the amounts of contributions [by the
 
20           State and respective counties to the Hawaii public
 
21           employees health fund] to subscribers and premiums paid
 
22           to the Hawaii insurance exchange pursuant to chapter
 
23           87, on behalf of officers or employees who are not
 

 
Page 68                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1           covered by adjustments made under this chapter shall be
 
 2           made by legislative enactment."
 
 3      SECTION 12.  Section 431:2-201, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "§431:2-201  General powers and duties.(a)  The
 
 6 commissioner shall have the authority expressly conferred upon
 
 7 the commissioner by or reasonably implied from the provisions of
 
 8 this code.
 
 9      (b)  The commissioner shall execute the commissioner's
 
10 duties and shall enforce this code.
 
11      (c)  The commissioner may:
 
12      (1)  Make reasonable rules for effectuating any provision of
 
13           this code, except those relating to the commissioner's
 
14           appointment, qualifications, or compensation.  The
 
15           commissioner shall adopt rules to effectuate article
 
16           10C of chapter 431, subject to the approval of the
 
17           governor's office and the requirements of chapter
 
18           91[.];
 
19      (2)  Conduct examinations and investigations to determine
 
20           whether any person has violated any provision of this
 
21           code or to secure information useful in the lawful
 
22           administration of any provision[.];
 

 
 
 
Page 69                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1      (3)  Require, upon reasonable notice, that insurers report
 
 2           any claims information the commissioner may deem
 
 3           necessary to protect the public interest[.]; or
 
 4      (4)  Arbitrate claims disputes regarding the qualifications
 
 5           for benefits of public employee beneficiaries pursuant
 
 6           to chapter 87."
 
 7      SECTION 13.  Section 431:19-102, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (h) to read as follows:
 
 9      "(h)  A captive insurance company may engage in the business
 
10 of any of the following types of insurance:
 
11      (1)  All casualty insurance;
 
12      (2)  Marine and transportation insurance;
 
13      (3)  Marine protection and indemnity insurance, which
 
14           includes insurance against, or against legal liability
 
15           of the insured for loss, damage, or expense arising out
 
16           of or incident to, the ownership, operation,
 
17           chartering, maintenance, use, repair, or construction
 
18           of a vessel, craft, or instrumentality in use in ocean
 
19           or inland waterways, including liability of the insured
 
20           for personal injury, illness, death, or for loss of or
 
21           damage to the property of another person;
 
22      (4)  Wet marine and transportation insurance, which is that
 
23           part of marine and transportation insurance that
 
24           includes only:
 

 
Page 70                                                    
                                     H.B. NO.           
                                                        
                                                        

 
 1           (A)  Insurance upon vessels, crafts, hulls, and of
 
 2                interests therein or with relation thereto;
 
 3           (B)  Insurance of marine builder's risks, marine war
 
 4                risks and contracts, or marine protection and
 
 5                indemnity insurance;
 
 6           (C)  Insurance of freights and disbursements pertaining
 
 7                to a subject of insurance; and
 
 8           (D)  Insurance of personal property and interests
 
 9                therein, in the course of exportation from or
 
10                importation into any country, and in the course of
 
11                transportation coastwise or on inland waters,
 
12                including transportation by land, water, or air
 
13                from point of origin to final destination, with
 
14                respect to, appertaining to, or in connection with
 
15                any and all risks or perils of navigation,
 
16                transit, or transportation, and while being
 
17                prepared for and while awaiting shipment, and
 
18                during delays, storage, transshipment, or
 
19                reshipment incident thereto;
 
20      (5)  Property insurance;
 
21      (6)  Surety insurance;
 
22      (7)  Title insurance;
 

 
 
 
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 1      (8)  Credit life insurance and credit disability insurance
 
 2           offered as part of, or relating directly to the
 
 3           business or operations of its parent or affiliated
 
 4           companies; and
 
 5      (9)  Those lines of insurance provided by the Hawaii
 
 6           insurance exchange pursuant to chapter 435.
 
 7     [(9)] (10)  Other lines of insurance that the commissioner
 
 8           may allow."
 
 9      SECTION 14.  Section 431:10D-207, Hawaii Revised Statutes,
 
10 is repealed.
 
11      ["§431:10D-207  Public employee association groups.  The
 
12 lives of a group of individuals may be insured under a policy
 
13 issued to an association of public employees, which shall be
 
14 deemed the policyholder, to insure members of the association for
 
15 the benefit of persons other than the association or any of its
 
16 officials, subject to the following requirements:
 
17      (1)  The association must have been formed for purposes
 
18           other than obtaining insurance and have when the policy
 
19           is placed in force, a membership in the classes
 
20           eligible for insurance of not less than seventy-five
 
21           per cent of the number of employees eligible for
 
22           membership in such classes.
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (2)  The members eligible for insurance under the policy
 
 2           shall be all of the members of the association, or all
 
 3           of any class or classes thereof.
 
 4      (3)  The premium for the policy shall be paid either from
 
 5           the association's own funds or from charges collected
 
 6           from the insured members specifically for the
 
 7           insurance, or from both.  Any charges collected from
 
 8           the insured members specifically for the insurance, and
 
 9           the dues of the association if they include the cost of
 
10           insurance, may be collected through deductions by the
 
11           employer from the salaries of the members.  The
 
12           deductions from salary may be paid by the employer to
 
13           the association or directly to the insurer.  No policy
 
14           may be placed in force unless and until at least
 
15           seventy-five per cent of the then eligible members of
 
16           the association, excluding any as to whom evidence of
 
17           individual insurability is not satisfactory to the
 
18           insurer, have elected to be covered and have authorized
 
19           their employer to make the required deductions from
 
20           salary, or have otherwise assigned pay or arranged for
 
21           payment of their individual contributions to the
 
22           association.  Except as provided in item (4), a policy
 
23           on which no part of the premium is to be derived from
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           funds contributed by the insured members specifically
 
 2           for their insurance must insure all eligible members,
 
 3           except those who reject such coverage in writing.
 
 4      (4)  An insurer may exclude or limit the coverage on any
 
 5           person as to whom evidence of individual insurability
 
 6           is not satisfactory to the insurer.
 
 7      (5)  Charges collected from the insured members specifically
 
 8           for the insurance, and the dues of the association if
 
 9           they include the cost of insurance, may be determined
 
10           according to each attained age or in not less than four
 
11           reasonably spaced attained age groups.  This provision,
 
12           however, shall not preclude an average rate for the
 
13           whole group with charges to the individual members
 
14           based on a schedule of insurance graded by rank, salary
 
15           bracket, or by length of service or seniority.
 
16      (6)  The policy must cover at least twenty-five persons at
 
17           date of issue.
 
18      (7)  The amounts of insurance under the policy must be based
 
19           upon some plan precluding individual selection either
 
20           by the members or by the association.
 
21      (8)  As used herein, public employees means employees of the
 
22           United States government, or of any state, or of any
 
23           political subdivision or instrumentality or department
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           or bureau or board or commission of any of them, or the
 
 2           national guard as an association in nature under its
 
 3           existing form."]
 
 4      SECTION 15.  Chapter 87, Hawaii Revised Statutes, is
 
 5 repealed.
 
 6      SECTION 16.  To ensure continuity of benefits for public
 
 7 employees, any insurer, service provider or other third party who
 
 8 has entered into a contract with the Public Employees Health Fund
 
 9 shall not cease providing insurance coverage or services pursuant
 
10 to the terms of the contract except under conditions provided for
 
11 under such contract.  For the purposes of this section, a
 
12 contract with the Public Employees Health Fund (hereinafter
 
13 "Fund") is legally binding unto all parties if the parties had
 
14 memorialized a final agreement, despite the fact that such final
 
15 agreement has not been properly executed by the Fund.
 
16      SECTION 17.  (a)  The attorney general shall locate and take
 
17 necessary measures to secure all property, which may be properly
 
18 assigned to the Fund, including bank accounts, reserves or all
 
19 other funds which are in the possession of other persons,
 
20 pursuant to legally binding agreements or otherwise.  During such
 
21 investigation, the attorney general shall have access to all
 
22 documents pertaining or related to the Fund in the possession of
 
23 the Fund or the board of trustees or the trustees individually.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 Nothing in this Act shall be construed to restrict any state
 
 2 agency from taking appropriate legal action upon any facts
 
 3 discovered by the attorney general in its investigation.
 
 4      (b)  The attorney general shall review all contracts with
 
 5 the Fund and analyze such contracts to provide the governor with
 
 6 recommendations on whether such contracts should be continued by
 
 7 the exchange or terminated.  In making its recommendations, the
 
 8 attorney general shall consider:
 
 9      (1)  The costs or penalties, which would be incurred in
 
10           terminating such agreement; and
 
11      (2)  Whether such contracts and the ensuing obligations may
 
12           properly be transferred to the exchange.
 
13 In considering subsection (2), the attorney general shall consult
 
14 with the captives administrator appointed pursuant to article 19
 
15 of chapter 431, Hawaii Revised Statutes.
 
16      (c)  The attorney general may delegate the duties outlined
 
17 in this section to appropriate third party service providers or
 
18 enlist the support of appropriate government agencies in its sole
 
19 discretion in carrying out the purposes of this measure.
 
20      (d)  The attorney general shall complete the duties outlined
 
21 in this section by July 1, 2001.
 
22      (e)  The attorney general shall submit a report to the
 
23 legislature twenty days prior to the first day of the 2001
 
24 legislative session detailing
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (1)  Its progress in performing the duties detailed in this
 
 2           section; and
 
 3      (2)  Any other manners material to any actions conducted
 
 4           pursuant to subsection (a).
 
 5      SECTION 18.  (a)  The assets and liabilities of the Public
 
 6 Employees Health Fund shall be identified by the department of
 
 7 the attorney general with the assistance of the Fund and the
 
 8 department of budget and finance and shall transferred to the
 
 9 subscribers' savings accounts within the Exchange proportionate
 
10 to each subscriber's existing interest in the Fund before July 1,
 
11 2001.
 
12      (b)  Once appointed, the subscribers' committee shall assign
 
13 net underwriting gains, and stabilization reserves which are
 
14 currently in the possession of insurance carriers pursuant to
 
15 agreements with the Fund, to the unassigned surplus account of
 
16 the Exchange established pursuant to section 2 of this Act.
 
17      (c)  Surplus employee contributions to the Fund, which have
 
18 accrued as of July 1, 2000 shall be assigned to a separate
 
19 account, designated the employees surplus account, and shall be
 
20 used to stabilize future employee contributions to the
 
21 subscribers made pursuant to chapter 87.
 
22      SECTION 19.  There is appropriated to the department of
 
23 budget and finance from the general fund $      for the purposes
 
24 of this Act.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 20.  There is appropriated $      from the general
 
 2 fund to the department of the attorney general for the purposes
 
 3 of carrying out the duties required by section 21 of this Act.
 
 4      SECTION 21.  In codifying the new chapter to Hawaii Revised
 
 5 Statutes, by section 3 of this Act, the revisor of statutes shall
 
 6 substitute appropriate section numbers for letters used in the
 
 7 designation of new sections in that chapter.
 
 8      SECTION 22.  Statutory material to be repealed is bracketed.
 
 9 New statutory material is underscored.
 
10      SECTION 23.  This Act shall take effect July 1, 2001;
 
11 provided that sections 16, 17, 18, and 19 shall take effect upon
 
12 its approval.
 
13 
 
14                       INTRODUCED BY:  ___________________________