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 S.B. No. 312 entitled:

begs leave to report as follows:

The purpose of this measure is to mandate that the Public Employees Health Fund (Fund) provide specific health benefits to retirees.

Testimony in support of this measure was submitted by the Retirees Unit of the Hawaii Government Employees Association, the Hawaii State Teachers Association, the Hawaii State Retired Teachers Association, the Oahu Retired Teachers Association, and a private citizen.

Comments were submitted by the Public Employees Health Fund who will review the measure at their next regular meeting.

Your Committee finds that a social contract exists whereby in return for years of dedicated service, public employees were promised certain health benefits, regardless of the cost. Since the enactment of chapter 87A, Hawaii Revised Statutes, which established the Employer-Union Health Benefits Trust Fund and shifted the provision of health benefits from a "defined benefits" model to a "defined contribution" model, the health benefits provided will be significantly diminished. Your Committee also finds that many public employees have accepted less pay throughout their careers in anticipation of future retirement benefits, including medical coverage.

Your Committee believes that the State is duty-bound to fulfill its obligation to these public employees by restoring mandated health benefit coverages that have been eliminated. Therefore, coverage for hospital, medical, surgical, prescription, vision, and adult dental plans will be guaranteed.

Your Committee also finds that, under the existing law, 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 determines that the cost of a Medicare Part B plan has continually increased and already exceeded the cap, costing $45.50 in 2000, $50 in 2001, $54 in 2002, and currently $58.70. Additionally, your Committee determines that a six-month lag exists in the reimbursement of retirees for any cost differential resulting from an increase in a Medicare Part B plan premium. Therefore, your Committee finds that the Fund should reimburse retirees for the full cost of their Medicare Part B plan and ensure that any differential due to a rate increase is also reimbursed in a timely manner.

Accordingly, your Committee has amended the measure 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 S.B. No. 312, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 312, S.D. 1, and be referred to the Committee on Ways and Means.