Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Labor, to which was referred H.B. No. 50, H.D. 2, entitled:

begs leave to report as follows:

The purpose of this measure is to mandate the provision of specific health benefits for public sector retirees under the Public Employees Health Fund (Fund).

The Retirees Unit of the Hawaii Government Employees Association and the Hawaii State Teachers Association submitted testimony in support of this measure. The Department of Budget and Finance submitted testimony in opposition to this measure. The Senator from the 12^th District presented oral testimony in support of the intent of the measure with request for amendments.

Your Committee finds that, prior to the enactment of Chapter 87A, Hawaii Revised Statutes (HRS), which changed the way health benefits are to be provided for public employees and retirees from a defined benefit model to a defined contribution model, state employees were promised specific health benefits at the onset and throughout the duration of their employment in return for their years of dedicated public service. Your Committee believes that it is the State's obligation to continue to provide the health benefits required by statute as the benefits existed when the retirees were active employees.

Your Committee also finds that the Fund's contribution to reimburse retirees for Medicare Part B premiums is capped at the lesser amount of $50 per month, or the Medicare Part B plan premium for retirees. However, your Committee finds that the cost of the Medicare Part B medical insurance plan has continually increased and has already exceeded this $50 amount. Additionally, your Committee finds that a six-month lag exists in the reimbursement of retirees for any cost differential resulting from an increase in the Medicare Part B medical insurance plan premium. Therefore, in order to adequately compensate retirees, your Committee believes that the Fund should reimburse retirees for at least the full amount of the Medicare Part B premium and ensure that any differential due to a rate increase is also reimbursed in a timely manner.

Your Committee also finds that it is necessary to require the Employer-Union Health Benefits Trust Fund (EUTF) to reimburse retirees for the full amount of the Medicare Part B premium and timely pay any differential.

Additionally, your Committee has determined that the cost for health benefits has already increased, if not exceeded the amounts specified in section 87A-33(b), HRS. Although the employer's monthly contribution for health benefits plans for retirees is scheduled to be adjusted annually, beginning July 1, 2004, the situation mandates more timely review.

Your Committee has amended this measure by replacing its contents with the contents of S.B. No. 312, S.D. 1, S.B. 763, S.D. 1 and S.B. 762, S.D. 1, which provide as follows:

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 H.B. No. 50, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 50, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.