STAND. COM. REP. NO. 2769

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2802
                                        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 S.B. No. 2802 entitled: 

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

beg leave to report as follows:

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

     Testimony in support of the measure was received from the
Department of Budget and Finance and the Department of Human
Resources Development.  The Hawaii State Teachers Association,
the Hawaii Government Employees Association, and the United
Public Workers supported the measure with reservations.  The
Public Employees Health Fund took no position.

     Specifically, the measure abolishes the Hawaii Public
Employees Health Fund and replaces it with a single employer-
union trust that would be jointly managed by public employers and
employee organizations.

     Under the employer-union health benefit trust fund concept
contained in the measure, 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

 
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benefit coverage.  The employer-union health benefit trust fund
would then negotiate with insurance providers for plans and
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 its 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 has therefore amended the
measure to 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 single employer-union trust fund proposed
by Administration.  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.


 
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     The amended measure also authorizes the subordinate trust
funds to make available voluntary employee benefits (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 amended the measure by inserting a
defective date of enactment of July 1, 2010, 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 S.B. No. 2802, as amended herein,
and recommend that it pass Second Reading in the form attached
hereto as S.B. No. 2802, 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

 
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