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

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  In a recent audit of the Hawaii public employees
 2 health fund, the legislative auditor found that from fiscal year
 3 1995-96 to fiscal year 1997-98, employer contributions rose from
 4 approximately $235,300,000 to $262,600,000; the cost to provide
 5 health benefits for active employees and retirees and post-
 6 retirement health benefit liability increased dramatically over
 7 the past decade; and as of July 1, 1998, the state's and
 8 counties' accrued liability for future retiree health benefits
 9 under current plans is estimated at $4,500,000,000.  By the year
10 2013, the legislative auditor's actuary estimated liability for
11 post-retirement health benefits to be $11,400,000,000.  The
12 annual pay-as-you-go employer costs for retiree benefits would be
13 $455,900,000 in the year 2013.
14      Health benefits have become a significant cost to public
15 employers and action is required to contain these rising health
16 fund benefit costs.
17      SECTION 2.  For the benefit plan year commencing July 1,
18 2001, the board of trustees for the public employees health fund
19 shall:

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 1      (1)  Not enter into contracts for or offer the basic major
 2           medical plan;
 3      (2)  Enter into contracts for and offer Preferred Provider
 4           Organization Plans (PPO) for medical benefits for
 5           actives and retirees ineligible for medicare;
 6      (3)  Enter into contracts for Medicare+Choice Plans for
 7           medicare-eligible retirees and their medicare-eligible
 8           spouses; medicare-eligible retirees with medicare-
 9           ineligible dependent beneficiaries shall continue to be
10           offered the Medicare Supplemental Plan pursuant to
11           section 87-27, Hawaii Revised Statutes;
12      (4)  Enter into contracts for drug benefit plans with
13           premiums based on inclusion of a closed formulary for
14           federally approved health maintenance organization
15           plans and a co-payment plus a differential for non-
16           preferred brand name drugs based on an open formulary
17           for service benefit plans; and
18      (5)  Revise the methodology to compute carrier payments
19           under service benefit medicare supplemental plans to no
20           more than what the carrier would pay under service
21           benefit non-medicare retiree plans.
22      SECTION 3.  The board shall continue to consider strategies
23 or other alternatives to control the rising cost of providing

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 1 health benefits.
 2      SECTION 4.  This Act shall take effect upon its approval.
 4                           INTRODUCED BY:_________________________

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