STAND. COM. REP. NO. 1343-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2802
                                     S.D. 1
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Labor and Public Employment and Finance,
to which was referred S.B. No. 2802, S.D. 1, entitled: 

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

beg leave to report as follows:

     The purpose of this bill is to authorize the establishment
of the State of Hawaii multiple employer-union health trust and
its related employer-union health trust funds to replace the
Hawaii Public Employees Health Fund (Health Fund) for
determination and administration of State of Hawaii public sector
employee and retiree health benefits.  

     The Hawaii Government Employees Association, Hawaii State
Teachers Association, Hawaii State Teachers Association -
Retired, Oahu Retired Teachers Association testified in support
of this bill.  One individual supported the intent of this bill.
The Employees' Retirement System and the Board of Trustees of the
Health Fund offered comments.  The Department of Budget and
Finance testified in opposition to this bill.

     Upon further consideration, your Committees have amended
this bill by deleting its contents and inserting the substantive
provisions of H.B. No. 1869, H.D. 1, which:

     (1)  Establishes the Hawaii Employer-Union Health Benefits
          Trust Fund (Trust Fund) to be placed under the

 
 
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          Department of Budget and Finance for administrative
          purposes to provide public employees and their
          dependents with a health benefits plan, 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
          (Board of Directors) to be composed of three directors
          appointed by the Board of Trustees to administer and
          carry out the purposes of the Trust Fund;

     (4)  Compensates the 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.

     In addition, your Committee further amended this bill by:

     (1)  Inserting the provisions of H.B. No. 1871, which
          requires the Board of Trustees of the Health Fund to

 
                                 STAND. COM. REP. NO. 1343-00
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          annually audit all health benefits plans offered by
          employee organizations;

     (2)  Requiring the Board of Trustees of the Health Fund to
          enter into contracts for and offer Preferred Provider
          Organization Plans (PPO) for medical benefits for
          active members and retirees; and

     (3)  Requiring the Board of Trustees of the Health Fund to
          enter into contracts for drug benefit plans with
          premiums based on inclusion of a closed formulary for
          federally approved health maintenance organization
          plans and a copayment plus a differential for
          nonpreferred brand name drugs based on an open
          formulary for service benefit plans.

     As affirmed by the records of votes of the members of your
Committees on Labor and Public Employment and Finance that are
attached to this report, your Committees are in accord with the
intent and purpose of S.B. No. 2802, S.D. 1, as amended herein,
and recommend that it pass Second Reading in the form attached
hereto as S.B. No. 2802, S.D. 1, H.D. 1, and be placed on the
calendar for Third Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Labor and Public
                                   Employment and Finance,

                                   
                                   
                                   
                                   
______________________________     ______________________________
DWIGHT Y. TAKAMINE, Chair          TERRY NUI YOSHINAGA, Chair