Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 568, H.D. 2, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to create a new governance structure for public employees' health benefits by establishing an Employer-Union Health Benefit Trust Fund, as a system and as a fund, to replace the Hawaii Public Employees Health Fund system and trust fund.

Specifically, this measure 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 measure 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 measure grants the new board several new powers, including the power to invest money in certain ways and to purchase certain securities and other instruments, hire an administrator and staff exempt from civil service laws, contract for financial audits of the fund and carriers, and retain auditors, actuaries, investment firms and managers, benefit plan consultants, or other professional advisors.

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

The measure 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 measure requires the public employers to pay unspecified 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 is determined through collective bargaining or under chapter 89C, Hawaii Revised Statutes, whichever is appropriate. The amount contributed by public employers is not to exceed the actual cost of the benefit plan provided.

The measure further transfers positions and personnel, and appropriations and assets, 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 measure also makes a blank appropriation for transition expenses including salary for the new staff.

Finally, the measure takes effect on July 1, 2050, for purposes of further discussion, although the repeal of chapter 87, Hawaii Revised Statutes, governing the existing Public Employees Health Fund, takes effect on July 1, 2003, and the appropriation in section 9 takes effect on July 1, 2001.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 568, H.D. 2, S.D. 1, and recommends that it pass Third Reading.