Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Labor and Public Employment, to which was referred H.B. No. 568 entitled:

begs leave to report as follows:

The purpose of this bill is to create an Employer-Union Health Benefit Trust Fund, as a system and as a fund, to replace the existing Public Employees Health Fund system and trust fund.

Specifically, this bill provides for a ten-member Board of Trustees, five representing employee organizations, including one retiree, and five members representing public employers, including the Directors of Human Resources Development and Finance and one representative of the counties on a rotational basis. The board is required to provide quality health and other benefit plans at a cost affordable to both public employers and public employees.

The bill gives the new Board of Trustees essentially the same duties and responsibilities as those given to the existing Board of Trustees of the Public Employees Health Fund. However, this bill grants the new board several new powers, including investing money in certain ways and purchasing certain securities and other instruments, hiring an administrator and staff exempt from civil service laws, contracting for financial audits of the fund and carriers, and retaining auditors, actuaries, investment firms and managers, benefit plan consultants, or other professional advisors.

The new board is permitted to hold meetings if the chairperson gives six days written notice, if two trustees give ten days notice, or without notice if all trustees agree to hold a meeting.

This bill further provides extensive procedures for decision making by the board, including steps to take in event of a deadlock on a vote that includes the use of an impartial umpire and the constitution of a board of arbitration.

This bill also creates the Employer-Union Health Benefit Trust Fund to pay for employee health benefits. The State and the counties are required to make monthly contributions to the new trust fund in a specified dollar amount that does not exceed the actual cost of the benefit plan. The bill requires the public employers to pay blank monthly "base amounts" for various retirees with varying years of service for various benefits, based on participation in Medicare part B self, two-party family, and three-party or more family plans, and for retirees without Medicare part B plans. The base amounts are legislatively set and annually adjusted by the percentage increase in Medicare part B premiums. Public employer contributions for active employees do not involve base amounts but must be in a specified dollar amount that does not exceed the actual cost of a benefit plan.

This bill further transfers positions and personnel, and appropriations and assets, etc., of the existing Public Employees Health Fund to the new Employer-Union Health Benefit Trust Fund on July 1, 2003. However, the Governor is required to appoint the ten members of the new board prior to December 29, 2001. The existing board may extend current benefit plans until July 1, 2003, and may hire an administrator of the Public Employees Health Fund exempt from civil service laws and contract for financial audits. Existing rules are to remain in effect until the new board adopts rules. The bill also makes a blank appropriation for transition expenses including salary for the new staff.

Finally, this bill takes effect upon approval except that the repeal of the existing Public Employees Health Fund takes effect on July 1, 2003, and the appropriation takes effect on July 1, 2001.

Your Committee received testimony in support of this bill from the United Public Workers. The Office of Information Practices testified taking no position on the substance of the bill but strongly objecting to the provision allowing the board to hold meetings without written notice if all members agree. Your Committee also received testimony in support, but with certain reservations, from the Department of Budget and Finance, the City and County of Honolulu Department of Human Resources, and the Hawaii Government Employees Association. The Public Employees Health Fund supplied comments.

Upon further consideration, your Committee has amended this bill to address the concerns of the Office of Information Practices by deleting language in section    -19, Hawaii Revised Statutes, on page 16, lines 18-19 allowing meeting without notice if all trustees agree. Your Committee has also made several technical, nonsubstantive amendments in that same section for purposes of clarity and style.

As affirmed by the record of votes of the members of your Committee on Labor and Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 568, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 568, H.D. 1, and be referred to the Committee on Finance.