Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 579, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to authorize public employee organizations to organize voluntary employees' beneficiary association trusts that offer health benefits to public employees during a three-year period.

Specifically, this measure creates a trust that is separate from and an alternative to the Hawaii employer-union health benefits trust fund. However, retirees are also allowed to participate, and section    -6(b) of section 2 of this bill explicitly gives present retirees a one-time choice to participate.

Your Committee finds that the establishment of voluntary employees' beneficiary association trusts, as an alternative to the Hawaii employer-union health benefits trust fund, will enable the State to analyze the costs and benefits of the voluntary employees' beneficiary association trusts against those of the Hawaii employer-union health benefits trust fund. Such an analysis is needed because of the disappointing performance of the Hawaii employer-union health benefits trust fund.

Your Committee finds that the Hawaii employer-union health benefits trust fund was established in 2001 to replace the former Hawaii public employees health fund because of the spiraling health benefit costs of the Hawaii public employees health fund. However, three years later, the evidence indicates that public employees under the Hawaii employer-union health benefits trust fund receive fewer plan options and lower benefit levels than under the Hawaii public employees health fund. Furthermore, it is questionable whether the State has realized the cost savings anticipated by the replacement of the Hawaii public employees health fund with the Hawaii employer-union health benefits trust fund.

Your Committee has amended this measure by:

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 S.B. No. 579, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 579, S.D. 2.