HB167.DOC

SECTION 1. The purpose of this Act is to change the manner in which health care and other benefits are provided to public employees who are subject to collective bargaining, by establishing health benefits trust funds for each bargaining unit. It is the legislature's intent that public officials, employees excluded from collective bargaining, and retirees continue to be covered by the Hawaii employer-union health benefits trust fund, but that the fund be renamed the Hawaii public employee health benefits trust fund.

SECTION 2. Chapter 87A, Hawaii Revised Statutes, is amended by adding four new parts to be appropriately designated and to read as follows:

"Part . BARGAINING UNIT HEALTH BENEFITS TRUST FUNDS

§87A-A Definitions. For the purposes of this part:

"Fund" means a bargaining unit health benefits trust fund.

§87A-B Bargaining unit health benefits trust funds; establishment. (a) There is established outside the state treasury, trust funds to be known as follows:

(1) The "bargaining unit (1) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (1);

(2) The "bargaining unit (2) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (2);

(3) The "bargaining unit (3) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (3);

(4) The "bargaining unit (4) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (4);

(5) The "bargaining unit (5) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (5);

(6) The "bargaining unit (6) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (6);

(7) The "bargaining unit (7) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (7);

(8) The "bargaining unit (8) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (8);

(9) The "bargaining unit (9) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (9);

(10) The "bargaining unit (10) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (10);

(11) The "bargaining unit (11) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (11);

(12) The "bargaining unit (12) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (12); and

(13) The "bargaining unit (13) health benefits trust fund", for employee-beneficiaries and dependent-beneficiaries of bargaining unit (13).

(b) Each fund shall consist of contributions, interest, income, dividends, refunds, rate credits, and other returns. It is hereby declared that any and all sums contributed or paid from any source to the funds created by this part, and all assets of the funds including any and all interest and earnings on the same, are and shall be held in trust by the respective board of trustees of each bargaining unit health benefits trust fund for the exclusive use and benefit of the employee-beneficiaries and dependent-beneficiaries of the respective fund, and shall not be subject to appropriation for any other purpose whatsoever. Each fund shall be under the control of the respective board and placed under the department of budget and finance for administrative purposes.

§87A-C Bargaining unit health benefits trust funds; purpose. (a) Each fund shall be used to provide the fund's employee-beneficiaries and dependent-beneficiaries with health and other benefit plans, and to pay administrative and other expenses of the fund. All assets of each fund are and shall be dedicated to providing health and other benefit plans to the employee-beneficiaries and dependent-beneficiaries in accordance with the terms of those plans and to pay administrative and other expenses of the fund, and shall be used for no other purposes except those set forth in this section.

(b) Each fund, including any of the fund's earnings on investments, and rate credits or reimbursements from any carrier or self-insured plan and any earning or interest derived therefrom, may be used to stabilize health and other benefit plan rates.

(d) Each fund may be used to provide long-term care benefits to its respective employees.

(e) At the discretion of each fund's respective board, some or all of each fund may be used as a reserve against or to pay the fund's future costs of providing health and other benefits plans.

§87A-D Employer contributions to bargaining unit health benefits trust funds irrevocable. Notwithstanding any law to the contrary, the contributions that the State and counties make to the bargaining unit health benefits trust funds shall be irrevocable; provided that this shall not preclude the funds from returning contributions or payments made by the State or any county under a mistake of fact within one year after the payment of contributions or payments.

§87A-E State and county contributions to the bargaining unit health benefits trust funds; active employees. The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the funds contributions equal to the amount and on the dates specified in the applicable public sector collective bargaining agreements, which shall be used toward the payment of costs of health and other benefit plans; provided that the contributions shall be a specified dollar amount.

§87A-F State and county contributions to bargaining unit health benefits trust funds not considered wages or salary. Contributions made by the State or the counties under this part shall not be considered wages or salary of an employee-beneficiary. No employee-beneficiary shall have any vested right in or be entitled to receive any part of any contribution made to the fund.

§87A-G Reimbursement for state contributions to bargaining unit health benefits trust funds. (a) All state agencies having control of funds other than the general fund shall reimburse the State for contributions made by the State pursuant to section 87A-E on account of agency employees whose compensation is paid in whole or part from funds other than the general fund.

(b) All state and county agencies receiving federal funds, which may be expended for the purpose of replacing the contributions payable by the State to the fund, shall set aside a portion of the federal funds sufficient to reimburse the State for contributions made by the State pursuant to section 87A-E on account of the employees in the agencies whose compensation is paid in whole or part from federal funds.

§87A-H Employee-beneficiary contributions to bargaining unit health benefits trust funds; health benefits plans. (a) If required by the applicable collective bargaining agreement, each employee-beneficiary shall make a contribution to the fund to cover the difference between the amount charged for the health benefits plans elected by the employee-beneficiary and the amount covered by the fund.

(b) If allowed by law and permitted by the applicable collective bargaining agreement, the employee-beneficiary may allow the employee-beneficiary's contribution to be withheld and transmitted to the fund by the comptroller or finance officer who disburses the employee-beneficiary's compensation. The contribution shall be withheld and transmitted to the fund at the times specified in the collective bargaining agreement.

§87A-I Employee-beneficiary or qualified-beneficiary contributions; long-term care benefits plan. During the period the long-term care benefits plan is in effect, the employee-beneficiary, if allowed by law and permitted by the collective bargaining agreement, may authorize the employee-beneficiary's contribution to be withheld and transmitted to the respective fund by the comptroller or finance officer who disburses the employee-beneficiary's compensation. The contribution shall be withheld and transmitted to the fund at the times specified in the collective bargaining agreement.

§87A-J Eligibility. Each board shall establish eligibility criteria to determine who may qualify as an employee-beneficiary, dependent-beneficiary, or qualified-beneficiary under its respective fund, consistent with the provisions of this chapter; provided that a retired employee shall not qualify as an employee-beneficiary or qualified-beneficiary.

§87A-K Annual financial audit. (a) Each fund shall be subject to an annual financial audit by an independent auditor. Each fund shall be responsible for the cost of its audit.

(b) The results of the annual audits of each fund shall be public records and shall be submitted to the relevant employers, the relevant exclusive representatives, and the legislature not later than six months after the end of the applicable fiscal year.

(c) The unaudited accounts of the bargaining units' use of the amounts specified in the applicable collective bargaining agreements shall be public records.

(d) The attorney general is authorized to investigate any discrepancies noted in any audit conducted pursuant to subsection (a) or discovered on the attorney general's own initiative. The attorney general may take corrective action, including filing criminal charges, if necessary.

(e) Any surplus or deficit at the end of a fiscal year, which results from the provision of health and other benefit plans, shall be included in the unaudited accounts of the respective fund.

PART . COMPOSITION OF THE BOARDS OF TRUSTEES

§87A-L Composition of the board of trustees of the Hawaii public employee health benefits trust fund. (a) The board of trustees of the Hawaii public employee health benefits trust fund shall consist of seven trustees, appointed as follows:

(1) Three trustees shall be appointed by the governor;

(2) Two trustees shall be appointed by the president of the senate; and

(3) Two trustees shall be appointed by the speaker of the house of representatives.

(b) Section 26-34 shall not apply to board member selection and terms.

§87A-M Composition of the boards of trustees of the bargaining unit health benefits trust funds. (a) Each board of trustees of a bargaining unit health benefits trust fund shall consist of seven trustees appointed by the governor from a list of nominees submitted by the exclusive representative organization. The list submitted by the exclusive representative organization shall contain at least two nominees for each available position.

(b) Section 26-34 shall not apply to board member selection and terms.

PART . ADDITIONAL POWERS AND DUTIES OF THE BOARD OF THE HAWAII PUBLIC EMPLOYEE HEALTH BENEFITS TRUST FUND

§87A-N Definitions. For purposes of this part:

"Board" means the board of trustees of the Hawaii public employee health benefits trust fund.

"Fund" means the Hawaii public employee health benefits trust fund.

§87A-O Plans for part-time, temporary, and seasonal or casual employees. (a) The board may offer medical, hospital, or surgical benefits plans to part-time, temporary, and seasonal or casual employees at no cost to the employers. The board may determine eligibility for part-time, temporary, and seasonal or casual employees by rules exempt from chapter 91 as provided in section 87A-26.

(b) The board shall establish the medical, hospital, or surgical benefits plan or plans, which shall be exempt from the minimum group requirements of article 10A of chapter 431. The medical, hospital, or surgical benefits plan or plans shall provide, pay for, arrange for, or reimburse the cost of medical, hospital, or surgical services, and may include prescribed hospital in-patient and out-patient service and medical benefits.

(c) The board may contract for the medical, hospital, or surgical benefits plan or plans. Each part-time, temporary, and seasonal or casual employee enrolled for medical, hospital, or surgical benefits shall pay monthly contributions directly to the fund's designated carriers. The monthly contributions may include the carrier's administrative costs.

§87A-P Health benefits plan supplemental to medicare. The board shall establish a health benefits plan, which takes into account benefits available to an employee-beneficiary and spouse under medicare, subject to the following conditions:

(1) There shall be no duplication of benefits payable under medicare. The plan under this section, which shall be secondary to medicare, when combined with medicare and any other plan to which the health benefits plan is subordinate under the National Association of Insurance Commissioners' coordination of benefit rules, shall provide benefits that approximate those provided to a similarly situated beneficiary not eligible for medicare;

(2) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a contribution equal to an amount not less than the medicare part B premium, for each of the following who are enrolled in the medicare part B medical insurance plan:

(A) An employee-beneficiary who is a retired employee;

(B) An employee-beneficiary's spouse while the employee-beneficiary is living; and

(C) An employee-beneficiary's spouse, after the death of the employee-beneficiary, if the spouse qualifies as an employee-beneficiary.

For purposes of this section, a "retired employee" means retired members of the employees' retirement system; county pension system; or a police, firefighters, or bandsmen pension system of the State or a county as set forth in chapter 88. If the amount reimbursed by the fund under this section is less than the actual cost of the medicare part B medical insurance plan due to an increase in the medicare part B medical insurance plan rate, the fund shall reimburse each employee-beneficiary and employee-beneficiary's spouse for the cost increase within thirty days of the rate change. Each employee-beneficiary and employee-beneficiary's spouse who becomes entitled to reimbursement from the fund for medicare part B premiums after July 1, 2006, shall designate a financial institution account into which the fund shall be authorized to deposit reimbursements. This method of payment may be waived by the fund if another method is determined to be more appropriate;

(3) All employee-beneficiaries or dependent-beneficiaries who are eligible to enroll in the medicare part B medical insurance plan shall enroll in that plan as a condition of receiving contributions and participating in benefits plans under this chapter. This paragraph shall apply to retired employees, their spouses, and the surviving spouses of deceased retirees and employees killed in the performance of duty; and

(4) The board shall determine which of the employee-beneficiaries and dependent-beneficiaries, who are not enrolled in the medicare part B medical insurance plan, may participate in the plans offered by the fund.

PART . FIDUCIARY DUTIES

§87A-Q Definition. For purposes of this part, a fiduciary shall mean the trustees appointed under section 87A-L and 87A-M.

§87A-R Fiduciaries of the funds. The members of the board of the Hawaii public employee health benefits trust fund and the members of the boards of the bargaining unit health benefits trust funds are fiduciaries of the respective funds.

§87A-S Fiduciary duties; prohibited transactions. A fiduciary shall comply, with respect to the fund, with all fiduciary duties imposed on fiduciaries under Title 29 United States Code Sections 1101-1191c, as amended, and related regulations.

§87A-T Liability for breach of fiduciary duty. (a) Any person who is a fiduciary of the fund and who breaches any of the responsibilities, obligations, or duties imposed on fiduciaries under section 87A-S shall be personally liable to reimburse any losses to the fund resulting from each breach and to restore to the fund any profits of the fiduciary that have been made through the use of assets of the fund by the fiduciary, and may be subject to any other equitable and remedial relief as the court may deem appropriate, including removal of the fiduciary; provided that the liability created by this section is only to the fund and not to individual participants or beneficiaries of the fund and does not apply to the design, amendment, or termination of health or other benefit plans established by the board.

(b) No attorneys' fees or costs incurred in bringing a claim arising under this section, including under a private attorney general doctrine, may be recovered from the fund, the State, or any county.

(c) Any provision in any agreement or instrument that purports to relieve a fiduciary of responsibility or liability for any responsibility, obligation, or duty under section 87A-S shall be void as against public policy. However, nothing in this section shall preclude:

(1) A fiduciary from claiming immunity under section 26-35.5(b);

(2) The fund from purchasing insurance for its fiduciaries or for itself to cover liability or losses occurring by reason of the act or omission of a fiduciary in the case of a breach of a fiduciary obligation by the fiduciary, if the insurance permits recourse by the insurer against the fiduciary in the case of a breach of fiduciary obligation by the fiduciary; or

(3) A fiduciary from purchasing insurance to cover the fiduciary's own liability for breach of fiduciary duty.

(d) If the fund purchases insurance for its fiduciaries or itself:

(1) The fund's and the fiduciaries' liability for any money damages, losses, costs, and expenses caused by any fiduciary breaches of the responsibilities, obligations, or duties imposed under section 87A-S shall be strictly limited to the extent of the insurance unless the fund or fiduciaries' breach is intentional, wilful, or criminal; and

(2) The amount of insurance purchased shall be reasonable and sufficient to cover the potential liability of the fund or its fiduciaries.

(e) In no event shall the State or any county be liable for any money damages, losses, costs or expenses caused by a fiduciary's breach of any of the responsibilities, obligations, or duties imposed on fiduciaries under section 87A-S. Neither the State nor any county shall be obligated to defend or indemnify any fiduciary against a claim arising under this section."

SECTION 3. Chapter 87A, Hawaii Revised Statutes, is amended by adding a new section to part II to be appropriately designated and to read as follows:

"§87A‑ Definitions. As used in this part:

"Board" means the board of trustees of the Hawaii public employee health benefits trust fund and the boards of trustees of the bargaining unit health benefits trust funds.

"Fund" means the Hawaii public employee health benefits trust fund and the bargaining unit health benefits trust funds.

"Trustee" means a trustee of the board of trustees of the Hawaii public employee health benefits trust fund and a trustee of a board of trustees of a bargaining unit health benefits trust fund."

SECTION 4. Chapter 87A, Hawaii Revised Statutes, is amended by adding a new section to part III to be appropriately designated and to read as follows:

"§87A‑ Definitions. As used in this part:

"Board" means the board of trustees of the Hawaii public employee health benefits trust fund and the boards of trustees of the bargaining unit health benefits trust funds.

"Fund" means the Hawaii public employee health benefits trust fund and the bargaining unit health benefits trust funds."

SECTION 5. Chapter 87A, Hawaii Revised Statutes, is amended by adding three new sections to part IV to be appropriately designated and to read as follows:

"§87A‑ Definitions. For the purposes of this part:

"Fund" means the Hawaii public employee health benefits trust fund.

§87A‑ Fund staff. (a) Managerial employees employed by the fund shall be exempt from chapter 76. The fund may employ, subject to chapter 76, other employees necessary for the efficient functioning of the fund.

(b) Subsection (a) shall apply to the managerial and other employees of the fund; provided that:

(1) No employee employed prior to the effective date of Act , Session Laws of Hawaii 2011, by the fund shall be affected by this subsection; and

(2) Upon becoming vacant, any non-managerial position filled on or after the effective date of Act , Session Laws of Hawaii 2011, by the fund shall be filled pursuant to chapter 76.

§87A‑ Eligibility. (a) The board shall establish eligibility criteria to determine who may qualify as an employee-beneficiary, dependent-beneficiary, or qualified-beneficiary, consistent with this chapter; provided that the employee-beneficiary or qualified-beneficiary is or was employed by an appropriate authority and is not included in an appropriate bargaining unit under section 89-6.

(b) A retired member of the employees' retirement system; a county pension system; or a police, firefighters, and bandsmen pension system of the State or county, shall be eligible to qualify as an employee-beneficiary:

(1) Regardless of whether the retired member was actively employed by the State or county at the time of the retired employee's retirement; and

(2) Without regard to the date of the retired member's retirement.

(1) Regardless of whether the retired member was actively employed by the State or county at the time of the retired employee's retirement; and

(2) Without regard to the date of the retired member's retirement."

SECTION 6. Section 28-8.3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) No department of the State other than the attorney general may employ or retain any attorney, by contract or otherwise, for the purpose of representing the State or the department in any litigation, rendering legal counsel to the department, or drafting legal documents for the department; provided that the foregoing provision shall not apply to the employment or retention of attorneys:

(1) By the public utilities commission, the labor and industrial relations appeals board, and the Hawaii labor relations board;

(2) By any court or judicial or legislative office of the State; provided that if the attorney general is requested to provide representation to a court or judicial office by the chief justice or the chief justice's designee, or to a legislative office by the speaker of the house of representatives and the president of the senate jointly, and the attorney general declines to provide such representation on the grounds of conflict of interest, the attorney general shall retain an attorney for the court, judicial, or legislative office, subject to approval by the court, judicial, or legislative office;

(3) By the legislative reference bureau;

(4) By any compilation commission that may be constituted from time to time;

(5) By the real estate commission for any action involving the real estate recovery fund;

(6) By the contractors license board for any action involving the contractors recovery fund;

(7) By the trustees for any action involving the travel agency recovery fund;

(8) By the office of Hawaiian affairs;

(9) By the department of commerce and consumer affairs for the enforcement of violations of chapters 480 and 485A;

(10) As grand jury counsel;

(11) By the Hawaiian home lands trust individual claims review panel;

(12) By the Hawaii health systems corporation, or its regional system boards, or any of their facilities;

(13) By the auditor;

(14) By the office of ombudsman;

(15) By the insurance division;

(16) By the University of Hawaii;

(17) By the Kahoolawe island reserve commission;

(18) By the division of consumer advocacy;

(19) By the office of elections;

(20) By the campaign spending commission;

(21) By the Hawaii tourism authority, as provided in section 201B-2.5;

(22) By the division of financial institutions for any action involving the mortgage loan recovery fund; [or]

(23) By the Hawaii public employee health benefits trust fund and the bargaining unit health benefits trust funds, as provided in section 87A-9; or

[~~(23)~~] (24) By a department, in the event the attorney general, for reasons deemed by the attorney general to be good and sufficient, declines to employ or retain an attorney for a department; provided that the governor thereupon waives the provision of this section."

SECTION 7. Chapter 87A, Hawaii Revised Statutes, is amended by amending its title to read as follows:

"[~~HAWAII EMPLOYER-UNION~~] HEALTH BENEFITS TRUST [~~FUND~~] FUNDS"

SECTION 8. Section 87A-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

""Bargaining unit health benefits trust fund" means a health benefits trust fund described in section 87A-A.

"Hawaii public employee health benefits trust fund" means the health benefits trust fund described in section 87A-30."

SECTION 9. Section 87A-1, Hawaii Revised Statutes, is amended by amending the definitions of "contribution", "health benefits plan", "long-term care benefits plan", and "periodic charge" to read as follows:

""Contribution" means money payments made to any of the [~~fund~~] funds established by sections 87A-30 or 87A-B by the State, the counties, an employee-beneficiary, or a qualified-beneficiary.

"Health benefits plan" means:

(1) A group insurance contract or service agreement that may include medical, hospital, surgical, prescribed drugs, vision, and dental services, in which a carrier agrees to provide, pay for, arrange for, or reimburse the cost of the services as determined by the respective board; or

(2) A similar schedule of benefits established by the respective board and provided through the fund on a self-insured basis.

"Long-term care benefits plan" means:

(1) A group insurance contract or service agreement in which a carrier agrees to provide, pay for, arrange for, or reimburse the cost of long-term care benefits as determined by the respective board; or

(2) A similar schedule of benefits established by the respective board and provided through the fund on a self-insured basis.

"Periodic charge" means the periodic payment by the respective board to a carrier for any health benefits plan or long-term care benefits plan."

SECTION 10. Section 87A-1, Hawaii Revised Statutes, is amended by deleting the definitions of "board", "fund", and "trustee".

["~~"Board" means the board of trustees of the Hawaii employer-union health benefits trust fund described in section 87A-5.~~

~~"Fund" means the Hawaii employer-union health benefits trust fund established in section 87A-30.~~

~~"Trustee" means a trustee of the board of trustees of the Hawaii employer-union health benefits trust fund, as described in section 87A-5.~~"]

SECTION 11. Chapter 87A, Hawaii Revised Statutes, is amended by amending the title to part II to read as follows:

"Part II. [~~Board~~] boards of Trustees"

SECTION 12. Section 87A-6, Hawaii Revised Statutes, is amended to read as follows:

"§87A-6 Term of a trustee; vacancy. The term of office of each trustee shall be four years; provided that a trustee may be reappointed for one additional consecutive four-year term.

A vacancy on the board shall be filled in the same manner as the trustee who vacated that position was nominated or appointed; provided that the criteria used for nominating or appointing the successor shall be the same criteria used for nominating or appointing the person's predecessor[; provided further that vacancies on the board for each trustee position representing retirees and employee-beneficiaries appointed under section 87A-5(1)(A) and (B) shall be filled by appointment of the governor as follows:

~~(1)~~ If a vacancy occurs in one of the trustee positions described in section 87A-5(1)(A), then the vacancy shall be appointed from a list of two nominees submitted by the exclusive employee representative from among the three largest exclusive employee representatives that does not have a trustee among the three trustee positions;

~~(2)~~ If a vacancy occurs in a trustee position described in section 87A-5(1)(B), then the vacancy shall be appointed from a list of two nominees submitted by mutual agreement of the exclusive employee representatives described in section 87A-5(1)(B); and

~~(3)~~ If a vacancy occurs in the retiree position described in section 87A-5(1)(C), then the vacancy shall be appointed from a list of two nominees submitted by mutual agreement of all eligible exclusive employee representatives].

If by the end of a trustee's term the trustee is not reappointed or the trustee's successor is not appointed, the trustee shall serve until the trustee's successor is appointed."

SECTION 13. Section 87A-7, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-7[]] Chair, vice-chair, and secretary-treasurer. The trustees of each board shall elect from among the members of the respective board a chair, a vice-chair, and a secretary-treasurer."

SECTION 14. Section 87A-8, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-8[]] Compensation and expenses. Each trustee shall serve without compensation, but the trustees may be reimbursed from the respective fund for any reasonable expenses incurred in carrying out the purposes of the [fund.] respective funds."

SECTION 15. Section 87A-9, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-9[]] Legal adviser. (a) The attorney general shall serve as legal adviser to the board of the Hawaii public employee health benefits trust fund and shall provide legal representation for the Hawaii [~~employer-union~~] public employee health benefits trust fund.

(b) The attorney general shall serve as legal adviser to each of the boards of the bargaining unit health benefits trust funds and shall provide legal representation for the bargaining unit health benefits trust funds; provided that the board has not retained private counsel pursuant to section 28-8.3."

SECTION 16. Section 87A-10, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-10[]] Meetings; notice. Meetings of each board may be scheduled, and notice of meetings shall be provided as follows:

(1) The chairperson may call a meeting of the board at any time by giving at least six calendar days' written notice of the time and place of the meeting to all trustees; and

(2) A majority of the trustees may call a meeting of the board by giving at least ten calendar days' written notice of the time and place to all other trustees."

SECTION 17. Section 87A-12, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-12[]] Records and minutes. [~~The~~] Each board shall keep records and minutes of all meetings of the board."

SECTION 18. Chapter 87A, Hawaii Revised Statutes, is amended by amending the title of part III to read as to read as follows:

"Part III. [~~Board~~] Powers and Duties of the boards"

SECTION 19. Section 87A-15, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-15[]] Administration of the [~~fund.~~] funds. The [~~board~~] boards shall administer and carry out the purpose of the [~~fund.~~] funds. [~~Health and other benefit plans shall be provided at a cost affordable to both the public employers and the public employees.~~]"

SECTION 20. Section 87A-16, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-16[]] Health benefits plan; carriers. (a) [~~The~~] Each board shall establish the health benefits plan or plans[,] for its respective fund, which shall be exempt from the minimum group requirements of chapter 431.

(b) [~~The~~] Each board may contract for health benefits plans or provide health benefits through a noninsured schedule of benefits."

SECTION 21. Section 87A-17, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-17[]] Group life insurance benefits or group life insurance program. [~~The~~] Each board may provide benefits under a group life insurance benefits program or group life insurance program to the fund's respective employees."

SECTION 22. Section 87A-18, Hawaii Revised Statutes, is amended to read as follows:

"§87A-18 Long-term care benefits plan; carrier or third-party administrator. (a) [~~The~~] Each board may establish a long-term care benefits plan or plans for the respective fund's employee-beneficiaries; the spouses, parents, grandparents, in-law parents, and in-law grandparents of the respective fund's employee-beneficiaries; and qualified-beneficiaries. [~~The~~] Any long-term care benefits plan or plans established by the Hawaii public employee health benefits trust fund for its employee-beneficiaries shall be established at no cost to employers and shall comply with article 10H of chapter 431.

(b) Notwithstanding any other law to the contrary, long-term care benefits shall be available only to:

(1) Employee-beneficiaries and their spouses, parents, and grandparents;

(2) Employee-beneficiary in-law parents and grandparents; and

(3) Qualified-beneficiaries who enroll between the ages of twenty and eighty-five,

who comply with the respective plan's age, enrollment, medical underwriting, and contribution requirements.

(c) [~~The~~] Each board may contract with a carrier to provide fully insured benefits or with a third-party administrator to administer self-insured benefits."

SECTION 23. Section 87A-22, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-22[]] Benefits plan information and enrollment. (a) [~~The~~] Each board shall make information summarizing approved benefits plans available to each employee-beneficiary[.] covered by the respective benefits plan. The information [~~shall~~], to the extent reasonably possible, shall be distributed to each employee-beneficiary covered by a benefits plan at the same time and in the same manner.

(b) [~~The~~] Each board shall establish conditions and procedures for benefits plan enrollment."

SECTION 24. Section 87A-24, Hawaii Revised Statutes, is amended to read as follows:

"§87A-24 Other powers. In addition to the power to administer the fund, [~~the~~] each board may:

(1) Collect, receive, deposit, and withdraw money on behalf of the fund;

(2) Invest moneys in the same manner specified in section 88-119(1)(A), (1)(B), (1)(C), (2), (3), (4), (5), (6), and (7);

(3) Hold, purchase, sell, assign, transfer, or dispose of any securities or other investments of the fund, as well as the proceeds of those investments and any money belonging to the fund;

(4) Appoint, and at pleasure dismiss, an administrator and other fund staff. The administrator and staff shall be exempt from chapter 76 and shall serve under and at the pleasure of the board; provided that this paragraph shall not apply to the Hawaii public employee health benefits trust fund;

(5) Make payments of periodic charges and pay for reasonable expenses incurred in carrying out the purposes of the fund;

(6) Contract for the performance of financial audits of the fund and claims audits of its insurance carriers;

(7) Retain auditors, actuaries, investment firms and managers, benefit plan consultants, or other professional advisors to carry out the purposes of this chapter;

(8) Establish health benefits plan and long-term care benefits plan rates that include administrative and other expenses necessary to effectuate the purposes of the fund; and

(9) Require any department, agency, or employee of the State or counties to furnish information to the board to carry out the purposes of this chapter."

SECTION 25. Section 87A-25, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-25[]] Other duties. [~~The~~] Each board shall:

(1) Authorize charges and payments from the fund only upon vouchers countersigned by the chairperson and any other person designated by the board;

(2) Maintain accurate records and accounts of all financial transactions of the fund that shall be audited annually and summarized in an annual report to the governor and legislature;

(3) Maintain suitable and adequate records and provide information requested by State and county employers as necessary to carry out the purpose of the fund;

(4) Procure fiduciary liability insurance and error and omissions coverage for all trustees; and

(5) Procure a fidelity bond of a reasonable amount for the chairperson and any other person authorized to handle fund moneys."

SECTION 26. Section 87A-26, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-26[]] Rules; policies, standards, and procedures. (a) [~~The~~] Each board may adopt rules for the purposes of this chapter. Rules shall be adopted without regard to chapter 91. Rule-making procedures shall be adopted by [~~the~~] each board and shall minimally provide for:

(1) Consultation with employers and affected employee organizations with regard to proposed rules;

(2) Adoption of rules at open meetings that permit the attendance of any interested persons;

(3) Approval of rules by the governor; and

(4) Filing of rules with the lieutenant governor.

(b) [~~The~~] Each board may also issue policies, standards, and procedures consistent with its rules.

(c) [~~The~~] Each board may adopt rules, without regard to chapter 91, governing dispute resolution procedures in the event of impasse in decision-making; provided that the rules shall be adopted with the concurrence of six trustees."

SECTION 27. Chapter 87A, Hawaii Revised Statutes, is amended by amending the title of part IV to read as follows:

"Part IV. HAWAII PUBLIC EMPLOYEE HEALTH BENEFITS Trust Fund"

SECTION 28. Section 87A-30, Hawaii Revised Statutes, is amended to read as follows:

"§87A-30 Hawaii [~~employer-union~~] public employee health benefits trust fund; establishment. There is established outside the state treasury, a trust fund to be known as the "Hawaii [~~Employer-Union~~] Public Employee Health Benefits Trust Fund". The fund shall consist of contributions, interest, income, dividends, refunds, rate credits, and other returns. It is hereby declared that any and all sums contributed or paid from any source to the fund created by this part, and all assets of the fund including any and all interest and earnings on the same, are and shall be held in trust by the board for the exclusive use and benefit of the employee-beneficiaries and dependent-beneficiaries and shall not be subject to appropriation for any other purpose whatsoever. The fund shall be under the control of the board and placed under the department of budget and finance for administrative purposes."

SECTION 29. Section 87A-32, Hawaii Revised Statutes, is amended to read as follows:

"[[]§87A-32[]] State and county contributions; active employees. [~~(a)~~] The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a monthly contribution equal to the amount established under chapter 89C [~~or specified in the applicable public sector collective bargaining agreements, whichever is appropriate,~~] for each of their respective employee-beneficiaries and employee-beneficiaries with dependent-beneficiaries, which shall be used toward the payment of costs of [a] health or other [~~benefits plan;~~] benefit plans; provided that:

(1) The monthly contribution shall be a specified dollar amount;

(2) The monthly contribution shall not exceed the actual cost of a health benefits plan;

(3) If both husband and wife are employee-beneficiaries, the total contribution by the State or the county shall not exceed the monthly contribution for a family plan; and

(4) If the State or any of the counties establish cafeteria plans in accordance with Title 26, United States Code section 125, the Internal Revenue Code of 1986, as amended, and part II of chapter 78, the monthly contribution for those employee-beneficiaries who participate in a cafeteria plan shall be made through the cafeteria plan, and the payments made by the State or counties shall include their respective contributions to the fund and their employee-beneficiary's share of the cost of the employee-beneficiary's health benefits plan.

[(b) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a monthly contribution equal to the amount established under chapter 89C or specified in the applicable public sector collective bargaining agreement, whichever is applicable, for each of their respective employees, to be used toward the payment of group life insurance benefits for each employee.]"

SECTION 30. Section 89-9, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) Negotiations relating to contributions to the [~~Hawaii employer-union health benefits trust fund~~] bargaining unit health benefits trust funds shall be for the purpose of agreeing upon the amounts which the State and counties shall contribute under [~~section 87-4,~~] section 87A-E toward the payment of the costs for [a] health [~~benefits plan, as defined in section 87-1(8), and group life insurance benefits,~~] and other benefit plans, in accordance with section 87A-C, and the parties shall not be bound by the amounts contributed under prior agreements[; provided that section 89-11 for the resolution of disputes by way of arbitration shall not be available to resolve impasses or disputes relating to the amounts the State and counties shall contribute to the Hawaii employer-union health benefits trust fund]."

SECTION 31. Section 89-11, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (c) to read:

"(c) An impasse over the terms of an initial or renewed agreement and the date of impasse shall be as follows:

(1) More than ninety days after written notice by either party to initiate negotiations, either party may give written notice to the board that an impasse exists. The date on which the board receives notice shall be the date of impasse; and

(2) If neither party gives written notice of an impasse and there are unresolved issues on [~~January 31~~] August 31 of [a] the second year [~~in which the agreement is due to expire,~~] of a fiscal biennium, the board shall declare on [~~January 31~~] August 31 that an impasse exists and [~~February 1~~] September 1 shall be the date of impasse."

2. By amending subsection (e) to read:

"(e) If an impasse exists between a public employer and the exclusive representative of bargaining unit (2), supervisory employees in blue collar positions; bargaining unit (3), nonsupervisory employees in white collar positions; bargaining unit (4), supervisory employees in white collar positions; bargaining unit (6), educational officers and other personnel of the department of education under the same salary schedule; bargaining unit (8), personnel of the University of Hawaii and the community college system, other than faculty; bargaining unit (9), registered professional nurses; bargaining unit (10), institutional, health, and correctional workers; bargaining unit (11), firefighters; bargaining unit (12), police officers; or bargaining unit (13), professional and scientific employees, the board shall assist in the resolution of the impasse as follows:

(1) Mediation. During the first twenty days after the date of impasse, the board shall immediately appoint a mediator, representative of the public from a list of qualified persons maintained by the board, to assist the parties in a voluntary resolution of the impasse.

(2) Arbitration. If the impasse continues twenty days after the date of impasse, the board shall immediately notify the employer and the exclusive representative that the impasse shall be submitted to a three-member arbitration panel who shall follow the arbitration procedure provided herein.

(A) Arbitration panel. Two members of the arbitration panel shall be selected by the parties; one shall be selected by the employer and one shall be selected by the exclusive representative. The neutral third member of the arbitration panel, who shall chair the arbitration panel, shall be selected by mutual agreement of the parties. In the event that the parties fail to select the neutral third member of the arbitration panel within thirty days from the date of impasse, the board shall request the American Arbitration Association, or its successor in function, to furnish a list of five qualified arbitrators from which the neutral arbitrator shall be selected. Within five days after receipt of such list, the parties shall alternately strike names from the list until a single name is left, who shall be immediately appointed by the board as the neutral arbitrator and chairperson of the arbitration panel.

(B) Final positions. Upon the selection and appointment of the arbitration panel, each party shall submit to the panel, in writing, with copy to the other party, a final position which shall include all provisions in any existing collective bargaining agreement not being modified, all provisions already agreed to in negotiations, and all further provisions which each party is proposing for inclusion in the final agreement.

(C) Arbitration hearing. Within [~~one hundred twenty~~] sixty days of its appointment, the arbitration panel shall commence a hearing at which time the parties may submit either in writing or through oral testimony, all information or data supporting their respective final positions. The arbitrator, or the chairperson of the arbitration panel together with the other two members, are encouraged to assist the parties in a voluntary resolution of the impasse through mediation, to the extent practicable throughout the entire arbitration period until the date the panel is required to issue its arbitration decision.

(D) Arbitration decision. Within thirty days after the conclusion of the hearing, a majority of the arbitration panel shall reach a decision pursuant to subsection (f) on all provisions that each party proposed in its respective final position for inclusion in the final agreement and transmit a preliminary draft of its decision to the parties. The parties shall review the preliminary draft for completeness, technical correctness, and clarity and may mutually submit to the panel any desired changes or adjustments that shall be incorporated in the final draft of its decision. Within fifteen days after the transmittal of the preliminary draft, a majority of the arbitration panel shall issue the arbitration decision."

3. By amending subsections (g) and (h) to read:

"(g) The decision of the arbitration panel shall be final and binding upon the parties on all provisions submitted to the arbitration panel. [If the parties have reached agreement with respect to the amounts of contributions by the State and counties to the Hawaii employer-union health benefits trust fund by the tenth working day after the arbitration panel issues its decision, the final and binding agreement of the parties on all provisions shall consist of the panel's decision and the amounts of contributions agreed to by the parties. If the parties have not reached agreement with respect to the amounts of contributions by the State and counties to the Hawaii employer-union health benefits trust fund by the close of business on the tenth working day after the arbitration panel issues its decision, the parties shall have five days to submit their respective recommendations for such contributions to the legislature, if it is in session, and if the legislature is not in session, the parties shall submit their respective recommendations for such contributions to the legislature during the next session of the legislature. In such event, the final and binding agreement of the parties on all provisions shall consist of the panel's decision and the amounts of contributions established by the legislature by enactment, after the legislature has considered the recommendations for such contributions by the parties. It is strictly understood that no member of a bargaining unit subject to this subsection shall be allowed to participate in a strike on the issue of the amounts of contributions by the State and counties to the Hawaii employer-union health benefits trust fund.] The parties shall take whatever action is necessary to carry out and effectuate the final and binding agreement. The parties may, at any time and by mutual agreement, amend or modify the panel's decision.

Agreements reached pursuant to the decision of an arbitration panel [~~and the amounts of contributions by the State and counties to the Hawaii employer-union health benefits trust fund, as provided herein,~~] shall not be subject to ratification by the employees concerned. All items requiring any moneys for implementation shall be subject to appropriations by the appropriate legislative bodies and the employer shall submit all such items within ten days after the date on which the agreement is entered into as provided herein, to the appropriate legislative bodies.

(h) Any time frame provided in an impasse procedure, whether an alternate procedure or the procedures in this section, may be [~~modified~~] shortened by mutual agreement of the parties. [~~In the absence of a mutual agreement to modify time frames, any~~] Time frames may not be extended in any impasse procedure. Any delay, failure, or refusal by either party to participate in the impasse procedure shall not be permitted to halt or otherwise delay the process, unless the board so orders due to an unforeseeable emergency. The process shall commence or continue as though all parties were participating."

SECTION 32. Section 103D-102, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) Notwithstanding subsection (a), this chapter shall not apply to contracts made by:

(1) Any regional system board of the Hawaii health systems corporation;

(2) The Kaho‘olawe island reserve commission, except as provided by section 6K-4.5; [or]

[[](3)[]] Except with respect to sections 103D-110, 103D-304 with respect to design professional services furnished by licensees under chapter 464, 103D-324, 103D-707, and 103D-1002, the university or the board of regents of the university[.]; or

(4) Any bargaining unit health benefits trust fund established under section 87A-B, or the Hawaii public employee health benefits trust fund established under section 87A-30."

SECTION 33. Section 87A-5, Hawaii Revised Statutes, is repealed.

["~~§87A-5 Composition of board.~~ ~~The board of trustees of the employer-union health benefits trust fund shall consist of ten trustees appointed by the governor in accordance with the following procedure:~~

~~(1)~~ ~~Five trustees, one of whom shall represent retirees, to represent employee-beneficiaries and to be selected as follows:~~

~~(A)~~ ~~Three trustees shall be appointed from a list of two nominees per trustee selected by each of the three exclusive representative organizations that have the largest number of employee-beneficiaries;~~

~~(B)~~ ~~One trustee shall be appointed from a list of two nominees selected by mutual agreement of the remaining exclusive employee representative organizations; and~~

~~(C)~~ ~~One trustee representing retirees shall be appointed from a list of two nominees selected by mutual agreement of all eligible exclusive representatives; and~~

~~(2)~~ ~~Five trustees to represent public employers.~~

Section 26-34 shall not apply to board member selection and terms. Notwithstanding any other provision of this section, no exclusive representative of a bargaining unit that sponsors or participates in a voluntary employee beneficiary association shall be eligible to select nominees or to be represented by a trustee on the board.

~~As used in this section, the term "exclusive representative" shall have the same meaning as in section 89-2.~~"]

SECTION 34. Section 87A-11, Hawaii Revised Statutes, is repealed.

["~~[§87A-11] Quorum; board actions; voting.~~ ~~(a) Six trustees, three of whom represent the public employer and three of whom represent employee-beneficiaries, shall constitute a quorum for the transaction of business.~~

~~(b) Trustees representing the public employers shall collectively have one vote. Trustees representing the employee-beneficiaries shall collectively have one vote.~~

For any vote of the trustees representing the public employers to be valid, three of these trustees must concur to cast such a vote. In the absence of such concurrence, the trustees representing the public employers shall be deemed to have abstained from voting.

For any vote of the trustees representing the employee-beneficiaries to be valid, three of these trustees must concur to cast such a vote. In the absence of such concurrence, the trustees representing the employee-beneficiaries shall be deemed to have abstained from voting.

~~An abstention shall not be counted as either a vote in favor or against a matter before the board.~~

(c) Any action taken by the board shall be by the concurrence of at least two votes. In the event of a tie vote on any motion, the motion shall fail. Upon the concurrence of six trustees, the board shall participate in dispute resolution."]

SECTION 35. Section 87A-19, Hawaii Revised Statutes, is repealed.

["~~[§87A-19] Plans for part-time, temporary, and seasonal or casual employees.~~ (a) The board may offer medical, hospital, or surgical benefits plans to part-time, temporary, and seasonal or casual employees at no cost to the employers. The board may determine eligibility for part-time, temporary, and seasonal or casual employees by rules exempt from chapter 91 as provided in section 87A-26.

(c) The board may contract for the medical, hospital, or surgical benefits plan or plans. Each part-time, temporary, and seasonal or casual employee enrolled for medical, hospital, or surgical benefits shall pay monthly contributions directly to the board's designated carriers. The monthly contributions may include the carrier's administrative costs."]

SECTION 36. Section 87A-21, Hawaii Revised Statutes, is repealed.

["~~[§87A-21] Eligibility.~~ (a) The board shall establish eligibility criteria to determine who can qualify as an employee-beneficiary, dependent-beneficiary, or qualified-beneficiary, consistent with the provisions of this chapter.

~~(1)~~ ~~Regardless of whether the retired member was actively employed by the State or county at the time of the retired employee's retirement; and~~

~~(2)~~ ~~Without regard to the date of the retired member's retirement.~~

~~(c) A dependent of a retired member shall be eligible to qualify as an employee-beneficiary or dependent-beneficiary:~~

~~(1)~~ ~~Regardless of whether the retired member was actively employed by the State or county at the time of the retired employee's retirement; and~~

~~(2)~~ ~~Without regard to the date of the retired member's retirement.~~"]

SECTION 37. Section 87A-23, Hawaii Revised Statutes, is repealed.

["~~§87A-23 Health benefits plan supplemental to medicare.~~ ~~The board shall establish a health benefits plan, which takes into account benefits available to an employee-beneficiary and spouse under medicare, subject to the following conditions:~~

~~(1)~~ There shall be no duplication of benefits payable under medicare. The plan under this section, which shall be secondary to medicare, when combined with medicare and any other plan to which the health benefits plan is subordinate under the National Association of Insurance Commissioners' coordination of benefit rules, shall provide benefits that approximate those provided to a similarly situated beneficiary not eligible for medicare;

~~(2)~~ The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a contribution equal to an amount not less than the medicare part B premium, for each of the following who are enrolled in the medicare part B medical insurance plan: (A) an employee-beneficiary who is a retired employee, (B) an employee-beneficiary's spouse while the employee-beneficiary is living, and (C) an employee-beneficiary's spouse, after the death of the employee-beneficiary, if the spouse qualifies as an employee-beneficiary. For purposes of this section, a "retired employee" means retired members of the employees' retirement system; county pension system; or a police, firefighters, or bandsmen pension system of the State or a county as set forth in chapter 88. If the amount reimbursed by the fund under this section is less than the actual cost of the medicare part B medical insurance plan due to an increase in the medicare part B medical insurance plan rate, the fund shall reimburse each employee-beneficiary and employee-beneficiary's spouse for the cost increase within thirty days of the rate change. Each employee-beneficiary and employee-beneficiary's spouse who becomes entitled to reimbursement from the fund for medicare part B premiums after July 1, 2006, shall designate a financial institution account into which the fund shall be authorized to deposit reimbursements. This method of payment may be waived by the fund if another method is determined to be more appropriate;

~~(3)~~ The benefits available under this plan, when combined with benefits available under medicare or any other coverage or plan to which this plan is subordinate under the National Association of Insurance Commissioners' coordination of benefit rules, shall approximate the benefits that would be provided to a similarly situated employee-beneficiary not eligible for medicare;

~~(4)~~ All employee-beneficiaries or dependent-beneficiaries who are eligible to enroll in the medicare part B medical insurance plan shall enroll in that plan as a condition of receiving contributions and participating in benefits plans under this chapter. This paragraph shall apply to retired employees, their spouses, and the surviving spouses of deceased retirees and employees killed in the performance of duty; and

~~(5)~~ The board shall determine which of the employee-beneficiaries and dependent-beneficiaries, who are not enrolled in the medicare part B medical insurance plan, may participate in the plans offered by the fund."]

SECTION 38. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act, which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 39. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 40. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 41. This Act shall take effect on July 1, 2011; provided that:

(1) Sections 30 and 31 shall take effect upon approval; and

(2) The amendment made to section 103D-102(c), Hawaii Revised Statutes, by this Act shall not be repealed when section 103D-102, Hawaii Revised Statutes, is reenacted on July 1, 2012, by section 14 of Act 175, Session Laws of Hawaii 2009, and on July 1, 2013, by section 4 of Act 159, Session Laws of Hawaii 2010.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	167
TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII