Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committees on Labor and Public Employment and Economic Development and Business Concerns, to which was referred H.B. No. 2750 entitled:

beg leave to report as follows:

The purpose of this bill is to provide direct, temporary economic relief from increased medical care costs and insurance premiums to private employers for a period of two years.

Specifically, this bill:

(2) Sets the maximum employee contribution at 40 percent.

The Hawaii Business League, National Federation of Independent Businesses, The Kauai Chamber of Commerce, The Chamber of Commerce of Hawaii, Alphabetland, and a concerned citizen testified in support of this measure. Kaiser Permanente and the Hawaii Medical Association supported the intent of the measure. The Department of Commerce and Consumer Affairs (DCCA), Department of Labor and Industrial Relations (DLIR), Attorney General (AG), and the International Longshoremen and Warehousers Union testified in opposition to this bill.

In 1974, The Prepaid Health Care Act (PHCA) was passed to provide equal sharing of health care costs between an employee and an employer. This was an attempt to ensure that all citizens of the State of Hawaii would receive health insurance coverage and could seek medical care without anguishing over its costs. To ensure that employees were not overburdened by the equal sharing requirement, however, a provision limiting the employee's contribution to premium costs to not more than 1.5 percent of a their monthly wages was added to the original measure. After surviving a legal challenge, the Congress of the United States allowed Hawaii to continue the PHCA by providing for a substantive exemption from the Employees Retirement Income Security Act (ERISA) but stipulating that PHCA could only be changed for administrative purposes.

However, continually rising health care and insurance premium costs have put an increasing burden upon employers, especially small businesses, causing some employers to lose their financial viability and other employers to scale back their workforce and working hours in order to be exempt from PHCA. This has resulted in an increased number of medically uninsured individuals.

Your Committees understand the concerns raised by businesses regarding this burden, as well as concerns regarding the fairness of the State and county governments' ability to implement a 60/40 cost sharing plan for public employees, but not allowing private providers this same benefit. However, your Committees also understand the concern of DLIR, DCCA, and the AG that this measure could jeopardize Hawaii's ERISA exemption. Nevertheless, your Committees find that this matter warrants further discussion.

Accordingly, this bill has been amended by providing that it be effective only after the enactment of legislation by Congress allowing amendments to be made to PHCA without loss of Hawaii's ERISA exemption.

As affirmed by the records of votes of the members of your Committees on Labor and Public Employment and Economic Development and Business Concerns that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2750, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2750, H.D. 1, and be referred to the Committee on Consumer Protection and Commerce.