STAND. COM. REP. NO. 3034

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 1869
                                        H.D. 1
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Commerce and Consumer Protection and Ways
and Means, to which was referred H.B. No. 1869, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO PUBLIC EMPLOYEE HEALTH
     BENEFITS,"

beg leave to report as follows:

     The purpose of this measure is to provide a new mechanism by
which health benefits for public employees are established,
managed, and paid by creating an employer-union health benefit
trust fund to replace the Hawaii Public Employees Health Fund.

     Specifically, the measure:

     (1)  Establishes the Hawaii Employer-Union Health Benefits
          Trust Fund (Trust Fund), to be placed under the
          Department of Budget and Finance for administrative
          purposes, to provide public employees and their
          dependents with a health benefits plan, a long-term
          care benefits plan, and group life insurance benefits;

     (2)  Establishes a Board of Trustees of the Trust Fund
          (Board of Trustees) composed of ten trustees to serve
          in an advisory capacity to the Trust Fund;

     (3)  Establishes a Board of Directors of the Trust Fund to
          be composed of three directors appointed by the Board

 
a                                                     HB1869 SD1
 
                                   STAND. COM. REP. NO. 3034
                                   Page 2


          of Trustees to administer and carry out the purposes of
          the Trust Fund;

     (4)  Compensates the Board of Directors of the Trust Fund
          (Board of Directors) with an annual base rate and
          provides for a bonus, depending upon the performance of
          the Trust Fund;

     (5)  Designates the Attorney General as the legal adviser to
          the Board of Trustees and Board of Directors;

     (6)  Repeals the Health Fund, Chapter 87, Hawaii Revised
          Statutes;

     (7)  Provides for the transfer of Health Fund staff,
          appropriations, and other assets to the Trust Fund;

     (8)  Requires the Governor to appoint all members of the
          Board of Trustees by December 29, 2000, who would then
          be required to appoint the three members of the Board
          of Directors by July 1, 2001;

     (9)  Requires the Board of Directors to develop and issue
          rules, policies, and procedures, and contract for
          health benefits plans and group life insurance plans
          that will become effective on July 1, 2002;

     (10) Authorizes the Health Fund to extend current health
          benefit and life insurance plan contracts through
          June 30, 2002; and

     (11) Appropriates an unspecified amount to hire necessary
          staff.

     Testimony in support of the intent of the measure was
received from the Hawaii Stated Teachers Association-Retired.

     The Hawaii Government Employees Association, the United
Public Workers, and the Oahu Retired Teachers Association
submitted comments on the measure.  The Hawaii State Teachers
Association opposed the measure.

     Under the measure's employer-union health benefit trust fund
concept, which is based on the Administration's health benefits
governance model, public employers would pay a defined dollar
contribution per employee, rather than a percentage, to the
employer-union health benefit trust fund to provide health
benefit coverage.  The employer-union health benefit trust fund
would then negotiate with insurance providers for plans and

 
a                                                     HB1869 SD1
                                   STAND. COM. REP. NO. 3034
                                   Page 3


rates, with the intent of maximizing value for both the employer
and the employees.

     Your Committees find that although the measure, as received,
envisions a single employer-union health benefit trust fund,
currently, there are public employee organizations that already
operate their own health benefits program for their members.
These public employee organizations' health benefits plans
provide their members with benefits tailored to their needs and
in many cases, at a lower cost.

     In light of these findings, your Committees believe that
public employee organizations, to a certain extent, should be
allowed to retain their autonomy with regard to managing health
benefits plans for their members and have therefore amended the
measure by deleting its substance and inserting provisions that
enable the creation of subordinate employer-union health benefits
trust funds under the umbrella of a master employer-union health
benefits trust fund.  Each of the subordinate employer-union
health trust funds will serve active employees and
retirant-beneficiaries.

     Under the amended measure, exclusive representatives
(unions) would be able to establish subordinate health benefit
trust funds, under the umbrella of a single employer-union trust
fund.  The primary function of the union health benefit trust
funds would be to define and provide employee-beneficiaries with
health benefits programs, in recognition of and in concert with,
the Administration's proposed health benefits defined
contribution program model.

     The amended proposal also creates a trust fund to accumulate
moneys for the purpose of funding future health benefit costs of
retiree beneficiaries.  The Administration's proposal did not
include any vehicle or means by which moneys could be accumulated
to fund future health benefit costs of retiree beneficiaries.

     To guarantee an employee's or retiree's ability to access
the best benefits plan available and to promote competition
between employer-union health benefits trust funds, your
Committees have also added provisions to clarify that the plans
offered should be available to all public employees and to allow
employees to join an employer-union health benefits trust fund
other than that which the employee's union provides.  This
transfer may occur only once a year.  A take-all-comers mandate
will be in place for each employer-union health benefits trust
fund.


 
a                                                     HB1869 SD1
                                   STAND. COM. REP. NO. 3034
                                   Page 4


     The amended measure also authorizes the subordinate trust
funds to make available voluntary employee benefits (at no cost
to employers) and empowers the Insurance Commissioner to regulate
employer-union health benefits trust funds.

     Your Committees believe that, as a vehicle for keeping the
discussion on the employer-union health benefit trust concept
alive, the model of governance provided under the amended measure
would be more flexible and therefore, more readily able to deal
with the rapidly increasing costs of health benefits while
remaining sensitive to the needs of the employee-beneficiaries.

     Your Committees have also amended the measure by inserting a
defective date of enactment of July 1, 2020, for the purpose of
ensuring further discussion during the legislative session.

     As affirmed by the records of votes of the members of your
Committees on Commerce and Consumer Protection and Ways and Means
that are attached to this report, your Committees are in accord
with the intent and purpose of H.B. No. 1869, H.D. 1, as amended
herein, and recommend that it pass Second Reading in the form
attached hereto as H.B. No. 1869, H.D. 1, S.D. 1, and be placed
on the calendar for Third Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Commerce and
                                   Consumer Protection and Ways
                                   and Means,



____________________________       ______________________________
CAROL FUKUNAGA, Co-Chair           BRIAN KANNO, Co-Chair



____________________________       ______________________________
ANDREW LEVIN, Co-Chair             BRIAN T. TANIGUCHI, Co-Chair

 
a                                                     HB1869 SD1