REPORT TITLE:
Hawaii Insurance Exchange


DESCRIPTION:
Creates Hawaii insurance exchange captive insurance company to
replace the public employees health fund structure.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        3193
THE SENATE                              S.B. NO.           S.D. 1
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, relating to the Hawaii public employees health
 
 9 fund.
 
10      The proposed facility will provide the respective
 
11 governments with direct control over approximately $384,000,000
 
12 in premiums that are currently paid to, and reserves held by,
 
13 third-party health plans and insurers.  It will also afford an
 
14 effective means of addressing the financial accounting and
 
15 internal control deficiencies noted in the auditor's report
 
16 entitled "Financial Audit of the Hawaii Public Employees Health
 
17 Fund" issued in April, 1999 (Report No. 99-18).
 
18      The proposed facility is organized as a "reciprocal
 
19 insurance exchange", pursuant to article 19, chapter 431, Hawaii
 
20 Revised Statutes, where the state and county governments are its
 

 
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 1 underlying "subscribers".  Anticipated funding is comprised of an
 
 2 initial surplus contribution of approximately $86,000,000 that
 
 3 will be obtained from rate stabilization reserves currently being
 
 4 held by various health insurers and $13,000,000 in surplus
 
 5 employee contributions held by the public employees health fund.
 
 6 Anticipated annual premiums are approximately $298,000,000 for
 
 7 benefits identical to those currently provided through the fund.
 
 8 The captive facility will be known as the Hawaii insurance
 
 9 exchange" (hereinafter "the exchange").
 
10      Oversight of the exchange's policies and operations is
 
11 performed by a subscribers committee.  The subscribers committee
 
12 shall appoint an attorney-in-fact to implement its requirements,
 
13 including obtaining services from independent third-party
 
14 providers, and providing for the ongoing management and
 
15 administration of the exchange including accounting and financial
 
16 reporting, insurance and other regulatory compliance, as well as
 
17 coordination of claims adjusting, treasury and investment
 
18 management, insurance and reinsurance administration, and safety
 
19 and informational services for employees.
 
20      Part I of this Act establishes the Hawaii insurance exchange
 
21 and its governing procedures.  Part II repeals the authorization
 
22 for the public employees health fund, establishes minimum
 

 
 
 
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 1 benefits to be afforded to public employees, retirees, and their
 
 2 dependents, and sets financing arrangements.  Part II also
 
 3 mandates that public employee health benefits be provided through
 
 4 the exchange.  The transition to the exchange should have minimal
 
 5 impact on the scope and servicing of existing public employees
 
 6 health benefits.
 
 7      Part III makes various amendments to the Hawaii Revised
 
 8 Statutes to comply with the new chapters created by parts I and
 
 9 II.
 
10      Finally, part IV addresses issues arising from its
 
11 implementation.  First, the part amends the insurance code to
 
12 specifically authorize the new insurance exchange to offer
 
13 insurance plans without securing prior approval of the insurance
 
14 commissioner.  Also, the attorney general is charged with
 
15 overseeing the transition of assets and liabilities from the
 
16 public employees health fund and to the exchange.  The Act
 
17 mandates that certain assets of the public employees health fund
 
18 be assigned to particular accounts within the exchange.
 
19                              PART I
 
20      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
21 a new chapter to be appropriately designated and to read as
 
22 follows:
 
23                             "CHAPTER
 

 
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 1                   THE HAWAII INSURANCE EXCHANGE
 
 2                             ARTICLE 1
 
 3                        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 an attorney-in-fact.
 
11      (c)  The exchange shall be under the control of the
 
12 subscribers committee.
 
13      §   :1-102  Purposes.(a)  The primary purpose of the
 
14 exchange shall be:
 
15      (1)  To provide its various subscribers with an effective
 
16           means of financing and managing their current and
 
17           potential future liabilities arising from contractual
 
18           and or other obligations to provide health, group life,
 
19           and other benefits to their respective employees; and
 
20      (2)  To provide other insurance coverage and other risk
 
21           financing plans as may be determined by the subscribers
 
22           committee.
 
23      (b)  The exchange may implement other plans or programs that
 

 
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 1 may be allowed, pursuant to article 19 of chapter 431, for the
 
 2 benefit of the subscribers.
 
 3      §   :1-103  Definitions.  For the purposes of this chapter:
 
 4      "Attorney-in-fact" means an individual, partnership, or
 
 5 corporation designated and appointed by the subscribers committee
 
 6 to act for and bind the subscribers in all transactions relating
 
 7 to and arising from the operations of the exchange.  The
 
 8 principal offices of the attorney-in-fact shall be located in any
 
 9 state of the United States.
 
10      "Commissioner" means the insurance commissioner.
 
11      "Employee-beneficiary" means an employee, the beneficiary of
 
12 an employee who is killed in the performance of the employee's
 
13 duty, an employee who retired prior to the establishment of the
 
14 fund, or the beneficiary of a retired member of the employees'
 
15 retirement system, a county pension system, or a police,
 
16 firefighters, or bandsmen pension system of the State or county,
 
17 upon the death of the retired member and, which beneficiary, if a
 
18 child, does not marry, or if a surviving spouse, does not
 
19 remarry; provided that for the purposes of this definition,
 
20 "family member" means the deceased retired member's or employee's
 
21 spouse and unmarried child under the age of nineteen years
 
22 (including a legally adopted child and a stepchild or recognized
 
23 natural child who lives with the deceased retired member or
 

 
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 1 employee in a regular parent-child relationship), or unmarried
 
 2 child regardless of age who is incapable of self-support because
 
 3 of a mental or physical incapacity which existed prior to the
 
 4 unmarried child's reaching the age of nineteen years; and
 
 5 provided further that the employee, the employee's beneficiary,
 
 6 or the beneficiary of the deceased retired member is deemed
 
 7 eligible to receive health or dental services of a health
 
 8 benefits plan or a long-term care benefits plan.
 
 9      "Employer" means the State, the judiciary, the legislature,
 
10 the respective counties of Honolulu, Hawaii, Maui, and Kauai, the
 
11 department of education, the University of Hawaii, and any
 
12 instrumentality of the State or its political subdivisions.
 
13      "Exchange" means the Hawaii insurance exchange.
 
14      "Health benefits plan" means the same as the term is defined
 
15 in chapter     .
 
16      "Life insurance plan" means the same as the term is defined
 
17 in chapter     .
 
18      "Long-term care benefits plan" means the same as the term is
 
19 defined in chapter     .
 
20      "Power of attorney" means the document executed by the
 
21 subscriber, which designates and appoints the attorney-in-fact
 
22 and prescribes the duties of the attorney-in-fact for the
 
23 exchange, including but not limited to those outlined in part IV
 

 
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 1 of article 2.
 
 2      "Public employee" means the same as the term is defined in
 
 3 chapter     .
 
 4      "Subscriber" means an employer who has become a member of
 
 5 the exchange through the execution of a power of attorney.
 
 6      "Subscribers committee" means the body of the exchange that
 
 7 oversees the operations of the attorney-in-fact of the exchange,
 
 8 to the extent that may be necessary to assure conformity with
 
 9 this chapter or power of attorney for the benefit of the
 
10 exchange.
 
11      "Subscriber's savings account" means the account established
 
12 within the exchange to which funds, which may be assigned to an
 
13 individual subscriber, may be deposited or withdrawn by the
 
14 subscriber pursuant to section    :2-406.
 
15      "Unassigned surplus account" means the account established
 
16 within the exchange to which a portion of the net profits of the
 
17 exchange may be deposited pursuant to section    :2-406.
 
18      §   :1-104  Conflicts with insurance code.  Where the
 
19 provisions of this chapter and those of chapter 431 conflict,
 
20 chapter 431 shall control.
 
21      §   :1-105  Construction.  The subscribers committee and the
 
22 attorney-in-fact shall be exempt:
 
23      (1)  From chapters 37, 46, 76, 77, 78, and 92; and
 

 
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 1      (2)  From any requirement of law for competitive bidding for
 
 2           agreements or contracts for goods or services,
 
 3           including lease and sublease agreements and chapter
 
 4           103D.
 
 5                             ARTICLE 2
 
 6                  ADMINISTRATION OF THE EXCHANGE
 
 7         PART I.  ADMINISTRATION OF THE EXCHANGE GENERALLY
 
 8      §   :2-101  Administration of the exchange.(a)  The
 
 9 subscribers committee shall be the governing body of the
 
10 exchange.
 
11      (b)  The attorney-in-fact shall be the administrator of the
 
12 exchange and shall be appointed by the subscribers committee.
 
13      §   :2-102  Fiscal year.  The exchange's accounting shall be
 
14 conducted on a fiscal year beginning on July 1 of each year and
 
15 ending the following June 30.
 
16      §   :2-103  Reports to the legislature.  The subscribers
 
17 committee shall prepare reports in accordance with the
 
18 requirements of section 37-47, but shall otherwise be exempt from
 
19 the requirements of chapter 37.
 
20                PART II.  THE SUBSCRIBERS COMMITTEE
 
21      § :2-201  Composition of the subscribers' committee.  The
 
22 subscribers' committee shall be composed of twelve members.  Two
 
23 members shall be appointed by the governor; provided that one
 

 
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 1 shall be a retired member of the employees' retirement system,
 
 2 one member by the mayor of the city and county of Honolulu, one
 
 3 member by the mayor of the county of Hawaii, one member by the
 
 4 mayor of the county of Maui, one member by the mayor of the
 
 5 county of Kauai, and one member per exclusive representative
 
 6 authorized under chapter 89.
 
 7      Vacancies on the committee shall be filled with a
 
 8 replacement from the subscriber for whom the representative
 
 9 represented.
 
10      §   :2-202  Powers and duties of the subscribers committee.
 
11 The subscribers committee shall:
 
12      (1)  Establish a reciprocal captive insurance company
 
13           pursuant to article 19 of chapter 431 and this chapter
 
14           to administer and carry out the purposes of this
 
15           chapter;
 
16      (2)  Appoint an attorney-in-fact to carry out the day-to-day
 
17           administration of the exchange;
 
18      (3)  Supervise the finances of the exchange;
 
19      (4)  Supervise the exchange's operations to assure
 
20           conformity with the insurance and reinsurance policies
 
21           issued through the exchange and with the standards
 
22           established by this chapter;
 
23      (5)  Procure the audit of accounts and records of the
 

 
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 1           exchange, at the exchange's expense;
 
 2      (6)  Adopt rules that may be necessary to carry out the
 
 3           purpose of this chapter in accordance with chapter 91;
 
 4      (7)  Approve the selection of the third-party service
 
 5           providers to which certain duties of the attorney-in-
 
 6           fact may be delegated; and
 
 7      (8)  Have such additional powers and functions as provided
 
 8           by the power of attorney executed by the subscribers
 
 9           committee, or rules adopted by the exchange.
 
10      §   :2-203  Participation in subscribers committee
 
11 compulsory.(a)  Each subscriber shall appoint a person to sit
 
12 on the subscribers committee; provided that no person shall be
 
13 appointed to simultaneously represent more than one subscriber.
 
14      (b)  The decisions of the subscribers committee shall be
 
15 binding upon all of the subscribers except where applicable law
 
16 or rules adopted by the exchange require a vote by all the
 
17 subscribers.
 
18      §   :2-204  Chairperson and secretary.  (a)  The members of
 
19 the subscribers committee shall select one of their members to
 
20 serve as chairperson and one member to serve as secretary.  The
 
21 secretary shall keep minutes of all meetings of the subscribers
 
22 committee.
 
23      (b)  The secretary, upon the approval of the subscribers
 

 
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 1 committee pursuant to section    :2-206, may delegate duties to
 
 2 an appropriate third-party professional services provider.
 
 3      §   :2-205  Compensation and expenses of the subscribers
 
 4 committee.  Each member of the subscribers committee shall serve
 
 5 without compensation, but an advisor may be reimbursed from the
 
 6 exchange for any necessary and reasonable expense made in the
 
 7 execution of the member's duties.
 
 8      §   :2-206  Meetings.(a)  The subscribers committee shall
 
 9 meet on July 15, October 15, January 15, and April 15 of each
 
10 fiscal year to further the purposes of this chapter.  If any date
 
11 should fall on a Saturday, Sunday, or state holiday, the
 
12 subscribers committee shall meet on the first Monday following
 
13 that date.
 
14      (b)  A majority of subscribers may call a meeting of the
 
15 subscribers committee by giving at least ten days' written notice
 
16 of the time and place to all other subscribers.
 
17      (c)  Each subscriber shall have one vote.  Any action shall
 
18 be taken by a simple majority of the subscribers present at a
 
19 meeting.  A majority of subscribers present at a meeting shall
 
20 constitute a quorum to transact business.
 
21                  PART III.  THE ATTORNEY-IN-FACT
 
22      §   :2-301  Powers and duties of attorney-in-fact.  (a)  The
 
23 attorney-in-fact shall:
 

 
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 1      (1)  Exchange reciprocal insurance or reinsurance contracts
 
 2           on behalf of the subscribers of the exchange;
 
 3      (2)  Solicit, receive, and accept, or reject applications
 
 4           for insurance or reinsurance to be issued by the
 
 5           exchange;
 
 6      (3)  Investigate and evaluate the desirability of risks
 
 7           involved in the applications for insurance or
 
 8           reinsurance;
 
 9      (4)  Underwrite, classify, rate, and issue policies and
 
10           binders of insurance or reinsurance for the exchange
 
11           that are actuarially sound and in accordance with
 
12           prudent insurance practices, and modify or cancel those
 
13           policies in accordance with the terms of those
 
14           policies;
 
15      (5)  Establish and maintain for the exchange and as the
 
16           exchange's property, complete and accurate records of
 
17           all policies written by the exchange;
 
18      (6)  Collect, receive, and account for all surplus
 
19           contributions and premiums paid for insurance issued or
 
20           reinsurance assumed, and deposit all of the surplus and
 
21           premiums in a bank or banks to the account of the
 
22           exchange as soon as practicable, and pay therefrom the
 
23           expenses of the exchange;
 

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

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

 
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 1 accounts in the exchange, the subscriber's proportionate share of
 
 2 any outlay for the payment and adjustment of losses, attorney
 
 3 fees, costs and expenses of lawsuits, reinsurance and excess
 
 4 insurance, taxes, insurance department fees and expenses, and
 
 5 fees of the attorney-in-fact.
 
 6      (d)  All disbursements shall be paid by the attorney-in-fact
 
 7 out of the exchange accounts, subject to the approval of the
 
 8 subscribers committee.
 
 9      §   :2-302  Delegation of duties.  Subject to any notice
 
10 requirement or approval under the laws of the State of Hawaii, or
 
11 to the extent applicable, of any other jurisdiction, the
 
12 attorney-in-fact may delegate some or all of its duties hereunder
 
13 to an appropriate third party, and may pay and reimburse costs to
 
14 the third party for services rendered on behalf of the exchange,
 
15 subject to the approval of the subscribers committee.
 
16      §   :2-303  Payments to the attorney-in-fact.  The
 
17 compensation to be paid to the attorney-in-fact from time to time
 
18 shall be approved by the subscribers committee.  Unless otherwise
 
19 determined by the subscribers committee, the attorney-in-fact
 
20 shall be paid its actual costs, including its costs pursuant to
 
21 section    :2-302.
 
22      §   -2-304  Contributions of surplus.  (a)  The attorney-in-
 
23 fact shall issue a certificate of membership to each subscriber
 

 
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 1 in receipt and as evidence of all paid-in surplus contributed to
 
 2 the exchange.
 
 3      (b)  The required paid-in contribution shall be as
 
 4 determined by the attorney-in-fact upon notice to the subscriber
 
 5 as paid by July 1 of each year.
 
 6      §   :2-305  Computation of net profits and losses.  Before
 
 7 September 15 of each year, the attorney-in-fact shall compute the
 
 8 net profit or loss from the underwriting and investment
 
 9 activities of the exchange during the fiscal year immediately
 
10 preceding, and allocate any net profits or losses pursuant to
 
11 section    :2-306.
 
12      §   :2-306  Distribution of net profits or losses.  (a)  The
 
13 attorney-in-fact, in its sole discretion, may allocate all or a
 
14 portion of net profits into an unassigned surplus account.  All
 
15 earnings in the unassigned surplus account shall accumulate
 
16 therein to the benefit of the exchange.
 
17      (b)  No subscriber shall have a vested right or interest in
 
18 any of the unassigned surplus account funds until the same have
 
19 been transferred to a subscriber's savings account, pursuant to
 
20 subsection (c).
 
21      (c)  After having first made the deductions, if any,
 
22 provided for in subsection (a), but in no case later than
 
23 September 15 following the fiscal year in question, the attorney-
 

 
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 1 in-fact, in its sole discretion, may also assign funds from the
 
 2 unassigned surplus account to an individual subscriber's savings
 
 3 account.  Each subscriber's savings account shall be established
 
 4 by the subscribers who were members of the exchange during the
 
 5 designated fiscal year.  The amount to be allocated to or
 
 6 deducted from each subscriber's savings account shall be
 
 7 determined according to an allocation methodology to be adopted
 
 8 and amended from time to time by the subscribers committee.
 
 9      (d)  The attorney-in-fact shall designate whether any such
 
10 allocations to the subscribers' savings accounts relate to the
 
11 year actually credited or to the prior fiscal year.  In the
 
12 absence of such designation, any allocations made from July 1 to
 
13 September 15 of any calendar year shall be presumed to relate to
 
14 the prior fiscal year.
 
15      (e)  On or before September 15 of the fiscal year subsequent
 
16 to the fiscal year to which the credits to the subscribers'
 
17 savings accounts relate, the attorney-in-fact shall mail to each
 
18 subscriber written notification of:
 
19      (1)  The amount credited to the subscriber's savings account
 
20           for the fiscal year;
 
21      (2)  The date on which the amount was credited; and
 
22      (3)  The date on which the subscriber's right to such
 
23           amounts would have become fixed if the subscriber has
 

 
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 1           terminated its contract at the close of the exchange's
 
 2           fiscal year.
 
 3      §   :2-307  Distribution of dividends.  The attorney-in-
 
 4 fact, in its sole discretion, shall determine if and in what
 
 5 amount cash dividends shall be paid upon each year's funds on
 
 6 hand in the subscribers' savings accounts, subject to the
 
 7 requirements of article 19 of chapter 431.
 
 8      §   :2-308  Authorized agent for service of process.  (a)
 
 9 The attorney-in-fact may act as agent for service of process upon
 
10 the exchange.
 
11      (b)  The attorney-in-fact may appoint the commissioner as
 
12 agent for service of process upon the exchange.
 
13      §   :2-309  Exempt from chapter 92.  Disclosure of records
 
14 and meetings of the attorney-in-fact shall be exempt from the
 
15 requirements of chapter 92.
 
16                             ARTICLE 3
 
17                    CONTRIBUTIONS AND PREMIUMS
 
18           PART I.  CONTRIBUTIONS AND PREMIUMS GENERALLY
 
19      §   :3-101  Authority to require surplus contribution.  (a)
 
20 The subscribers committee, in its sole discretion, shall require
 
21 each subscriber to make a surplus contribution to the account of
 
22 the exchange.  The amount of the contribution shall be
 
23 established by the committee by a majority vote.
 

 
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 1      (b)  Neither the attorney-in-fact nor any individual
 
 2 subscriber shall increase the subscribers' liability as set by
 
 3 the subscribers committee.
 
 4      §   :3-102  Subscribers not jointly liable.  The attorney-
 
 5 in-fact may not bind the subscribers jointly, but may bind each
 
 6 subscriber severally and alone on any one contract during any one
 
 7 year to the extent of the subject subscriber's:
 
 8      (1)  Paid-in surplus accounts as set forth in part III of
 
 9           article 2;
 
10      (2)  The subscribers' accounts as set forth in part III of
 
11           article 2; and
 
12      (3)  The total amount of annual premiums on the subject
 
13           subscriber's policies.
 
14      §   :3-103  Premiums paid from the exchange prohibited.
 
15 Notwithstanding any provisions of this chapter to the contrary,
 
16 no funds of the exchange's unassigned surplus account shall be
 
17 used to finance a subscriber's premiums.
 
18      §   :3-104  Premium payments; deadline.  Each subscriber
 
19 shall advance premium payments to the exchange on or before the
 
20 first day of each month, or according to any other payment
 
21 schedule that may be adopted by the subscribers committee.
 
22                            ARTICLE 4.
 
23                   INSURANCE PLANS AND BENEFITS
 

 
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 1      §   :4-101  Compliance with state insurance code.  All
 
 2 insurance plans provided by the exchange shall comply with
 
 3 chapters 431 and 432E."
 
 4                              PART II
 
 5      SECTION 3.  The Hawaii Revised Statutes is amended by adding
 
 6 a new chapter to be appropriately designated and to read as
 
 7 follows:                    "CHAPTER
 
 8                 PUBLIC EMPLOYEES HEALTH BENEFITS
 
 9                        PART I.  IN GENERAL
 
10      §   -101  Employers governed.  This chapter applies to the
 
11 State, the judiciary, the legislature, the counties of Honolulu,
 
12 Hawaii, Maui, and Kauai, the department of education, the
 
13 University of Hawaii, and any instrumentality of the State or its
 
14 political subdivisions in their respective roles as employer.
 
15      §   -102  Benefits to be provided through the Hawaii
 
16 insurance exchange.  All benefits which are mandated by this
 
17 chapter shall be provided by the Hawaii insurance exchange
 
18 established in section    :1-101.
 
19      §   -103  Minimum benefits.(a)  Public employees shall be
 
20 entitled to health benefits pursuant to this chapter as a term of
 
21 their employment.
 
22      (b)  An employer governed by this chapter shall provide the
 
23 following benefits to its employees subject to the requirements
 

 
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 1 of this chapter:
 
 2      (1)  A health insurance plan;
 
 3      (2)  A group life benefits plan; and
 
 4      (3)  A long-term care benefits plan.
 
 5      §   -104  Definitions.  For the purposes of this chapter:
 
 6      "Commissioner" means the insurance commissioner.
 
 7      "Dependent-beneficiary" means a public employee-
 
 8 beneficiary's spouse and any unmarried child, including an
 
 9 adopted child, stepchild, foster child, or recognized natural
 
10 child who lives with the public employee-beneficiary, deemed
 
11 eligible by the subscribers committee to receive health or dental
 
12 services of a health benefits plan.
 
13      "Employee-beneficiary" means a public employee, or the
 
14 beneficiary of an employee.
 
15      "Employer" means the State, the judiciary, the legislature,
 
16 the respective counties of Honolulu, Hawaii, Maui, and Kauai, the
 
17 department of education, the University of Hawaii, and any
 
18 instrumentality of the State or its political subdivisions.
 
19      "Exchange" means the Hawaii insurance exchange as
 
20 established in section    :1-101.
 
21      "Health benefits plan" means a schedule of benefits
 
22 established by the subscribers committee to provide, pay for,
 
23 arrange for, or reimburse the cost of medical, hospital,
 

 
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 1 surgical, prescription drugs, vision, or dental services to be
 
 2 provided through the exchange.
 
 3      "Life insurance plan" means a schedule of benefits
 
 4 established by the subscribers committee to provide group life
 
 5 insurance through the exchange.
 
 6      "Long-term care benefits plan" means a schedule of benefits
 
 7 established by the subscribers committee to reimburse the cost of
 
 8 long-term care benefits to be provided through the exchange.
 
 9      "Part-time, temporary, and seasonal or casual public
 
10 employee" means a person employed by the state or county
 
11 governments or the legislature for less than three months or
 
12 whose employment is less than one-half of a full-time equivalent
 
13 position.
 
14      "Public employee" means an employee or officer of the state
 
15 or county governments or the legislature:
 
16      (1)  Including:
 
17           (A)  An elective officer or a person who has served as
 
18                a member of the legislature for at least ten
 
19                years;
 
20           (B)  A per diem employee;
 
21           (C)  An officer or employee under an authorized leave
 
22                of absence;
 
23           (D)  An employee of the Hawaii national guard although
 

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

 
Page 24                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1                employed temporarily on a fee or contract basis;
 
 2                and
 
 3           A person employed for less than three months and whose
 
 4           employment is less than one-half of a full-time
 
 5           equivalent position.
 
 6      "Public employee-beneficiary" means:
 
 7      (1)  A public employee;
 
 8      (2)  The beneficiary of a public employee who is killed in
 
 9           the performance of the public employee's duty;
 
10      (3)  A public employee who retired prior to the
 
11           establishment of the exchange; or
 
12      (4)  The beneficiary of a retired member of the public
 
13           employees' retirement system, a county pension system,
 
14           or a police, firefighters, or bandsmen pension system
 
15           of the State or county, upon:
 
16           (A)  The death of the retired member; and
 
17           (B)  Who does not marry or remarry;
 
18                provided that for the purposes of this paragraph,
 
19                "family member" means:
 
20                (i)   The deceased retired member's or employee's
 
21                      spouse;
 
22               (ii)   Unmarried child under the age of nineteen
 
23                      years, including a legally adopted child and
 

 
Page 25                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1                      a stepchild or recognized natural child who
 
 2                      lives with the deceased retired member or
 
 3                      employee in a regular parent-child
 
 4                      relationship; or
 
 5              (iii)   Unmarried child regardless of age who is
 
 6                      incapable of self-support because of a
 
 7                      mental or physical incapacity which existed
 
 8                      prior to the unmarried child's reaching the
 
 9                      age of nineteen years;
 
10           provided further that the public employee, the public
 
11           employee's beneficiary, or the beneficiary of the
 
12           deceased retired member is deemed eligible by the
 
13           subscribers committee to receive health or dental
 
14           services of a health benefits plan or a long-term care
 
15           benefits plan.
 
16      "Premium" means the same as the term is defined in
 
17 chapter     .
 
18      "Qualified-beneficiary" means, for purposes of the long-term
 
19 care benefits plan, a former public employee or a public employee
 
20 who is not eligible for benefits due to a reduction in work hours
 
21 including the employee's spouse or a divorced spouse of an
 
22 employee or retiree provided the person was enrolled in the plan
 
23 prior to loss of benefits.
 

 
Page 26                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      "Subscriber" means the same as the term is defined in
 
 2 chapter     .
 
 3      "Subscribers committee" means the same as the term is
 
 4 defined in chapter     .
 
 5      §   -105  Attorney-in-fact to prepare reports.  The
 
 6 attorney-in-fact of the exchange shall prepare and provide
 
 7 reports and other information as may be necessary detailing
 
 8 projected costs with respect to the benefits to be provided
 
 9 pursuant to this chapter at the request of parties to collective
 
10 bargaining, mediation, or arbitration procedures held to
 
11 reconcile issues or resolve an impasse or as defined by chapter
 
12 89; provided that all parties to the procedure:
 
13      (1)  Each agree to submit 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      §   -201  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
 

 
Page 27                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1           dependent-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-beneficiaries.
 
11      §   -202  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,
 
16 or the police, firefighters, or bandsmen pension system of the
 
17 State or county, except those public employees hired after
 
18 June 30, 1996, under section    -203, or who retired after
 
19 June 30, 1984, with fewer than ten years of credited service,
 
20 excluding sick leave.
 
21      (b)  Each subscriber shall pay to the exchange a monthly
 
22 premium equal to one-half each of their respective retired public
 
23 employee's monthly Medicare or non-Medicare premium:
 

 
Page 28                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 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
 

 
Page 29                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 this section.
 
 2      (d)  Each subscriber shall pay to the exchange a monthly
 
 3 premium equal to the total monthly premium for each retired
 
 4 public employee enrolled in the exchange's group life insurance
 
 5 benefits plan under this section.
 
 6      §   -203  Premium payments by subscribers; public employees
 
 7 hired after June 30, 1996, and retired with fewer than twenty-
 
 8 five years of service.   (a)  This section shall apply to
 
 9 premiums paid by subscribers to the exchange for public employees
 
10 who:
 
11      (1)  Were hired after June 30, 1996; and
 
12      (2)  Retired with fewer than twenty-five years of credited
 
13           service, excluding sick leave.
 
14      (b)  This section shall not apply to a public employee who:
 
15      (1)  Was hired prior to July 1, 1996, and transferred
 
16           employment after June 30, 1996; or
 
17      (2)  Has at least ten years of credited service and who has
 
18           suffered a break in service.
 
19 For purposes of this section, "transfer" means to leave state or
 
20 county employment and return to state or county employment within
 
21 ninety calendar days.
 
22      (c)  For purposes of this section, if a public employee left
 
23 state or county employment and returned to state or county
 

 
Page 30                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 employment after June 30, 1996, when the employee retires, the
 
 2 employee's years of service shall be computed in the same manner
 
 3 as set forth in chapter 88.
 
 4      (d)  Each subscriber shall pay to the exchange a monthly
 
 5 premium equal to:
 
 6      (1)  One-half of the retired public employee's monthly
 
 7           Medicare or non-Medicare premium for the benefits in
 
 8           subsection (e) for retired public employees with ten or
 
 9           more years but fewer than fifteen years of service; or
 
10      (2)  Seventy-five per cent of the retired employee's monthly
 
11           Medicare or non-Medicare premium for the benefits in
 
12           subsection (e) for retired employees with at least
 
13           fifteen but fewer than twenty-five years of service.
 
14      (e)  The following benefits shall be established by the
 
15 subscribers committee:
 
16      (1)  For hospital, medical, and surgical benefits of a
 
17           health benefits plan for each of their respective
 
18           public employee-beneficiaries or their respective
 
19           public employee-beneficiaries and their dependent-
 
20           beneficiaries enrolled under this section;
 
21      (2)  For prescription drug benefits of a health benefits
 
22           plan for each of their respective public employee-
 
23           beneficiaries or their respective public employee-
 

 
Page 31                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1           beneficiaries and their dependent-beneficiaries
 
 2           enrolled under this section;
 
 3      (3)  For vision care benefits of a health benefits plan for
 
 4           each of their respective public employee-beneficiaries
 
 5           or their respective public employee-beneficiaries and
 
 6           their dependent-beneficiaries enrolled under this
 
 7           section; and
 
 8      (4)  For adult dental benefits of a health benefits plan for
 
 9           each of their respective public employee-beneficiaries
 
10           or their respective public employee-beneficiaries and
 
11           their spouses enrolled under this section.
 
12      (f)  Each subscriber, after an employee's retirement
 
13 pursuant to this section, shall pay to the exchange a monthly
 
14 contribution equal to the total monthly premium for each child
 
15 who has not attained the age of nineteen of their respective
 
16 public employee-beneficiaries who are enrolled in the exchange's
 
17 dental plan for children under this section.
 
18      (g)  Each subscriber shall pay to the exchange a monthly
 
19 premium for each retired public employee enrolled in the
 
20 exchange's group life insurance benefits plan under this section.
 
21      §   -204  Contributions to be paid by public employee-
 
22 beneficiaries and retirees.  (a)  Each public employee-
 
23 beneficiary or retiree shall pay a monthly contribution to their
 

 
Page 32                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 respective subscriber equal to the amount established under
 
 2 chapter 89C, or other applicable statute or rule, or specified in
 
 3 the applicable public sector collective bargaining agreement,
 
 4 whichever is appropriate for their respective subscriber's
 
 5 health, long-term care, and life insurance benefits plans.
 
 6      (b)  During the period the health, long-term care, or life
 
 7 insurance benefits plan selected by a public employee-beneficiary
 
 8 is in effect, the public employee-beneficiary shall authorize the
 
 9 public employee-beneficiary's contribution to be withheld and
 
10 transmitted to the exchange, through the respective subscriber,
 
11 monthly by the comptroller or finance officer who disburses the
 
12 public employee-beneficiary's compensation, pension, or
 
13 retirement pay.
 
14      (c)  During the period the long-term care benefits plan
 
15 selected by a retiree is in effect, the retiree shall authorize
 
16 the retiree's contribution to be withheld and transmitted to the
 
17 exchange, through the respective subscriber, monthly by the
 
18 comptroller or finance officer who disburses the public employee-
 
19 beneficiary's compensation, pension, or retirement pay.
 
20      (d)  If, however, a public employee-beneficiary or retiree
 
21 contribution to the exchange is not withheld and transmitted to
 
22 the exchange pursuant to subsection (b) or (c), the public
 
23 employee-beneficiary or retiree shall pay the monthly
 

 
Page 33                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 contribution to the respective finance officer from whom the
 
 2 public employee-beneficiary normally receives compensation for
 
 3 transmittal to the exchange by the first day of each month.
 
 4      §   -205  Contributions to be paid by public employees;
 
 5 long-term care benefits plan.  (a)  During the period a long-term
 
 6 care benefits plan is in effect, the public employee-beneficiary
 
 7 shall authorize, if otherwise allowed by law, the public
 
 8 employee-beneficiary's premiums to be withheld and transmitted to
 
 9 the exchange, through the respective subscriber, monthly by the
 
10 comptroller or finance officer who disburses the employee-
 
11 beneficiary's compensation, pension, or retirement pay.
 
12      (b)  If, however, a public employee-beneficiary's monthly
 
13 contribution to the fund is not withheld and transmitted to the
 
14 exchange, the public employee-beneficiary shall pay the monthly
 
15 contribution to the comptroller or finance officer who disburses
 
16 the employee-beneficiary's compensation, pension, or retirement
 
17 pay, who shall transmit the contribution to the exchange through
 
18 the respective subscriber by the first day of each month.
 
19      (c)  Qualified-beneficiaries shall pay monthly contributions
 
20 to the comptroller or finance officer who disburses the employee-
 
21 beneficiary's compensation, pension, or retirement pay, who shall
 
22 transmit the contribution to the exchange through the respective
 
23 subscriber by the first day of each month.
 

 
Page 34                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      §   -206  Public employees exempt from contribution
 
 2 requirement.  (a)  Notwithstanding any other law to the contrary,
 
 3 the following persons shall not be required to pay a monthly
 
 4 premium:
 
 5      (1)  The beneficiary of a public employee who is killed in
 
 6           the performance of duty;
 
 7      (2)  A public employee-beneficiary who retired after
 
 8           June 30, 1984, due to a disability as defined in
 
 9           sections 88-79 and 88-285;
 
10      (3)  A public employee-beneficiary who retired before
 
11           July 1, 1984;
 
12      (4)  A public employee-beneficiary who:
 
13           (A)  Was hired before July 1, 1996;
 
14           (B)  Retired after June 30, 1984; and
 
15           (C)  Who had ten years or more of credited service,
 
16                excluding sick leave; and
 
17      (5)  A public employee-beneficiary who was hired after
 
18           June 30, 1996, and who retired with twenty-five or more
 
19           years of credited service, excluding sick leave; or
 
20      (6)  Upon the death of the public employee-beneficiary,
 
21           their dependent-beneficiary, including public employees
 
22           who retired prior to the establishment of the exchange.
 
23      (b)  The monthly premium of the persons identified in this
 

 
Page 35                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 section shall be financed by the respective subscriber for each
 
 2 of their respective public employee-beneficiaries.
 
 3      §   -207  Earnings from public employee-beneficiary and
 
 4 retirees contributions.  (a)  The attorney-in-fact shall assign
 
 5 public employee-beneficiary and retiree contributions and surplus
 
 6 public employee-beneficiary and retiree contributions to separate
 
 7 accounts.
 
 8      (b)  Any earnings, interest, or investment income derived
 
 9 from the accounts established by the attorney-in-fact, pursuant
 
10 to subsection (a), shall be used to stabilize the health benefits
 
11 plans or long-term care benefits plan rates.
 
12      §   -208  No vested rights to premiums paid.  Premiums paid
 
13 by public employees shall not be considered as wages or salary of
 
14 an employee-beneficiary, and no employee-beneficiary shall have
 
15 any vested right in or be entitled to receive any part of any
 
16 premium paid to the exchange.
 
17                    PART III.  MINIMUM BENEFITS
 
18      §   -301  Plans and benefits; public employees generally.
 
19 (a)  The subscribers committee shall establish health benefits
 
20 plans and the requirements for eligibility under the health
 
21 benefits plans for public employees generally.  The health
 
22 benefits plan or plans shall provide, pay for, arrange for, or
 
23 reimburse the cost of hospitalization, surgery, medical, dental,
 

 
Page 36                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 and vision treatment and care, and may include prescribed drugs,
 
 2 medicines, prosthetic appliances, hospital in-patient and out-
 
 3 patient service benefits, medical, dental, and vision benefits.
 
 4      (b)  The subscribers committee shall establish a dental plan
 
 5 and eligibility requirements for dental benefits for the children
 
 6 of employee-beneficiaries who have not attained the age of
 
 7 nineteen based upon a monthly public employee-beneficiary
 
 8 premium.
 
 9      (c)  The subscribers committee shall provide benefits under
 
10 a group life insurance benefit program for public employees based
 
11 upon the premium paid per public employee pursuant to part II.
 
12      (d)  The subscribers committee shall determine the long-term
 
13 care benefits plan for public employee-beneficiaries, their
 
14 spouses or reciprocal beneficiaries, as well as their parents and
 
15 grandparents, and in-law parents and grandparents and other
 
16 qualified beneficiaries.
 
17      §   -302  Health benefits for part-time, temporary, and
 
18 seasonal or casual employees.  (a)  The health, life insurance,
 
19 and long-term care plans shall be made available to part-time,
 
20 temporary, and seasonal or casual public employees on par with
 
21 the terms of chapter 89C and at no cost to the subscribers.
 
22      (b)  Each part-time, temporary, and seasonal or casual
 
23 public employee enrolled in the health benefits plan shall pay
 

 
Page 37                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 monthly premiums directly to the exchange.
 
 2      §   -303  Supplemental plan to federal Medicare.  (a)  A
 
 3 health benefit plan provided by the exchange shall take into
 
 4 account benefits available to a public employee-beneficiary and
 
 5 spouse under the federal Medicare plan, subject to the following
 
 6 conditions:
 
 7      (1)  The plan so established by the exchange shall be
 
 8           supplemental to the federal Medicare plan so that there
 
 9           shall be no duplication of benefits payable under
 
10           federal Medicare; and
 
11      (2)  The premium paid for voluntary medical insurance
 
12           coverage under federal Medicare may be paid by the
 
13           exchange, in any manner that the subscribers committee
 
14           shall specify.
 
15      (b)  The benefits available under the supplemental plan,
 
16 when taken together with the benefits available under the federal
 
17 Medicare plan, as nearly as is possible, shall approximate the
 
18 benefits available under the plans set forth in section    -301.
 
19 If, for any reason, a situation develops where the benefits
 
20 available under the supplemental plan and the federal Medicare
 
21 plan substantially differ from those that would otherwise be
 
22 available, the subscribers committee may correct this inequity to
 
23 assure substantial equality of benefits.
 

 
Page 38                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (c)  Notwithstanding any other law to the contrary, all
 
 2 public employee-beneficiaries or dependent-beneficiaries who are
 
 3 eligible to enroll in the federal Medicare Part B medical
 
 4 insurance plan shall enroll in that federal plan as a requirement
 
 5 to participate in the public employee benefit plans provided by
 
 6 the exchange.
 
 7      This subsection shall pertain to retired public employees
 
 8 and their spouses and the surviving spouses of deceased retirees
 
 9 and employees killed in the performance of duty.
 
10      §   -304  Determination of eligibility of employee,
 
11 dependent, or person.  (a)  The subscribers committee shall
 
12 establish and adopt eligibility requirements to determine which
 
13 public employee, dependent, or person may qualify as a public
 
14 employee-beneficiary, dependent-beneficiary, or qualified-
 
15 beneficiary; provided that a retired member of the employees'
 
16 retirement system, a county pension system, or a police,
 
17 firefighters, and bandsmen pension system of the State or county,
 
18 or the retired member's dependent shall be eligible to qualify as
 
19 a public employee-beneficiary or dependent-beneficiary, whether
 
20 or not the retired member was actively employed by the State or
 
21 county at the time of the retired member's retirement and whether
 
22 or not the employee retired before or after the establishing of
 
23 the exchange.
 

 
Page 39                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

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

 
Page 40                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 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,
 
13           383 to 386A, 392, [and] 393[;], and     ;
 
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
 
22           this case, the comptroller's decision shall be final;
 
23      (5)  Consolidate and combine state insurance coverages, and
 

 
Page 41                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

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

 
Page 42                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 health fund and] employee organizations for dues and insurance
 
 2 premiums.
 
 3      (b)  A retired member shall request to have withheld from
 
 4 the retired member's pension, the retired member's monthly
 
 5 contribution to the retired member's respective subscriber for
 
 6 benefits from the Hawaii insurance exchange pursuant to section
 
 7     -204."
 
 8      SECTION 6.  Section 88-103.5, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "§88-103.5  Disclosure of information.(a)  The employees'
 
11 retirement system shall:
 
12      (1)  Disclose to the [Hawaii public employees health fund]
 
13           subscribers committee of the Hawaii insurance exchange
 
14           under chapter      and employee organizations
 
15           information related to the administration of pension,
 
16           annuity, or retirement allowance deductions, as
 
17           follows:  name, social security number, amounts and
 
18           dates of both voluntary and mandatory deductions
 
19           remitted to the recipient; and
 
20      (2)  Release the records of its retirants and beneficiaries
 
21           to the [Hawaii public employees health fund]
 
22           subscribers committee of the Hawaii insurance exchange
 
23           under chapter      for the disbursement of payments
 

 
Page 43                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1           authorized under [section 87-27.] chapter     .
 
 2      (b)  Any government agency, or the subscribers committee or
 
 3 attorney-in-fact of the Hawaii insurance exchange under chapter
 
 4      or employee organization receiving government records
 
 5 pursuant to this section shall be subject to the same
 
 6 restrictions on disclosure of the records as the originating
 
 7 agency."
 
 8      SECTION 7.  Section 89-2, Hawaii Revised Statutes, is
 
 9 amended as follows:
 
10      1.  By amending the definitions of "collective bargaining"
 
11 and "cost items" to read:
 
12      ""Collective bargaining" means the performance of the mutual
 
13 obligations of the public employer and the exclusive
 
14 representative to meet at reasonable times, to confer and
 
15 negotiate in good faith, and to execute a written agreement with
 
16 respect to wages, hours, amounts of contributions by the State
 
17 and counties [to the Hawaii public employees health fund,] as
 
18 subscribers of the Hawaii insurance exchange for the direct
 
19 benefit of public employees pursuant to chapter     , and other
 
20 terms and conditions of employment, except that by any such
 
21 obligation neither party shall be compelled to agree to a
 
22 proposal, or be required to make a concession.
 
23      "Cost items" includes wages, hours, amounts of contributions
 

 
Page 44                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 by the State and counties [to the Hawaii public employees health
 
 2 fund,] as subscribers of the Hawaii insurance exchange for the
 
 3 direct benefit of public employees pursuant to chapter     , and
 
 4 other terms and conditions of employment, the implementation of
 
 5 which requires an appropriation by a legislative body."
 
 6      2.  By amending the definition of "employee organization" to
 
 7 read:
 
 8      ""Employee organization" means any organization of any kind
 
 9 in which public employees participate and which exists for the
 
10 primary purpose of dealing with public employers concerning
 
11 grievances, labor disputes, wages, hours, amounts of
 
12 contributions by the State and counties [to the Hawaii public
 
13 employees health fund,] as subscribers of the Hawaii insurance
 
14 exchange for the direct benefit of public employees pursuant to
 
15 chapter     , and other terms and conditions of employment of
 
16 public employees."
 
17      3.  By amending the definition of "mediation" to read:
 
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 direct benefit of public employees pursuant to
 

 
Page 45                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 chapter     , and other terms and conditions of employment
 
 2 through interpretation, suggestion, and advice to resolve the
 
 3 impasse."
 
 4      SECTION 8.  Section 89-9, Hawaii Revised Statutes, is
 
 5 amended as follows:
 
 6      1.  By amending subsection (a) to read:
 
 7      "(a)  The employer and the exclusive representative shall
 
 8 meet at reasonable times, including meetings in advance of the
 
 9 employer's budget-making process, and shall negotiate in good
 
10 faith with respect to wages, hours, the number of incremental and
 
11 longevity steps and movement between steps within the salary
 
12 range, the amounts of contributions by the State and respective
 
13 counties [to the Hawaii public employees health fund] as
 
14 subscribers of the Hawaii insurance exchange for the direct
 
15 benefit of public employees pursuant to chapter     , to the
 
16 extent allowed in subsection (e), and other terms and conditions
 
17 of employment which are subject to negotiations under this
 
18 chapter and which are to be embodied in a written agreement, or
 
19 any question arising thereunder, but such obligation does not
 
20 compel either party to agree to a proposal or make a concession;
 
21 provided that the parties may not negotiate with respect to cost
 
22 items as defined by section 89-2 for the biennium 1999 to 2001,
 
23 and the cost items of employees in bargaining units under section
 

 
Page 46                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 89-6 in effect on June 30, 1999, shall remain in effect until
 
 2 July 1, 2001."
 
 3      2.  By amending subsections (d) and (e) to read:
 
 4      "(d)  Excluded from the subjects of negotiations are matters
 
 5 of classification and reclassification, benefits [of but not
 
 6 contributions to the Hawaii public employees health fund,]
 
 7 provided by but not contributions to subscribers or premiums paid
 
 8 to the Hawaii insurance exchange for the benefit of public
 
 9 employees pursuant to chapter     , retirement benefits except as
 
10 provided in section 88-8(h), and the salary ranges now provided
 
11 by law; provided that the number of incremental and longevity
 
12 steps, the amount of wages to be paid in each range and step, and
 
13 movement between steps within the salary range shall be
 
14 negotiable.  The employer and the exclusive representative shall
 
15 not agree to any proposal which would be inconsistent with merit
 
16 principles or the principle of equal pay for equal work pursuant
 
17 to sections 76-1, 76-2, 77-31, and 77-33, or which would
 
18 interfere with the rights of a public employer to (1) direct
 
19 employees; (2) determine qualification, standards for work, the
 
20 nature and contents of examinations, hire, promote, transfer,
 
21 assign, and retain employees in positions and suspend, demote,
 
22 discharge, or take other disciplinary action against employees
 
23 for proper cause; (3) relieve an employee from duties because of
 

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

 
Page 48                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

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

 
Page 49                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 officers; or optional appropriate bargaining unit (13),
 
 2 professional and scientific employees, other than registered
 
 3 professional nurses, exists over the terms of an initial or
 
 4 renewed agreement more than ninety working days after written
 
 5 notification by either party to initiate negotiations, either
 
 6 party may give written notice to the board that an impasse exists
 
 7 and the board shall assist in the voluntary resolution of the
 
 8 impasse by appointing a mediator within three days after the date
 
 9 of impasse.  If the dispute continues to exist fifteen working
 
10 days after the date of impasse, the dispute shall be submitted to
 
11 arbitration proceedings as provided herein.
 
12      The board shall immediately determine whether the parties to
 
13 the dispute have mutually agreed upon an arbitration procedure
 
14 and whether the parties have agreed upon a person or persons whom
 
15 the parties desire to be appointed as the arbitrator or as a
 
16 panel of arbitrators, as the case may be.
 
17      If the board determines that an arbitration procedure
 
18 mutually agreed upon by the parties will result in a final and
 
19 binding decision, and that an arbitrator or arbitration panel has
 
20 been mutually agreed upon, it shall appoint such arbitrator or
 
21 arbitration panel and permit the parties to proceed with the
 
22 arbitration procedure mutually agreed upon.
 
23      If, after eighteen working days from the date of impasse,
 

 
Page 50                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 the parties have not mutually agreed upon an arbitration
 
 2 procedure and an arbitrator or arbitration panel, the board shall
 
 3 immediately notify the employer and the exclusive representative
 
 4 that the issues in dispute shall be submitted to a three-member
 
 5 arbitration panel who shall follow the arbitration procedure
 
 6 provided herein.
 
 7      Within twenty-one working days from the date of impasse, two
 
 8 members of the arbitration panel shall be selected by the
 
 9 parties; one shall be selected by the employer and one shall be
 
10 selected by the exclusive representative.  The impartial third
 
11 member of the arbitration panel shall be selected by the two
 
12 previously selected panel members and shall chair the arbitration
 
13 panel.
 
14      In the event that the two previously selected arbitration
 
15 panel members fail to select an impartial third arbitrator within
 
16 twenty-four working days from the date of impasse, the board
 
17 shall request the American Arbitration Association, or its
 
18 successor in function, to furnish a list of five qualified
 
19 arbitrators from which the impartial arbitrator shall be
 
20 selected.  Within five calendar days after receipt of such list,
 
21 the parties shall alternately strike names therefrom until a
 
22 single name is left, who shall be immediately appointed by the
 
23 board as the impartial arbitrator and chairperson of the
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

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

 
Page 52                                                    3193
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 1 and binding decision.
 
 2      In reaching a decision, the arbitration panel shall give
 
 3 weight to the factors listed below and shall include in a written
 
 4 opinion an explanation of how the factors were taken into account
 
 5 in reaching the decision:
 
 6      (1)  The lawful authority of the employer.
 
 7      (2)  Stipulations of the parties.
 
 8      (3)  The interests and welfare of the public.
 
 9      (4)  The financial ability of the employer to meet these
 
10           costs.
 
11      (5)  The present and future general economic condition of
 
12           the counties and the State.
 
13      (6)  Comparison of wages, hours, and conditions of
 
14           employment of the employees involved in the arbitration
 
15           proceeding with the wages, hours, and conditions of
 
16           employment of other persons performing similar
 
17           services, and of other state and county employees in
 
18           Hawaii.
 
19      (7)  The average consumer prices for goods or services,
 
20           commonly known as the cost of living.
 
21      (8)  The overall compensation presently received by the
 
22           employees, including direct wage compensation,
 
23           vacation, holidays and excused time, insurance and
 

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

 
Page 54                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

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

 
Page 55                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 agreement.  The parties may, at any time and by mutual agreement,
 
 2 amend or modify the panel's 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,] as
 
 6 subscribers and premiums paid to the Hawaii insurance exchange
 
 7 for the benefit of public employees pursuant to chapter    , 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:
 
23      "§89C-1 Purpose.  The legislature finds that existing
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

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

 
Page 57                                                    3193
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 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,] as subscribers and premiums
 
 8 paid to the Hawaii insurance exchange for the benefit of public
 
 9 employees pursuant to chapter     , 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 58                                                    3193
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 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,] as subscribers and premiums
 
19           paid to the Hawaii insurance exchange for the benefit
 
20           of public employees pursuant to chapter     , 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 59                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 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.
 
19      (6)  Adjustments to the amounts of contributions by the
 
20           State and respective counties [to the Hawaii public
 
21           employees health fund] as subscribers and premiums paid
 
22           to the Hawaii insurance exchange for the benefit of
 
23           public employees pursuant to chapter     , on behalf of
 

 
Page 60                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1           officers or employees who are not covered by
 
 2           adjustments made under this chapter shall be made by
 
 3           legislative enactment."
 
 4      SECTION 12.  Section 431:2-201, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (c) to read as follows:
 
 6      "(c)  The commissioner may:
 
 7      (1)  Make reasonable rules for effectuating any provision of
 
 8           this code, except those relating to the commissioner's
 
 9           appointment, qualifications, or compensation.  The
 
10           commissioner shall adopt rules to effectuate article
 
11           10C of chapter 431, subject to the approval of the
 
12           governor's office and the requirements of chapter
 
13           91[.];
 
14      (2)  Conduct examinations and investigations to determine
 
15           whether any person has violated any provision of this
 
16           code or to secure information useful in the lawful
 
17           administration of any provision[.];
 
18      (3)  Require, upon reasonable notice, that insurers report
 
19           any claims information the commissioner may deem
 
20           necessary to protect the public interest[.]; and
 
21      (4)  Arbitrate claims disputes regarding qualifications for
 
22           benefits of public employee-beneficiaries pursuant to
 
23           chapter     ."
 

 
Page 61                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      SECTION 13.  Section 431:19-102, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (h) to read as follows:
 
 3      "(h)  A captive insurance company may engage in the business
 
 4 of any of the following types of insurance:
 
 5      (1)  All casualty insurance;
 
 6      (2)  Marine and transportation insurance;
 
 7      (3)  Marine protection and indemnity insurance, which
 
 8           includes insurance against, or against legal liability
 
 9           of the insured for loss, damage, or expense arising out
 
10           of or incident to, the ownership, operation,
 
11           chartering, maintenance, use, repair, or construction
 
12           of a vessel, craft, or instrumentality in use in ocean
 
13           or inland waterways, including liability of the insured
 
14           for personal injury, illness, death, or for loss of or
 
15           damage to the property of another person;
 
16      (4)  Wet marine and transportation insurance, which is that
 
17           part of marine and transportation insurance that
 
18           includes only:
 
19           (A)  Insurance upon vessels, crafts, hulls, and of
 
20                interests therein or with relation thereto;
 
21           (B)  Insurance of marine builder's risks, marine war
 
22                risks and contracts, or marine protection and
 
23                indemnity insurance;
 

 
Page 62                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1           (C)  Insurance of freights and disbursements pertaining
 
 2                to a subject of insurance; and
 
 3           (D)  Insurance of personal property and interests
 
 4                therein, in the course of exportation from or
 
 5                importation into any country, and in the course of
 
 6                transportation coastwise or on inland waters,
 
 7                including transportation by land, water, or air
 
 8                from point of origin to final destination, with
 
 9                respect to, appertaining to, or in connection with
 
10                any and all risks or perils of navigation,
 
11                transit, or transportation, and while being
 
12                prepared for and while awaiting shipment, and
 
13                during delays, storage, transshipment, or
 
14                reshipment incident thereto;
 
15      (5)  Property insurance;
 
16      (6)  Surety insurance;
 
17      (7)  Title insurance;
 
18      (8)  Credit life insurance and credit disability insurance
 
19           offered as part of, or relating directly to the
 
20           business or operations of its parent or affiliated
 
21           companies; [and]
 
22      (9)  Those lines of insurance provided by the Hawaii
 
23           insurance exchange; and
 

 
Page 63                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1     [(9)] (10)  Other lines of insurance that the commissioner
 
 2           may allow."
 
 3      SECTION 14.  Chapter 87, Hawaii Revised Statutes, is
 
 4 repealed.
 
 5      SECTION 15.  Section 431:10D-207, Hawaii Revised Statutes,
 
 6 is repealed.
 
 7      ["§431:10D-207  Public employee association groups.  The
 
 8 lives of a group of individuals may be insured under a policy
 
 9 issued to an association of public employees, which shall be
 
10 deemed the policyholder, to insure members of the association for
 
11 the benefit of persons other than the association or any of its
 
12 officials, subject to the following requirements:
 
13      (1)  The association must have been formed for purposes
 
14           other than obtaining insurance and have when the policy
 
15           is placed in force, a membership in the classes
 
16           eligible for insurance of not less than seventy-five
 
17           per cent of the number of employees eligible for
 
18           membership in such classes.
 
19      (2)  The members eligible for insurance under the policy
 
20           shall be all of the members of the association, or all
 
21           of any class or classes thereof.
 
22      (3)  The premium for the policy shall be paid either from
 
23           the association's own funds or from charges collected
 

 
Page 64                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

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

 
Page 65                                                    3193
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 1           is not satisfactory to the insurer.
 
 2      (5)  Charges collected from the insured members specifically
 
 3           for the insurance, and the dues of the association if
 
 4           they include the cost of insurance, may be determined
 
 5           according to each attained age or in not less than four
 
 6           reasonably spaced attained age groups.  This provision,
 
 7           however, shall not preclude an average rate for the
 
 8           whole group with charges to the individual members
 
 9           based on a schedule of insurance graded by rank, salary
 
10           bracket, or by length of service or seniority.
 
11      (6)  The policy must cover at least twenty-five persons at
 
12           date of issue.
 
13      (7)  The amounts of insurance under the policy must be based
 
14           upon some plan precluding individual selection either
 
15           by the members or by the association.
 
16      (8)  As used herein, public employees means employees of the
 
17           United States government, or of any state, or of any
 
18           political subdivision or instrumentality or department
 
19           or bureau or board or commission of any of them, or the
 
20           national guard as an association in nature under its
 
21           existing form."]
 
22      SECTION 16.  To ensure continuity of benefits for public
 
23 employees, any insurer, service provider, or other third party
 

 
Page 66                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 who has entered into a contract with the public employees health
 
 2 fund shall not cease providing insurance coverage or services
 
 3 pursuant to the terms of its contract except under conditions
 
 4 provided for under that contract.  For the purposes of this
 
 5 section, a contract with the public employees health fund is
 
 6 legally binding on all parties if the parties memorialized a
 
 7 final agreement, despite the fact that the final agreement has
 
 8 not been properly executed by the public employees health fund.
 
 9      SECTION 17.  (a)  The attorney general shall locate and take
 
10 necessary measures to secure all property, which may be properly
 
11 assigned to the public employees health fund, including bank
 
12 accounts, reserves or all other funds that are in the possession
 
13 of other persons, pursuant to legally binding agreements or
 
14 otherwise.  During the attorney general's investigation, the
 
15 attorney general shall have access to all documents pertaining or
 
16 related to the public employees health fund in the possession of
 
17 the public employees health fund or the board of trustees, or the
 
18 trustees individually.  Nothing in this Act shall be construed to
 
19 restrict any state agency from taking appropriate legal action
 
20 upon any facts discovered by the attorney general in its
 
21 investigation.
 
22      (b)  The attorney general shall review all contracts with
 
23 the public employees health fund and analyze these contracts to
 

 
Page 67                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 provide the governor with recommendations on whether the
 
 2 contracts should be continued by the exchange or terminated.  In
 
 3 making its recommendations, the attorney general shall consider:
 
 4      (1)  The costs or penalties which would be incurred by
 
 5           terminating an agreement; and
 
 6      (2)  Whether a contract and the ensuing obligations may
 
 7           properly be transferred to the exchange.
 
 8 With regard to paragraph (2), the attorney general shall consult
 
 9 with the captives administrator appointed pursuant to article 19
 
10 of chapter 431, Hawaii Revised Statutes.
 
11      (c)  The attorney general, in its sole discretion, may
 
12 delegate the duties outlined in this section to appropriate
 
13 third-party service providers or enlist the support of
 
14 appropriate government agencies in carrying out the purposes of
 
15 this Act.
 
16      (d)  The attorney general shall complete the duties outlined
 
17 in this section no later than July 1, 2001.
 
18      (e)  The attorney general shall submit a report to the
 
19 legislature no later than twenty days prior to the convening of
 
20 the regular session of 2001 detailing:
 
21      (1)  Its progress in performing the duties detailed in this
 
22           section; and
 
23      (2)  Any other matters material to any actions conducted
 

 
Page 68                                                    3193
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1           pursuant to subsection (a).
 
 2      SECTION 18.  (a)  The assets and liabilities of the public
 
 3 employees health fund shall be identified by the department of
 
 4 the attorney general with the assistance of the public employees
 
 5 health fund and the department of budget and finance and shall be
 
 6 transferred to the subscribers' savings accounts within the
 
 7 Hawaii insurance exchange proportionate to each subscriber's
 
 8 existing interest in the public employees health fund before
 
 9 July 1, 2001.
 
10      (b)  Once appointed, the subscribers committee shall assign
 
11 net underwriting gains and stabilization reserves, which are
 
12 currently in the possession of insurance carriers pursuant to
 
13 agreements with the public employees health fund, to the
 
14 unassigned surplus account of the Hawaii insurance exchange
 
15 established pursuant to section 2 of this Act.
 
16      (c)  Surplus employee contributions to the public employees
 
17 health fund, which have accrued as of July 1, 2000, shall be
 
18 assigned to a separate account, designated the employees surplus
 
19 account, and shall be used to stabilize future employee
 
20 contributions to the subscribers made pursuant to chapter     .
 
21      SECTION 19.  There is appropriated out of the general
 
22 revenues of the State of Hawaii the sum of $          , or so
 
23 much thereof as may be necessary for fiscal year 2000-2001, to
 

 
Page 69                                                    3193
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 1 carry out the purposes of this Act.  The sum appropriated shall
 
 2 be expended by the department of budget and finance.
 
 3      SECTION 20.  There is appropriated out of the general
 
 4 revenues of the State of Hawaii the sum of $          , or so
 
 5 much thereof as may be necessary for fiscal year 2000-2001, to
 
 6 carry out the purposes of sections 17 and 18 of this Act.  The
 
 7 sum appropriated shall be expended by the department of the
 
 8 attorney general.
 
 9      SECTION 21.  This Act does not affect rights and duties that
 
10 matured, penalties that were incurred, accidents which occurred,
 
11 and proceedings that were begun, before July 1, 2001.
 
12      SECTION 22.  If any provision of this Act, or the
 
13 application thereof to any person or circumstance is held
 
14 invalid, the invalidity does not affect other provisions or
 
15 applications of the Act which can be given effect without the
 
16 invalid provision or application, and to this end the provisions
 
17 of this Act are severable.
 
18      SECTION 23.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 24.  This Act shall take effect on July 1, 2010;
 
21 provided that sections 16, 17, and 18 shall take effect upon
 
22 approval.