REPORT TITLE:
Public Employee Hlth Benefits


DESCRIPTION:
Creates health benefit board serving both public employers &
employees with flexible powers to terminate certain coverages.
Limits employer contributions for active and retired employees
based on legislative appropriations.  Repeals existing PEHF law.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1869
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO PUBLIC EMPLOYEE HEALTH BENEFITS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that health benefits are a
 
 2 significant component of the total compensation package for
 
 3 public employees and a significant cost to public employers.  The
 
 4 large number of baby boomers approaching retirement, increasing
 
 5 health care costs, and retirees' increased life expectancies have
 
 6 raised concerns about the future financial stability of the
 
 7 current pay-as-you-go funding method of the Hawaii public
 
 8 employees health fund.
 
 9      Established by chapter 87, Hawaii Revised Statutes, the
 
10 health fund is a trust fund attached to the department of budget
 
11 and finance for administrative purposes.  The health fund is
 
12 controlled by a nine-member board of trustees appointed by the
 
13 governor.  The director of finance is an ex officio member of the
 
14 board and custodian of the fund.  The board negotiates employee
 
15 benefit plan contracts with insurance carriers and oversees
 
16 enrollment and financial operations.
 
17      The health fund provides health benefits, including medical,
 
18 hospital, surgical, prescription drug, vision, dental, and life
 
19 insurance benefits, and Medicare Part B premium reimbursement, to
 

 
Page 2                                                     1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 eligible active state and county employees, retirees, and their
 
 2 dependents.
 
 3      Each month, the health fund receives contributions from
 
 4 employers and employees for health benefits.  From fiscal year
 
 5 1995-1996 to fiscal year 1997-1998, employer contributions rose
 
 6 from approximately $235.3 million to $262.6 million and employee
 
 7 contributions declined from about $39.2 million to $32.2 million
 
 8 because of the large migration of employees from the health fund
 
 9 plans to the union plans.  As of July 31, 1997, a total of 77,478
 
10 active employees and retirees were enrolled in medical plans.  Of
 
11 these, about sixty-six per cent were enrolled in the health fund
 
12 medical plans and about thirty-four per cent in union medical
 
13 plans.  Among active employees, 22,973 or about forty-eight per
 
14 cent, were enrolled in the health fund's medical plan, while
 
15 25,403, nearly fifty-three per cent, were enrolled in union
 
16 medical plans.  Each month, the health fund "ports," or
 
17 transfers, to the union health plans the employer contributions
 
18 for the employees enrolled in the union plans.
 
19      Three medical plans are offered:  a fee-for-service medical
 
20 plan through the Hawaii Medical Service Association and two
 
21 health maintenance organization plans, Kaiser Permanente, and
 
22 Kapi'olani HealthHawaii.  Eligible employees and retirees can
 

 
 
 
Page 3                                                     1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 enroll in a union-sponsored health benefit plan in lieu of a plan
 
 2 provided directly by the health fund.  Thirteen employee
 
 3 organizations or unions sponsor health benefit plans for their
 
 4 members, including the Hawaii Government Employees Association,
 
 5 the United Public Workers, the Hawaii State Teachers Association,
 
 6 the University of Hawaii Professional Assembly, the State of
 
 7 Hawaii Organization of Police Officers, and the Employees
 
 8 Association of the City and County of Honolulu.
 
 9      For employees hired before July 1, 1996, public employers
 
10 pay the entire monthly health care premium for employees retiring
 
11 with ten or more years of credited service.  For those with fewer
 
12 than ten years, employers pay half the monthly premium.
 
13      For employees hired after June 30, 1996 and who retire with
 
14 fewer than ten years of service, public employers pay no
 
15 contributions.  For these later hires retiring with between more
 
16 than ten and less than fifteen years of service, employers pay
 
17 half the retired employees' monthly Medicare or non-Medicare
 
18 premium.  Those with more than fifteen and less than twenty-five
 
19 years of service have seventy-five per cent of their premiums
 
20 paid.  Public employers pay the entire premium for those with
 
21 twenty-five or more years of service.
 
22      Retirees enrolled in both the federal Medicare plan and the
 

 
 
 
Page 4                                                     1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 health fund's Medicare Supplement plan or the Medicare Risk plan
 
 2 receive a monthly Medicare Part B reimbursement from the health
 
 3 fund.  Spouses participate in these retiree benefits as well.
 
 4      The auditor, in a report entitled "Actuarial Study and
 
 5 Operational Audit of the Hawaii Public Employees Health Fund"
 
 6 Report No. 99-20, dated May 1999, found that the presence of
 
 7 union plans competing with the health fund for enrollees will
 
 8 continue to drive state and county costs higher, perhaps by
 
 9 several million dollars a year, because of a phenomenon called
 
10 adverse selection.  The least costly strategy for enrollees is
 
11 the most costly for employers.  The existence of union plans has
 
12 also increased the premium costs for participants enrolled in the
 
13 health fund plans.
 
14      The auditor also found that the health fund's cost to
 
15 provide health benefits for active employees and retirees as well
 
16 as the post-retirement health benefit liability have increased
 
17 dramatically by five-fold over the past decade.  The auditor's
 
18 most likely or intermediate estimate is that as of July 1, 1998,
 
19 the State and counties' accrued unfunded liability for providing
 
20 future retiree health benefits, under the current plans, is $4.5
 
21 billion and the most likely estimate of the unfunded liability
 
22 for the year 2013 is $11.4 billion.
 

 
 
 
Page 5                                                     1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      The auditor made the following recommendations:
 
 2      (1)  Combining the health fund program and all of the union
 
 3           programs into one single overall health benefit
 
 4           program, with an employer/union trust fund approach as
 
 5           a reasonable alternative;
 
 6      (2)  Giving the health fund more authority and flexibility
 
 7           to deal with the dynamics of the health care
 
 8           marketplace, for example, by being able to offer as
 
 9           many and comparable plan choices as the unions and as
 
10           many rate tiers;
 
11      (3)  Giving the health fund the authority to audit union
 
12           health benefit plans;
 
13      (4)  Restructuring the board of trustees of the health fund
 
14           that oversees a single program and thus requiring equal
 
15           representation of government employers and unions where
 
16           members have substantive knowledge of health benefit
 
17           programs and their financing;
 
18      (5)  Considering reducing employer contributions for retiree
 
19           coverage in certain areas, such as the Medicare Part B
 
20           subsidy;
 
21      (6)  Considering Medicare Risk and Medicare + Choice plans;
 
22      (7)  Considering changing benefits for retirees and their
 

 
 
 
Page 6                                                     1869
                                     H.B. NO.           
                                                        
                                                        

 
 1           dependents; and
 
 2      (8)  Considering the implementation of prefunding post-
 
 3           retirement health benefit liability based on actuarial
 
 4           calculations as an alternative to the current pay-as-
 
 5           you-go system.
 
 6      The purpose of this Act is to:
 
 7      (1)  Repeal the present Hawaii public employees health fund
 
 8           law;
 
 9      (2)  Mandate a dual fiduciary role for the new public
 
10           employees health benefit board to enable it to achieve
 
11           cost efficiencies for both public employers and public
 
12           employees by granting the board flexible powers to
 
13           terminate certain coverages under a benefit plan or
 
14           plans; and
 
15      (3)  Limit the contributions of the State and the counties,
 
16           as public employers, for both active employees and
 
17           retired employees, based on the amount of legislative
 
18           appropriations made for the purpose of funding these
 
19           contributions for benefit plan coverage.
 
20      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
21 a new chapter to be appropriately designated and to read as
 
22 follows:
 

 
 
 
Page 7                                                     1869
                                     H.B. NO.           
                                                        
                                                        

 
 1                             "CHAPTER
 
 2               PUBLIC EMPLOYEES HEALTH BENEFIT PLAN
 
 3       -1 Definitions.  Unless the context requires otherwise:
 
 4      "Benefit plan" includes:
 
 5      (1)  Contracts for insurance or other benefit based on life;
 
 6      (2)  Supplemental medical, dental, vision care, and
 
 7           prescription drug insurance;
 
 8      (3)  Group medical, surgical, hospital, or any other
 
 9           remedial care recognized by state law;
 
10      (4)  Long-term care insurance;
 
11      (4)  Related services and supplies; and
 
12      (5)  A noninsured schedule of benefits similar to any of the
 
13           benefits in paragraphs (1) through (4).
 
14      "Board" means the public employees health benefit board.
 
15      "Carrier" means an association, corporation, organization,
 
16 or two or more companies or health care service contractors
 
17 acting pursuant to a joint venture, partnership, or other joint
 
18 means of operation, or a board-approved guarantor of benefit plan
 
19 coverage and compensation, engaged in providing, paying for,
 
20 arranging for, or reimbursing the cost of the benefit plan.
 
21      "Contributions" means money payments made to the fund by the
 
22 state or the county governments or an employee-beneficiary or
 

 
 
 
Page 8                                                     1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 qualified-beneficiary.
 
 2      "Dependent" means an employee's spouse and any unmarried
 
 3 child under the age of nineteen, including an adopted child,
 
 4 stepchild, foster child, or recognized natural child or unmarried
 
 5 child regardless of age who is incapable of self-support because
 
 6 of a mental or physical incapacity which existed prior to the
 
 7 unmarried child's reaching the age of nineteen.
 
 8      "Employee" means an officer or employee of the state or
 
 9 county governments or the legislature,
 
10      (1)  Including:
 
11           (A)  An elective officer or a person who has served as
 
12                a member of the legislature for at least ten
 
13                years;
 
14           (B)  A per diem employee;
 
15           (C)  An officer or employee under an authorized leave
 
16                of absence;
 
17           (D)  An employee of the Hawaii national guard although
 
18                paid from federal funds;
 
19           (E)  A retired member of the employees retirement
 
20                system, the county pension system, or the police,
 
21                firefighters, or bandsmen pension system of the
 
22                State or county;
 

 
 
 
Page 9                                                     1869
                                     H.B. NO.           
                                                        
                                                        

 
 1           (F)  A salaried and full-time member of a board,
 
 2                commission, or agency appointed by the governor or
 
 3                the mayor of a county; and
 
 4           (G)  A person employed by contract for a period not
 
 5                exceeding one year, where the director of human
 
 6                resources development, personnel services, or
 
 7                civil service has certified that the service is
 
 8                essential or needed in the public interest and
 
 9                that, because of circumstances surrounding its
 
10                fulfillment, personnel to perform the service
 
11                cannot be obtained through normal civil service
 
12                recruitment procedures;
 
13      (2)  But excluding:
 
14           (A)  A designated beneficiary of a retired member of
 
15                the employees retirement system, the county
 
16                pension system, or the police, firefighters, or
 
17                bandsmen pension system of the State or county;
 
18           (B)  Except as allowed under paragraph (1)(G), a person
 
19                employed temporarily on a fee or contract basis;
 
20                and
 
21           (C)  A person employed for less than three months or
 
22                whose employment is less than one-half of a full-
 

 
 
 
Page 10                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1                time equivalent position.
 
 2      "Employee-beneficiary" means an employee, the beneficiary of
 
 3 an employee who is killed in the performance of the employee's
 
 4 duty, an employee who retired prior to the establishment of the
 
 5 fund, or the beneficiary of a retired member of the employees
 
 6 retirement system, a county pension system, or a police,
 
 7 firefighters, or bandsmen pension system of the State or county,
 
 8 upon the death of the retired member and, which beneficiary, if a
 
 9 child under the age of nineteen, does not marry, or if a
 
10 surviving spouse, does not remarry; provided that the employee,
 
11 the employee's beneficiary, or the beneficiary of the deceased
 
12 retired member is deemed eligible by the board to receive health
 
13 or dental services of a benefit plan or a long-term care benefit
 
14 plan.
 
15      "Employee organization" means any organization of any kind
 
16 in which public employees participate and which exists for the
 
17 primary purpose of dealing with public employers concerning
 
18 grievances, labor disputes, wages, hours, amounts of
 
19 contributions by the State and counties to the Hawaii public
 
20 employees health fund, and other terms and conditions of
 
21 employment of public employees.
 
22      "Fund" means the public employees health benefit fund.
 

 
 
 
Page 11                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      "Long-term care benefit plan" means the long-term care
 
 2 insurance plan or plans as described in section    -16.
 
 3      "Premium" means the monthly or other periodic charge for a
 
 4 benefit plan.
 
 5      "Qualified-beneficiary" means, for purposes of the long-term
 
 6 care benefit plan, a former employee or an employee who is not
 
 7 eligible for benefits due to a reduction in work hours including
 
 8 the employee's spouse or a divorced spouse of an employee or
 
 9 retiree provided the person was enrolled in the plan prior to
 
10 loss of benefits.
 
11         -2 Public employees health benefit board; members;
 
12 term; confirmation; expenses.  (a)  The legislature finds that
 
13 health benefits are an important and integral part of the system
 
14 of compensation for public employees.  It is in the interest of
 
15 the State and all public employees to ensure that public
 
16 employees receive the most cost-effective health benefits
 
17 coverage that meets the needs of public employees.  However, it
 
18 is also in the interest of the State and public employers to
 
19 ensure that this coverage is provided at a reasonable cost that
 
20 does not become an overwhelming financial burden for the people
 
21 of Hawaii, and that purchased coverage represents a fair return
 
22 for employers' contributions.  The legislature also finds and
 

 
 
 
Page 12                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 declares that there is a need to create an entity that
 
 2 recognizes, takes into account, and balances the interests and
 
 3 needs of both public employees and public employers in the
 
 4 provision of health benefits coverage for public employees in the
 
 5 State, as limited by available appropriations.  To accomplish
 
 6 this goal, the purpose of this section is to create the public
 
 7 employees health benefit board.
 
 8      (b)  There is created the public employees health benefit
 
 9 board, attached to the department of budget and finance for
 
10 administrative purposes, consisting of eight members.  The eight
 
11 members shall be appointed by the governor pursuant to section
 
12 26-34, as follows:
 
13      (1)  Four members representing the State and the counties as
 
14           public employers; and
 
15      (2)  Four members appointed from a list of an equal number
 
16           of nominees nominated by the president of the senate
 
17           and the speaker of the house of representatives,
 
18           representing nonmanagement representable employees or
 
19           retirees as follows:
 
20           (A)  One person from the largest bargaining unit under
 
21                chapter 89;
 
22           (B)  One person from the second largest bargaining unit
 

 
 
 
Page 13                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1                under chapter 89; and
 
 2           (C)  Two persons who do not represent bargaining units
 
 3                in either subparagraphs (A) or (B) who shall
 
 4                represent nonmanagement employees or retirees.
 
 5 All appointed members shall each have substantive knowledge of
 
 6 benefit plans including financing and administration.
 
 7      Each member shall serve for four years.  No member shall
 
 8 serve for more than two terms.
 
 9      (c)  A member whose term has expired may continue in office
 
10 as a holdover member until a successor is appointed; provided
 
11 that the holdover member shall not hold office beyond the end of
 
12 the second regular legislative session following the expiration
 
13 of the member's term of office.  Vacancies occurring before the
 
14 expiration of a member's term shall be filled by appointment by
 
15 the governor.  Individuals elected to fill a vacancy shall serve
 
16 only for the remainder of the unexpired term.
 
17      (d)  If three vacancies exist at any one time, no remaining
 
18 member shall resign until at least one vacancy has been filled in
 
19 accordance with this section.
 
20      (e)  A member may be removed by the governor for good cause.
 
21      (f)  Members shall serve without compensation but shall be
 
22 reimbursed for expenses, including travel expenses, necessary for
 

 
 
 
Page 14                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 the performance of their duties.
 
 2      (g)  No person shall serve on the board who has any actual
 
 3 or potential conflict of interest as defined in chapter 84.
 
 4       -3  Officers; quorum; meetings; records.  (a)  The board
 
 5 shall elect from among its members a chairperson, a vice
 
 6 chairperson, and a secretary-treasurer for two-year terms.
 
 7      (b)  Five members of the board shall constitute a quorum,
 
 8 whose affirmative vote shall be necessary for all actions by the
 
 9 board.
 
10      (c)  The board shall meet at times and places specified by
 
11 the call of the chairperson after having given seven days written
 
12 notice; provided that the board shall be exempt from the notice
 
13 requirements under section 92-7 and the requirements relating to
 
14 emergency meetings under section 92-8.  Any two board members may
 
15 call a meeting by giving at least ten days written notice to all
 
16 other board members.  A meeting of the board may be called at any
 
17 time without notice if all members agree.  All board meetings
 
18 shall be open to the public pursuant to chapter 92.  However,
 
19 when it is necessary for the board to receive information that is
 
20 proprietary or confidential, the board may enter into closed
 
21 executive session pursuant to sections 92-4 and 92-5.
 
22      (d)  The board shall keep minutes of all regular and special
 

 
 
 
Page 15                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 meetings pursuant to chapter 92.
 
 2       -4  Powers and duties; rules; extent of coverage and
 
 3 benefits; terms for receipt of benefits; exemption from
 
 4 procurement code; termination of contracts; audit; staff,
 
 5 consultants; investments, payments, and records; bond; attorneys.
 
 6 (a)  The board shall adopt rules in accordance with chapter 91 to
 
 7 carry out the purpose of this chapter, including rules to
 
 8 determine the extent and range of coverage and benefits of any
 
 9 benefit plan or plans for employees and dependents, and the terms
 
10 and conditions for receipt of the coverage and benefits; provided
 
11 that the board shall have the power to issue interim rules which
 
12 shall be exempt from the public notice, public hearing, and
 
13 gubernatorial approval requirements of chapter 91.  The interim
 
14 rules shall be effective for not more than eighteen months from
 
15 the date of adoption.
 
16      (b)  The board shall study all matters connected with the
 
17 providing of adequate benefit plan coverage for public employees
 
18 on the best basis possible with relation both to the welfare of
 
19 the public employees and to the State and the counties as public
 
20 employers.  The board shall have the flexibility to design and
 
21 modify benefits and benefit plans, devise and modify
 
22 specifications, solicit bids or negotiate directly with a carrier
 

 
 
 
Page 16                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 to provide benefits or a benefit plan, analyze carrier responses,
 
 2 and award contracts.  Contracts shall be signed by the
 
 3 chairperson on behalf of the board.
 
 4      (c)  In carrying out its duties under subsection (a), the
 
 5 goal of the board shall be to provide a high quality plan of
 
 6 health and other benefits for public employees at a cost
 
 7 affordable to both the public employers and the public employees.
 
 8      (d)  The board shall not be subject to chapter 103D except
 
 9 for the hiring of attorneys.  The board shall prepare
 
10 specifications, invite bids, and perform acts necessary to award
 
11 benefit plan contracts.  The benefit plan or plans shall be
 
12 exempt from the minimum group requirements of article 10A of
 
13 chapter 431.
 
14      (e)  Notwithstanding any other law to the contrary,
 
15 including chapters 89 and 89C, the board, in accordance with and
 
16 limited by legislative appropriations made by the State for the
 
17 purpose of funding contributions by the State as a public
 
18 employer, for benefit plans for active and retired employees and
 
19 their employee-beneficiaries, shall annually calculate and
 
20 determine the monthly contributions to be made to the fund by the
 
21 State for each year for active and retired employees.  Upon
 
22 making the calculation and determination of the monthly
 

 
 
 
Page 17                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 contribution, the board shall notify the counties through their
 
 2 respective departments of finance of the amount of the monthly
 
 3 public employer contribution.  Notwithstanding sections    -10
 
 4 through    -12, the counties, through their respective
 
 5 departments of finance, shall also limit their monthly public
 
 6 employer contribution to the amount that the board calculates and
 
 7 determines under this subsection.  The board shall be authorized
 
 8 to collect these monthly contribution amounts from the counties
 
 9 through their respective departments of finance.
 
10      (f)  The board shall have the flexibility and authority to
 
11 employ whatever means that are reasonably necessary to carry out
 
12 the purposes of this chapter.  This authority shall include
 
13 authority to seek clarification, amendment, modification,
 
14 suspension, or termination of any agreement or contract that in
 
15 the board's judgment requires such action.
 
16      (g)  Upon providing specific notice in writing to the
 
17 carrier, the affected employee organization or organizations, the
 
18 department of budget and finance, and affected employees and
 
19 employee-beneficiaries, and after affording opportunity for a
 
20 public hearing upon the issues that may be involved, the board
 
21 may enter an order withdrawing approval of any benefit plan.
 
22 Thirty days after entry of the order, the board shall terminate
 

 
 
 
Page 18                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 all benefit plan withholding authorizations of employees and
 
 2 terminate all board-approved participation in that plan.
 
 3      (h)  In addition, the board may:
 
 4      (1)  Collect, receive, deposit, withdraw, money on behalf of
 
 5           the fund;
 
 6      (2)  Make investments subject to the requirements and
 
 7           guidelines identified in sections 88-119 and 88-119.5;
 
 8      (3)  Appoint an administrator and staff necessary to carry
 
 9           out this chapter, subject to the limitations of
 
10           available appropriations and chapters 76 and 77 and
 
11           section 78-1;
 
12      (4)  Conduct or contract to conduct:
 
13           (A)  Financial audits of the fund and claims audits of
 
14                its insurance carriers and pay for reasonable
 
15                expenses incurred.  The audit costs shall be the
 
16                responsibility of the fund and shall be paid from
 
17                the fund's reserves; and
 
18           (B)  Annual audits by an independent certified public
 
19                accountant of the use of amounts ported by the
 
20                fund to any benefit plans offered by employee
 
21                organizations.  These annual audits shall be paid
 
22                by the respective employee organizations;
 

 
 
 
Page 19                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      (5)  Authorize the director of finance to make periodic
 
 2           payments and charges from the fund only upon vouchers
 
 3           countersigned by the chairperson or any other person
 
 4           designated by the board;
 
 5      (6)  Procure a fidelity bond of a reasonable amount for the
 
 6           chairperson and any other person designated by the
 
 7           board to handle money of the fund;
 
 8      (7)  Require any department, agency, or employee of the
 
 9           State and county to furnish information to the board to
 
10           carry out the purposes of this chapter; and
 
11      (8)  Assess a charge to employee-beneficiaries to pay for
 
12           the cost of administering benefit plans and may pay
 
13           some or all of that cost from funds authorized to pay
 
14           general administrative expenses incurred by the fund.
 
15      (i)  When necessary, the board may retain auditors,
 
16 actuaries, attorneys, brokers, benefit plan consultants, or other
 
17 professional advisors, and any other staff to carry out its
 
18 functions.
 
19       -5  Benefit plans for public employees; terms and
 
20 conditions; termination of certain coverages; eligibility rules;
 
21 carriers; options; tiers; union plans; porting; information.(a)
 
22 The board shall contract for a benefit plan or plans, which shall
 

 
 
 
Page 20                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 be excepted from the minimum group requirements of chapter 431,
 
 2 that are best designed to meet the needs and provide for the
 
 3 welfare of both public employees and the State and the counties
 
 4 as public employers.  In considering whether to enter into a
 
 5 contract for a benefit plan, the board shall emphasize:
 
 6      (1)  Employee choice among high quality plans;
 
 7      (2)  A competitive marketplace and cost considerations;
 
 8      (3)  Plan performance and information;
 
 9      (4)  Employer flexibility in plan design and contracting;
 
10      (5)  Quality customer service;
 
11      (6)  Creativity and innovation;
 
12      (7)  Plan benefits as part of total employee compensation;
 
13           and
 
14      (8)  The improvement of employee health.
 
15      (b)  The board, in its absolute discretion and without
 
16 regard to chapters 89 and 89C, shall have the power to terminate
 
17 any of the following coverages under a benefit plan or plans
 
18 provided under this chapter:
 
19      (1)  Prescription drugs;
 
20      (2)  Vision care;
 
21      (3)  Dental care; and
 
22      (4)  Group life insurance;
 

 
 
 
Page 21                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 provided that the board shall give one calendar year prior notice
 
 2 before any termination of coverage to the State and the counties,
 
 3 as public employers, and all eligible employees.
 
 4      (c)  The board shall adopt rules in accordance with chapter
 
 5 91, pursuant to section    -4(a), to establish eligibility
 
 6 requirements for employee-beneficiaries and all other dependents
 
 7 for any benefits authorized under this chapter.
 
 8      (d)  The board may approve more than one carrier for each
 
 9 type of benefit plan contracted for and offered but the number of
 
10 carriers shall be held to a number consistent with adequate
 
11 service to public employees and their dependents.
 
12      (e)  Where appropriate for a contracted and offered benefit
 
13 plan, the board shall provide options for additional coverage for
 
14 employees and their dependents at an additional cost or premium
 
15 to be borne by the employees, with or without state and county
 
16 contributions for that coverage.
 
17      (f)  The board may consider and implement a benefit plan or
 
18 plans that employ as many rate tiers of coverage as are
 
19 appropriate, in order to efficiently segment the market to
 
20 achieve the lowest cost for different rate tiers of coverage.
 
21      (g)  For:
 
22      (1)  Those employee-beneficiaries who are not participating
 

 
 
 
Page 22                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1           in a benefit plan of an employee organization
 
 2           (hereafter "nonparticipating employee-beneficiaries"),
 
 3           the board shall establish benefit plans; or
 
 4      (2)  Employee-beneficiaries who participate in the benefit
 
 5           plan of an employee organization, the board shall pay a
 
 6           monthly contribution for each employee-beneficiary, in
 
 7           the amount provided in section    -10(a), or the actual
 
 8           monthly cost of the coverage, whichever is less,
 
 9           towards the purchase of benefits under the benefit plan
 
10           of an employee organization.
 
11      (h)  Transfer of enrollment from one plan to another shall
 
12 be open to all employees and their dependents under rules adopted
 
13 by the board.  The board shall provide a procedure under which
 
14 any employee may apply to port benefits coverage from the fund's
 
15 health plan to any health plan sponsored by an employee
 
16 organization.
 
17      (i)  The board shall make available to each employee-
 
18 beneficiary summary plan information which will help each
 
19 employee-beneficiary exercise an informed choice among the
 
20 approved benefit plans.  The information on all plans shall be
 
21 distributed to each employee at the same time and in the same
 
22 manner.
 

 
 
 
Page 23                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1       -6  Cafeteria plan options; rules; costs.(a)  In
 
 2 addition to the powers and duties otherwise provided by law to
 
 3 provide employee benefits, the board may provide, administer, and
 
 4 maintain cafeteria plans under which employees may choose among
 
 5 taxable and nontaxable benefits as provided in section 125 of the
 
 6 Internal Revenue Code of 1986, as amended.
 
 7      (b)  In providing cafeteria plans, the board may offer:
 
 8      (1)  Health or dental benefits;
 
 9      (2)  Other insurance benefits;
 
10      (3)  Dependent care assistance;
 
11      (4)  Expense reimbursement;
 
12      (5)  Any other benefit that may be excluded from an
 
13           employee's gross income under the federal Internal
 
14           Revenue Code, such as flexible spending accounts; and
 
15      (6)  Any part or all of the state or county contribution for
 
16           employee benefits in cash to the employee.
 
17      (c)  In developing cafeteria plans under this section, the
 
18 board shall design the plan on the best basis possible with
 
19 relation to the welfare of both public employees and to the State
 
20 and the counties as public employers.
 
21      (d)  If the board offers cafeteria plans, the state or
 
22 county payments shall include the State's and the counties'
 

 
 
 
Page 24                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 respective contributions to the fund and the employee-
 
 2 beneficiary's share of the cost of the benefit plan selected and
 
 3 authorized by the employee-beneficiary through the cafeteria
 
 4 plan.
 
 5      (e)  The board, if it offers flexible spending accounts, may
 
 6 enter into all contracts necessary to establish, administer, and
 
 7 maintain the accounts.  For the purpose of this section,
 
 8 "flexible spending account" and "plan" mean a flexible spending
 
 9 accounts plan for public employees authorized by section 125 of
 
10 the Internal Revenue Code of 1986, as amended, and established in
 
11 accordance with this section.  The contributions, interest
 
12 earned, and forfeited participant balances shall:
 
13      (1)  Be held in trust for the benefit of the participants
 
14           and the plan; and
 
15      (2)  Not be subject to the general creditors of the State.
 
16 The interest earned and forfeited participant balances shall be
 
17 used to defray participant fees and other administrative costs as
 
18 determined by the board.  For the purpose of this subsection,
 
19 "contributions" means the the employee pretax compensation
 
20 reductions contributed to the plan.
 
21      (f)  In providing cafeteria plans, the board shall adopt
 
22 rules in accordance with chapter 91, pursuant to section
 

 
 
 
Page 25                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1    -4(a), to establish and administer the plans.
 
 2      (g)  The board may assess a charge to participating
 
 3 employees to pay the cost of administering the plans and may pay
 
 4 some or all of that cost from funds authorized to pay general
 
 5 administrative expenses incurred by the board.
 
 6      (h)  The board may contract with private organizations for
 
 7 administration of cafeteria plans in accordance with rules.
 
 8       -7  Health benefits for part-time, temporary, and
 
 9 seasonal or casual employees; provision of.(a)  The board may
 
10 offer to part-time, temporary, and seasonal or casual employees,
 
11 at no cost to the employers, a benefit plan or plans that shall
 
12 be exempted from the minimum group requirements of article 10A of
 
13 chapter 431, and that are best designed to meet the needs and
 
14 provide for the welfare of both these employees and the State and
 
15 the counties as public employers.
 
16      (b)  A part-time, temporary, and seasonal or casual employee
 
17 means a person employed for less than three months or whose
 
18 employment is less than one-half of a full-time equivalent
 
19 position.  The board may determine eligibility for part-time,
 
20 temporary, and seasonal or casual employees by rules adopted
 
21 pursuant to chapter 91 and section    -4(a).
 

 
 
 
 
 
Page 26                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      (c)  In offering the benefit plan or plans, the board shall
 
 2 adhere to the requirements of section    -5.
 
 3      (d)  Each part-time, temporary, and seasonal or casual
 
 4 employee enrolled for health benefits shall submit enrollment
 
 5 applications and pay monthly contributions directly to the
 
 6 board's contracted carrier or carriers.  The monthly
 
 7 contributions may include the carrier's administrative costs.
 
 8       -8  Public employees health benefit fund.  There is
 
 9 established a health trust fund to be known as the public
 
10 employees health benefit fund and shall consist of contributions,
 
11 interest, income, dividends, refunds, rate credits, and other
 
12 returns.  The fund shall be under the control of the board and
 
13 placed within the department of budget and finance for
 
14 administrative purposes.  The director of finance shall have
 
15 custody of the fund.
 
16         -9 Purpose of the fund.(a)  The board shall use the
 
17 fund to provide employee-beneficiaries and dependents with a
 
18 benefit plan.  The board may also provide a long-term care
 
19 benefit plan; provided that no State or county contributions
 
20 shall be used to provide long-term care coverage, which shall be
 
21 funded entirely by employee-beneficiary contributions.
 
22      (b)  The board may use the fund, including rate credits or
 

 
 
 
Page 27                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 reimbursements from any carrier or self-insured plan or any
 
 2 earning or interest derived therefrom, to stabilize the
 
 3 respective benefit plan rates or to temporarily finance the fund
 
 4 in the event appropriations are not made in a timely manner.
 
 5 Notwithstanding any law to the contrary, the board may return to
 
 6 the State or the counties for deposit into the appropriate
 
 7 general fund, any rate credit or reimbursement from any carrier
 
 8 or self-insured plan in excess of funds used to stabilize the
 
 9 benefit plan or the long-term care benefit plan costs, or any
 
10 earning or interest derived therefrom.
 
11      (c)  To the extent that state and county contributions are
 
12 provided or received for group life insurance benefits, the board
 
13 shall use the fund to provide these benefits to employee-
 
14 beneficiaries and eligible participants.  To the extent that
 
15 contributions are received from employee-beneficiaries and
 
16 qualified-beneficiaries for long-term care insurance benefits,
 
17 the board shall use the fund to provide long-term care insurance
 
18 benefits to eligible participants.
 
19         -10  State and county contributions to the fund for
 
20 current liabilities.(a)  The director of finance and the
 
21 counties, through their respective departments of finance, shall
 
22 pay to the fund for:
 

 
 
 
Page 28                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      (1)  Active employees, a monthly contribution equal to the
 
 2           amount established under chapter 89C or specified in
 
 3           the applicable public sector collective bargaining
 
 4           agreement, whichever is appropriate, for each of their
 
 5           respective active employees and other employee's
 
 6           beneficiaries, to cover current pay-as-you-go benefit
 
 7           plan costs; provided that:
 
 8           (A)  The monthly contributions shall be limited, as
 
 9                necessary, by the application of section    -4(e);
 
10           (B)  The monthly contribution shall not exceed the
 
11                actual current cost of the benefit plan or plans;
 
12                and
 
13           (C)  The percentage of the total premium cost to be
 
14                contributed by the State and the counties, as
 
15                employers, shall be based on:
 
16                (i)  For nonparticipating employee-beneficiaries,
 
17                     the benefit plan with the highest enrollment;
 
18                     and
 
19               (ii)  For employee-beneficiaries participating in a
 
20                     benefit plan of an employee organization, the
 
21                     lowest cost plan of the employee
 
22                     organization; and
 

 
 
 
Page 29                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      (2)  Retired employees and other retired employee-
 
 2           beneficiaries and their dependent-beneficiaries,
 
 3           monthly contributions to cover current pay-as-you-go
 
 4           benefit plan costs, which contributions shall be
 
 5           limited, as necessary, by the application of section
 
 6              -4(e).
 
 7      (b)  The counties, through their respective departments of
 
 8 finance, shall reimburse the State quarterly each fiscal year for
 
 9 their respective pro rata share of the cost of administering the
 
10 fund for the fiscal year.  Each county's pro rata share shall be
 
11 determined by allocating the amount appropriated for
 
12 administering the fund for the fiscal year, after excluding
 
13 therefrom state and county contributions for health and group
 
14 life insurance benefits, in the same proportion as the aggregate
 
15 annual amount of state and county contributions for such benefits
 
16 as of October 31 of the preceding fiscal year.  The amount of any
 
17 excess or deficiency required to administer the fund shall be
 
18 subtracted from or added to, as the case may be, the amount due
 
19 from each county for the succeeding fiscal year.
 
20      (c)  The director of finance and the counties, through their
 
21 respective departments of finance, shall advance the amount of
 
22 their respective employee-beneficiaries' contributions to the
 

 
 
 
Page 30                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 fund on or before the first day of each month.
 
 2      (d)  Contributions made by the State or the counties shall
 
 3 not be considered as wages or salary and no employee-beneficiary
 
 4 shall have any vested right in or be entitled to receive any part
 
 5 of any contribution made to the fund.
 
 6         -11  State and county contributions to fund for current
 
 7 liabilities; retired employees with fewer than ten years of
 
 8 service.(a)  This section shall apply to state and county
 
 9 contributions to the fund for employees who are retired members
 
10 of the employees retirement system, the county pension system, or
 
11 the police, firefighters, or bandsmen pension system of the State
 
12 or county, who retire after June 30, 1984, with fewer than ten
 
13 years of credited service, excluding sick leave, except those
 
14 hired after June 30, 1996 under section    -12.
 
15      (b)  The director of finance and the counties, through their
 
16 respective departments of finance, shall pay to the fund monthly
 
17 contributions; provided that the monthly contributions shall be:
 
18      (1)  Limited, as necessary, by the application of section
 
19              -4(e); and
 
20      (2)  Not more than one-half of each retired employee and
 
21           dependent's monthly supplemental Medicare plan premiums
 
22           or non-Medicare plan premiums of a benefit plan to
 

 
 
 
Page 31                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1           cover current pay-as-you-go benefit costs.
 
 2      (c)  The director of finance and the counties, through their
 
 3 respective departments of finance, shall advance the amount of
 
 4 their respective retired employees' and dependents' contributions
 
 5 to the fund on or before the first day of each month.
 
 6      (d)  Contributions made by the State or the counties shall
 
 7 not be considered as wages or salary of an employee-beneficiary,
 
 8 and no employee-beneficiary shall have any vested right in or be
 
 9 entitled to receive any part of any contribution made to the
 
10 fund.
 
11         -12  State and county contributions to fund for current
 
12 liabilities; employees hired after June 30, 1996, and retired
 
13 with fewer than twenty-five years of service.(a)  This section
 
14 shall apply to state and county contributions to the fund for
 
15 employees who were hired after June 30, 1996, and who retire with
 
16 fewer than twenty-five years of credited service, excluding sick
 
17 leave; provided that this section shall not apply if an employee
 
18 is hired prior to July 1, 1996, and transfers employment after
 
19 June 30, 1996 nor to any employee who has at least ten years of
 
20 credited service and who has suffered a break in service.  For
 
21 purposes of this section, "transfer" means to leave state or
 
22 county employment and return to state or county employment within
 

 
 
 
Page 32                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 ninety calendar days.
 
 2      (b)  For purposes of this section, if an employee leaves
 
 3 state or county employment and returns to state or county
 
 4 employment after June 30, 1996, when the employee retires, the
 
 5 employee's years of service shall be computed in the same manner
 
 6 as set forth in chapter 88.
 
 7      (c)  The director of finance and the counties, through their
 
 8 respective departments of finance, shall pay to the fund monthly
 
 9 contributions to cover current pay-as-you-go benefit plan costs
 
10 for each retired employee's and dependent's monthly supplemental
 
11 Medicare plan premiums or non-Medicare plan premiums of a benefit
 
12 plan for the following groups; provided that the monthly
 
13 contributions shall be:
 
14      (1)  Limited, as necessary, by the application of section
 
15              -4(e);
 
16      (2)  Not more than fifty per cent for retired employees with
 
17           ten or more years but fewer than fifteen years of
 
18           service; and
 
19      (3)  Be not more than seventy-five per cent for retired
 
20           employees with at least fifteen but fewer than twenty-
 
21           five years of service.
 
22      (d)  The director of finance and the counties, through their
 

 
 
 
Page 33                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 respective departments of finance, shall advance the amount of
 
 2 their respective retired employees' and dependents' contributions
 
 3 to the fund on or before the first day of each month.
 
 4      (e)  Contributions made by the State or the several counties
 
 5 shall not be considered as wages or salary of an employee-
 
 6 beneficiary, and no employee-beneficiary shall have any vested
 
 7 right in or be entitled to receive any part of any contribution
 
 8 made to the fund.
 
 9         -13  Reimbursement for state contributions.  All state
 
10 and county agencies having control of special funds shall
 
11 reimburse the State for contributions made by the State pursuant
 
12 to section    -10 on account of the employees in the agencies
 
13 whose compensation is paid in whole or part from the special
 
14 funds.  All state and county agencies receiving federal funds,
 
15 which may be expended for the purpose of absorbing the
 
16 contributions payable by the State to the fund, shall set aside a
 
17 portion of the federal funds sufficient to reimburse the State
 
18 for contributions made by the State pursuant to section    -10 on
 
19 account of the employees in the agencies whose compensation is
 
20 paid in whole or part from federal funds.
 
21         -14  Contributions by employee-beneficiaries to the fund
 
22 for current liabilities.(a)  Each employee-beneficiary shall
 

 
 
 
Page 34                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 pay a monthly contribution to the fund, to cover current pay-as-
 
 2 you-go benefit liabilities, amounting to the difference between
 
 3 the monthly charge of the benefit plan selected by the employee-
 
 4 beneficiary and the State's and county's contribution to the
 
 5 fund.
 
 6      (b)  Nothing in this section shall prohibit any employee-
 
 7 beneficiary from participating in a cafeteria plan authorized
 
 8 under section 125 of the Internal Revenue Code of 1986, as
 
 9 amended.
 
10      (c)  During the period the benefit plan selected by the
 
11 employee-beneficiary is in effect, the employee-beneficiary shall
 
12 authorize, if otherwise allowed by law, the employee-
 
13 beneficiary's contribution to be withheld and transmitted to the
 
14 fund monthly by the comptroller or finance officer who disburses
 
15 the employee-beneficiary's compensation, pension, or retirement
 
16 pay.  If, however, an employee-beneficiary's contribution to the
 
17 fund is not withheld and transmitted to the fund, the employee-
 
18 beneficiary shall pay the monthly contribution, in the case of:
 
19      (1)  An employee-beneficiary who normally receives the
 
20           employee-beneficiary's compensation from the
 
21           comptroller of the State, directly to the fund by the
 
22           first day of each month; or
 

 
 
 
Page 35                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      (2)  All other employee-beneficiaries, to the respective
 
 2           finance officer from whom the employee-beneficiary
 
 3           normally receives compensation for transmittal to the
 
 4           fund by the first day of each month.
 
 5      (d)  Notwithstanding any other law to the contrary:
 
 6      (1)  The beneficiary of an employee who is killed in the
 
 7           performance of duty;
 
 8      (2)  An employee-beneficiary who retired after June 30,
 
 9           1984, due to a disability as defined in sections 88-79
 
10           and 88-285;
 
11      (3)  An employee-beneficiary who retired before July 1,
 
12           1984;
 
13      (4)  An employee-beneficiary who:
 
14           (A)  Was hired before July 1, 1996;
 
15           (B)  Retired after June 30, 1984; and
 
16           (C)  Who had ten years or more of credited service,
 
17                excluding sick leave; and
 
18      (5)  An employee-beneficiary who was hired after June 30,
 
19           1996, and who retired with twenty-five or more years of
 
20           credited service, excluding sick leave;
 
21 or upon death their beneficiary, including employees who retired
 
22 prior to the establishing of the previous health fund under
 

 
 
 
Page 36                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 chapter 87 and their beneficiaries, or the beneficiary of any
 
 2 employee-beneficiary, may not be required to make any
 
 3 contribution to the fund.  The director of finance and the
 
 4 counties, through their respective departments of finance, shall
 
 5 pay the monthly contributions of the individuals identified in
 
 6 this subsection to cover current pay-as-you-go benefit costs;
 
 7 provided that the monthly contributions shall be limited, as
 
 8 necessary, by the application of section    -4(e).
 
 9      (e)  Subsection (a) notwithstanding, an employee-
 
10 beneficiary's monthly contribution to the fund shall be deemed to
 
11 include the amount which would have been the employee-
 
12 beneficiary's contribution if the employee-beneficiary had not
 
13 elected to participate in the cafeteria plan.
 
14       -15  Long-term care benefit plan; eligibility; contract
 
15 with carrier or third-party administrator; education.(a)  The
 
16 board shall make available one or more fully insured long-term
 
17 care insurance plans to be funded exclusively by the employee-
 
18 beneficiary.  The board shall develop long-term care insurance
 
19 plan design, eligibility criteria, underwriting principles, and
 
20 educational materials in order to allow eligible employees to
 
21 continue to participate in the plan after retirement.  The board
 
22 shall develop effective and cost-effective ways to make the long-
 

 
 
 
Page 37                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 term care insurance plan available.
 
 2      (b)  The plan shall be made available to employee-
 
 3 beneficiaries, their spouses or reciprocal beneficiaries,
 
 4 children, parents and grandparents, in-law parents and
 
 5 grandparents, and qualified-beneficiaries.  The plan shall comply
 
 6 with article 10H of chapter 431.
 
 7      (c)  Notwithstanding any other law to the contrary, the
 
 8 benefits shall be available only to employee-beneficiaries, their
 
 9 spouses or reciprocal beneficiaries, children, parents and
 
10 grandparents, and in-law parents and grandparents, and qualified-
 
11 beneficiaries who enroll between the ages of          and eighty-
 
12 five.  Eligible persons must comply with the plan's age,
 
13 enrollment, medical underwriting, and contribution requirements.
 
14      (d)  The board may contract with a carrier to provide fully-
 
15 insured benefits or a third-party administrator to administer
 
16 self-insured benefits.
 
17      (e)  The board shall implement an education program for
 
18 employees and retired employees that provides information on the
 
19 potential need for long-term care, methods of financing long-term
 
20 care, and the availability of long-term care insurance plans
 
21 offered by the board.
 
22         -16  Contributions by an employee-beneficiary or
 

 


 

Page 38                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 qualified-beneficiary for long-term care benefit plan.(a)
 
 2 During the period the long-term care benefit plan is in effect,
 
 3 the employee-beneficiary shall authorize, if otherwise allowed by
 
 4 law, the employee-beneficiary's contribution to be withheld and
 
 5 transmitted to the fund monthly by the comptroller or finance
 
 6 officer who disburses the employee-beneficiary's compensation,
 
 7 pension, or retirement pay.  If, however, an employee-
 
 8 beneficiary's monthly contribution to the fund is not withheld
 
 9 and transmitted to the fund, the employee-beneficiary shall pay
 
10 the monthly contribution directly to the board's designated
 
11 carrier or third-party administrator by the first day of each
 
12 month.
 
13      (b)  Qualified-beneficiaries shall pay monthly contributions
 
14 directly to the board's designated carrier or third-party
 
15 administrator by the first day of each month.
 
16         -17  Supplemental plan to federal Medicare.  Any other
 
17 provision of this chapter notwithstanding, the board shall
 
18 establish a benefit plan which takes into account benefits
 
19 available to an employee-beneficiary and spouse under the federal
 
20 Medicare plan, subject to the following conditions:
 
21      (1)  There shall be no duplication of benefits payable under
 
22           federal Medicare but the plan so established by the
 

 
Page 39                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1           board shall be supplemental to the federal Medicare
 
 2           plan;
 
 3      (2)  The contribution for voluntary medical insurance
 
 4           coverage under federal Medicare may be paid by the
 
 5           fund, in such manner as the board shall specify, in the
 
 6           case of an employee-beneficiary who is a retired
 
 7           employee, and spouse while the employee-beneficiary is
 
 8           living, including members of the old pension system and
 
 9           after death the employee-beneficiary's spouse provided
 
10           the spouse qualifies as an employee-beneficiary;
 
11           provided that the counties, through their respective
 
12           departments of finance, shall reimburse the fund for
 
13           any contributions made for county employee-
 
14           beneficiaries under this paragraph;
 
15      (3)  The benefits available under the plan, when taken
 
16           together with the benefits available under the federal
 
17           Medicare plan, as nearly as is possible, shall
 
18           approximate the benefits available under the plans set
 
19           forth in section    -5.  If, for any reason, a
 
20           situation develops where the benefits available under
 
21           the supplemental plan and the federal Medicare plan
 
22           substantially differ from those that would otherwise be
 

 
 
 
Page 40                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1           available, the board is authorized to correct this
 
 2           inequity to assure substantial equality of benefits;
 
 3      (4)  Notwithstanding any other law to the contrary, all
 
 4           employee-beneficiaries or dependent-beneficiaries who
 
 5           are eligible to enroll in the federal Medicare Part B
 
 6           medical insurance plan shall enroll in that federal
 
 7           plan as a requirement to receive any benefits under any
 
 8           benefit plan provided under this chapter.  This
 
 9           paragraph shall pertain to retired employees and their
 
10           spouses and the surviving spouses of deceased retirees
 
11           and employees killed in the performance of duty; and
 
12      (5)  The board shall determine which employee-beneficiaries
 
13           and dependent-beneficiaries, who are eligible to enroll
 
14           in the federal Medicare Part B medical insurance plan
 
15           but who are not enrolled, may participate in such other
 
16           plans as are set forth in section    -5.
 
17         -18  Employee organization benefit plans; rate credits;
 
18 return of employer's share.  Notwithstanding any other law to the
 
19 contrary, and in addition to section    -4(h)(4)(B), the board
 
20 shall require employee organization benefit plans to comply with
 
21 the following requirements:
 
22      (1)  Employee organizations that participate in the fund's
 

 
 
 
Page 41                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1           benefit plan and group life insurance program shall
 
 2           return to the fund the approximate employer's share of
 
 3           any rate credits or reimbursements from any carrier or
 
 4           self-insurance plan or any earnings or interest derived
 
 5           therefrom;
 
 6      (2)  By March 31 of each year, each participating employee
 
 7           organization shall submit a report to the board
 
 8           identifying the amount and source of the funds
 
 9           identified in paragraph (1); and
 
10      (3)  Each employee organization plan shall permit the board
 
11           to examine and audit the enrollment and financial
 
12           transactions of their benefit plans to verify each
 
13           participating employee organization's compliance with
 
14           this section."
 
15      SECTION 3.  Section 28-8.3, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "28-8.3  Employment of attorneys.(a)  No department of
 
18 the State other than the attorney general may employ or retain
 
19 any attorney, by contract or otherwise, for the purpose of
 
20 representing the State or the department in any litigation,
 
21 rendering legal counsel to the department, or drafting legal
 
22 documents for the department; provided that the foregoing
 

 
 
 
Page 42                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 provision shall not apply to the employment or retention of
 
 2 attorneys:
 
 3      (1)  By the public utilities commission, the labor and
 
 4           industrial relations appeals board, and the Hawaii
 
 5           labor relations board;
 
 6      (2)  By any court or judicial or legislative office of the
 
 7           State;
 
 8      (3)  By the legislative reference bureau;
 
 9      (4)  By any compilation commission that may be constituted
 
10           from time to time;
 
11      (5)  By the real estate commission for any action involving
 
12           the real estate recovery fund;
 
13      (6)  By the contractors license board for any action
 
14           involving the contractors recovery fund;
 
15      (7)  By the trustees for any action involving the travel
 
16           agency recovery fund;
 
17      (8)  By the office of Hawaiian affairs;
 
18      (9)  By the department of commerce and consumer affairs for
 
19           the enforcement of violations of chapters 480 and 485;
 
20     (10)  As grand jury counsel;
 
21     (11)  By the Hawaiian home lands trust individual claims
 
22           review panel;
 

 
 
 
Page 43                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1     (12)  By the Hawaii health systems corporation or any of its
 
 2           facilities;
 
 3     (13)  By the auditor;
 
 4     (14)  By the office of ombudsman;
 
 5     (15)  By the insurance division;
 
 6     (16)  By the University of Hawaii; [or]
 
 7     (17)  By the public employees health benefit board; or
 
 8     (18)  By a department, in the event the attorney general, for
 
 9           reasons deemed by the attorney general good and
 
10           sufficient, declines, to employ or retain an attorney
 
11           for a department; provided that the governor thereupon
 
12           waives the provision of this section.
 
13      (b)  For purposes of this section the term "department"
 
14 includes any department, board, commission, agency, bureau, or
 
15 officer of the State.
 
16      (c)  Every attorney employed by any department on a full-
 
17 time basis, except an attorney employed by the public utilities
 
18 commission, the labor and industrial relations appeals board, the
 
19 Hawaii labor relations board, the office of Hawaiian affairs, the
 
20 Hawaii health systems corporation, the department of commerce and
 
21 consumer affairs in prosecution of consumer complaints, insurance
 
22 division, the University of Hawaii, the Hawaiian home lands trust
 

 
 
 
Page 44                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 individual claims review panel, the public employees health
 
 2 benefit board, or as grand jury counsel, shall be a deputy
 
 3 attorney general.
 
 4      (d)  All attorneys retained by contract, whether by the
 
 5 attorney general or a department, shall be retained in accordance
 
 6 with chapter 103D."
 
 7      SECTION 4.  Chapter 87, Hawaii Revised Statutes, is
 
 8 repealed.
 
 9      SECTION 5.  All officers and employees whose functions are
 
10 transferred by this Act shall be transferred with their functions
 
11 and shall continue to perform their regular duties upon their
 
12 transfer, subject to the state personnel laws and this Act.
 
13      No officer or employee of the State having tenure shall
 
14 suffer any loss of salary, seniority, prior service credit,
 
15 vacation, sick leave, or other employee benefit or privilege as a
 
16 consequence of this Act, and such officer or employee may be
 
17 transferred or appointed to a civil service position without the
 
18 necessity of examination; provided that the officer or employee
 
19 possesses the minimum qualifications for the position to which
 
20 transferred or appointed; and provided that subsequent changes in
 
21 status may be made pursuant to applicable civil service and
 
22 compensation laws.
 

 
 
 
Page 45                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      An officer or employee of the State who does not have tenure
 
 2 and who may be transferred or appointed to a civil service
 
 3 position as a consequence of this Act shall become a civil
 
 4 service employee without the loss of salary, seniority, prior
 
 5 service credit, vacation, sick leave, or other employee benefits
 
 6 or privileges and without the necessity of examination; provided
 
 7 that such officer or employee possesses the minimum
 
 8 qualifications for the position to which transferred or
 
 9 appointed.
 
10      In the event that an office or position held by an officer
 
11 or employee having tenure is abolished, the officer or employee
 
12 shall not thereby be separated from public employment, but shall
 
13 remain in the employment of the State with the same pay and
 
14 classification and shall be transferred to some other office or
 
15 position for which the officer or employee is eligible under the
 
16 personnel laws of the State as determined by the head of the
 
17 department or the governor.
 
18      SECTION 6.  All appropriations, assets, including funds to
 
19 be refunded to employees and any funds in benefit plans and
 
20 cafeteria plans, records, equipment, machines, files, supplies,
 
21 contracts, books, papers, documents, maps, and other personal
 
22 property heretofore made, used, acquired, or held by the public
 

 
 
 
Page 46                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1 employees health fund and/or the board of trustees of the public
 
 2 employees health fund shall be transferred to the public
 
 3 employees health benefit fund and/or the public employees health
 
 4 benefit board.
 
 5      SECTION 7.  (a)  The governor shall appoint all members of
 
 6 the board of the public employees health benefit fund no later
 
 7 than July 31, 2000.
 
 8      (b)  The board of trustees and the administrator of the
 
 9 public employees health fund shall give all necessary assistance
 
10 to the new members of the public employees health benefit board
 
11 during the transition from the public employees health fund to
 
12 the public employees health benefit fund.
 
13      SECTION 8.  All rules governing the public employees health
 
14 fund under chapter 87, Hawaii Revised Statutes, if not contrary
 
15 to chapter      created under section 2 of this Act and if not
 
16 already superseded by interim rules adopted by the public
 
17 employees health benefit board under section    -4(a), shall
 
18 remain in effect until such time that the public employees health
 
19 benefit board under chapter      adopts permanent rules.
 
20      SECTION 9.  Statutory material to be repealed is bracketed.
 
21 New statutory material is underscored.
 

 
 
 
 
 
Page 47                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 10.  This Act shall take effect on July 1, 2000.
 
 2 
 
 3                         INTRODUCED BY: __________________________
 
 4 
 
 5   _________________________            __________________________
 
 6   
 
 7   _________________________            __________________________
 
 8   
 
 9   _________________________            __________________________
 
10   
 
11   _________________________            __________________________
 
12   
 
13   _________________________            __________________________
 
14   
 
15   _________________________            __________________________
 
16   
 
17   _________________________            __________________________
 
18   
 
19   _________________________            __________________________
 
20   
 
21   _________________________            __________________________
 
22   
 

 
 
 
Page 48                                                    1869
                                     H.B. NO.           
                                                        
                                                        

 
 1   _________________________            __________________________
 
 2   
 
 3   _________________________            __________________________
 
 4   
 
 5   _________________________            __________________________
 
 6   
 
 7   _________________________            __________________________
 
 8   
 
 9   _________________________            __________________________
 
10   
 
11   _________________________            __________________________
 
12   
 
13   _________________________            __________________________
 
14   
 
15   _________________________            __________________________
 
16   
 
17   _________________________            __________________________
 
18   
 
19   _________________________            __________________________