Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 1058 entitled:

begs leave to report as follows:

The purpose of this measure is to require that the amount ported to the employee organizations for health benefit plans and group life insurance be based on the most cost effective plan that provides the same level of benefits for participants in the plans of the Public Employee Health Fund (PEHF).

This measure also clarifies the employer's authority to audit the employee organization plans and requires employee organizations to return the employer's share of refunds from their insurance carriers to the PEHF.

Your Committee received testimony in support of this measure from the Department of Budget and Finance. Testimony in opposition was received from the Hawaii State Teachers Association, Hawaii Government Employees Association, and United Public Workers. The PEHF submitted comments.

This measure remedies a problem for the PEHF under current law. Presently, the amount ported to employee organizations is based on the benefit plan with the largest enrollment as set forth in the collective bargaining agreements. Over the years, enrollment in the employee organization plans has significantly increased, resulting in higher employer costs for the PEHF due to competition with the union plans for enrollees. Employer contribution costs for active employees are higher for the PEHF because union plans generally enroll employees who are younger and families that are smaller than those enrolled in the PEHF. These higher contribution amounts are ported out of the PEHF to the union plans that can offer more attractive benefits. This results in continued adverse selection for PEHF plans and increasingly higher overall employer contributions.

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1058 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.