Establishes Employer-Union Trust Fund pilot project to begin in 2003. Allows for the porting of Medicare Part B to employee organizations. Allows Public Employees Health Fund to offer different benefits to retirants.

A BILL FOR AN ACT

SECTION 1. The legislature finds that Act 146, Session Laws of Hawaii (SLH) 1961, established the public employees health fund (health fund), later codified as chapter 87, Hawaii Revised Statutes (HRS). Currently, the health fund provides state and county public employees and their dependents with a health benefits plan, a dental benefits plan for certain children, a group life benefit program, and a long-term care benefits program. The State and the counties as employers, and public employees, share in the cost of the health benefits through the payment of required monthly contributions to the health fund.

The legislature, in Act 309, SLH 1996 (Act 309), stated that: ". . . the present governance structure to determine and fund health benefits for public employees and retirees is not only cumbersome and inflexible, but does not foster cost-efficiency. Benefits are statutorily established and administered by an independent board of trustees within a fixed statutory framework. At the same time, public employer contributions for these health benefits are negotiated separately through collective bargaining agreements with public employee organizations. Consequently, there is little connection between benefit levels and costs, and limited latitude to design benefit packages that minimize costs and better meet the health care needs of employees." Act 309 further stated that ". . . public employers and public employee organizations should be involved in determining health care coverage and costs because health benefits have not only become a significant component of the total compensation package for public employees, but represent a significant cost to public employers. The employer-union trust concept for determining and administering health benefits provides a mechanism for linking benefit levels and costs, as well as the necessary flexibility to establish appropriate health benefits coverage."

Toward this end, Act 309 required the director of finance to establish a committee comprising representatives from state and county public employers and public employee organizations to develop and recommend a proposal to implement an employer-union trust concept for determining and administering public employee and retiree health benefits. The proposal was to include a suggested trust structure and necessary statutory changes to chapters 87 and 89, HRS. Although Act 309 required the director of finance to report to the legislature prior to the convening of the 1997 regular session, no report was submitted. In subsequent years, legislation has been introduced to alter the composition of the committee and to extend its term to allow for continued discussion on the issue with the hope of someday obtaining a recommendation. Meanwhile, the legislature is keenly aware that a large number of "baby boomers" are approaching retirement, the increasing cost of health care, and the retirees' increased life expectancy threatens the future financial stability of the current "pay-as-you-go" funding method. Based on these findings, the legislature believes that the time has come to effectuate significant change in the provision of health care benefits for its employees, retirees, and beneficiaries.

In the meantime, the legislature is committed to making the health benefits plan of the public employees health fund more competitive with other health benefits plans. To accomplish this, the porting of Medicare Part B reimbursements is crucial to evening out the actuarial experience of the public employees health fund's pool of beneficiaries. By authorizing the porting of Medicare Part B reimbursements to employee organizations' health benefits plans, retirees have more of an incentive to switch to employee organization health benefits plans if allowed to retain the Medicare Part B reimbursement.

The purpose of this Act is to establish an employer-union trust fund pilot project and to allow for the porting of Medicare Part B reimbursements to employee organization health benefits plans.

SECTION 2. Section 87-22, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The board may contract for the following health benefits plans[; provided that benefits provided under any respective plan shall be equally available to all employee-beneficiaries and dependent-beneficiaries selecting the plan regardless of age,] as provided for below:

"§87-27 Supplemental plan to federal Medicare. Any other provision of this chapter notwithstanding, the board of trustees shall establish, effective July 1, 1966, a health benefits plan which takes into account benefits available to an employee-beneficiary and spouse under the federal Medicare plan, subject to the following conditions:

(5) The board of trustees shall determine which employee-beneficiaries and dependent-beneficiaries, who are not enrolled in the federal Medicare Part B medical insurance plan, may participate in such other plans as are set forth in section 87-22."

SECTION 4. (a) For the purposes of this section:

"Health fund" means the public employees health fund under chapter 87, HRS.

"Pilot project" means an employer-union trust fund pilot project established by the public employees health fund pursuant to this Act.

(b) There is established an employer-union trust fund pilot project to be administered by the health fund. The pilot project shall commence on July 1, 2003, and shall cease to exist on June 30, 2005, unless otherwise extended by the legislature.

(c) No later than December 31, 2001, the health fund shall establish criteria for the selection of the public sector union for the pilot project and cost-performance guidelines by which the pilot project is to be evaluated. The health fund, prior to selecting a public sector union to participate in the pilot project, shall submit a report containing the selection criteria and cost-performance guidelines to the legislature prior to the convening of the 2002 regular session. By June 30, 2002, the health fund shall select one public sector union to establish the employer-union trust fund under the pilot project.

(d) Upon the selection of the public sector union as provided under subsection (c), the health fund shall allocate to the employer-union trust fund the total sum of money owing to its employee-beneficiaries from any rate credits or reimbursements from any carrier or self-insured plan or any earning or interest derived therefrom. The employee-beneficiaries of the employer-union trust fund shall include all the members of the selected public sector union, including retirees.

(e) Notwithstanding the contribution deposit requirements of chapter 87, HRS, for the purposes of effectuating the pilot project, the health fund, for the time period in which the pilot project is in effect, shall port to the employer-union trust fund all contributions made by public employers and employee-beneficiaries to the health fund for employee-beneficiaries who are members of the selected public sector union.

(f) At least twenty days prior to the 2004 and 2005 regular sessions, the health fund shall report to the legislature on the status and efficacy of the pilot project. These reports shall include information on cost/benefit comparisons between health fund plans and the pilot project plans and employee-beneficiary satisfaction with the health benefits plans offered by the pilot project.

(g) Upon completion of the pilot project, the provision of health benefits of the employee-beneficiaries participating in the pilot project shall revert to the employee-beneficiaries' choice of health benefits plans offered by the health fund.