STAND. COM. REP. NO. 2687

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 3193
                                        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. 3193 entitled: 

     "A BILL FOR AN ACT RELATING TO THE HAWAII INSURANCE
     EXCHANGE,"

beg leave to report as follows:

     The purpose of this measure is to provide for improved,
cost-effective administration of current and future public
employee benefit obligations, by transferring the administration
of these obligations from the Hawaii Public Employees Health Fund
(HPEHF), to a newly established captive insurance company to be
known as the Hawaii Insurance Exchange (Exchange).

     Your Committees received testimony commenting on this
measure from the Department of Commerce and Consumer Affairs,
Department of Budget and Finance, HPEHF, Hawaii State Teachers
Association, and the Office of Information Practices.  The Hawaii
Government Employees Association and the United Public Workers
opposed passage of the measure.

     Your Committees find that under the measure, surplus
contributions of approximately $86,000,000 currently held by
various health insurers, and $13,000,000 held by HPEHF, would be
transferred to, and be controlled by the Exchange.  The Exchange
would be organized as a reciprocal insurer subject to regulation
under the State's captive insurance laws.  The Exchange would be
governed by a subscribers' committee composed of representatives
of public employers with oversight coming from a board of

 
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advisors comprised of representatives from employee organizations
and public employees.  Day-to-day management of the exchange
would be delegated to a professional entity given power of
attorney by subscribers.

     As an insurance entity, the Exchange would also have the
flexibility to negotiate and contract with specialists to provide
claims administration services, benefit plan administration,
accounting and financial reporting services, captive insurance
management, and reinsurance administration.  Further, the
Exchange could negotiate rates directly with health care
providers.

     Your Committees believe that the concept embodied in the
measure has merit and requires further consideration.  In light
of this belief, your Committees have amended the measure by:

     (1)  Deleting the board of advisors;

     (2)  Adding public employee organization and retired
          beneficiary representation to the subscribers
          committee;

     (3)  Making the effective date defective to ensure further
          discussion on the matter; and

     (4)  Making numerous technical, nonsubstantive amendments
          for purposes of clarity, consistency, and style.

     Your Committees believe that a board of advisors is
unnecessary and that including employee organization and retiree
representation in the subscribers committee would adequately
address representation equity issues.

     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. 3193, as amended herein,
and recommend that it pass Second Reading in the form attached
hereto as S.B. No. 3193, S.D. 1, and be placed on the calendar
for Third Reading.


 
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                                   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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