Public Employees Health Fund

Establishes Employer-Union Trust Fund pilot project to begin in
2002.  Allows for the porting of Medicare Part B to employee
organizations.  Allows Public Employees Health Fund to offer
different benefits to retirants.

THE SENATE                              S.B. NO.           2331
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that Act 146, Session Laws
 2 of Hawaii 1961, established the public employees health fund
 3 ("Health Fund"), later codified as chapter 87, Hawaii Revised
 4 Statutes.  Currently, the Health Fund provides state and county
 5 public employees and their dependents with a health benefits
 6 plan, a dental benefits plan for certain children, a group life
 7 benefit program, and long-term care benefits (although this
 8 program has not yet been funded).  The State and the counties as
 9 employers, and public employees share in the cost of the health
10 benefits through the payment of required monthly contributions to
11 the Health Fund.
12      The legislature, in Act 309, Session Laws of Hawaii 1996
13 (Act 309), stated that:  ". . . the present governance structure
14 to determine and fund health benefits for public employees and
15 retirees is not only cumbersome and inflexible, but does not
16 foster cost-efficiency.  Benefits are statutorily established and
17 administered by an independent board of trustees within a fixed
18 statutory framework.  At the same time, public employer
19 contributions for these health benefits are negotiated separately

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 1 through collective bargaining agreements with public employee
 2 organizations.  Consequently, there is little connection between
 3 benefit levels and costs, and limited latitude to design benefit
 4 packages that minimize costs and better meet the health care
 5 needs of employees."  Act 309 further stated that ". . . public
 6 employers and public employee organizations should be involved in
 7 determining health care coverage and costs because health
 8 benefits have not only become a significant component of the
 9 total compensation package for public employees, but represent a
10 significant cost to public employers.  The employer-union trust
11 concept for determining and administering health benefits
12 provides a mechanism for linking benefit levels and costs, as
13 well as the necessary flexibility to establish appropriate health
14 benefits coverage."
15      Toward this end, Act 309 required the director of finance to
16 establish a committee comprised of representatives from state and
17 county public employers and public employee organizations to
18 develop and recommend a proposal to implement an employer-union
19 trust concept for determining and administering public employee
20 and retiree health benefits ("employer-union trust concept
21 committee").  The proposal was to include a suggested trust
22 structure and necessary statutory changes to chapters 87 and 89,
23 Hawaii Revised Statutes.  Although Act 309 required the director

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 1 of finance to report to the legislature prior to the convening of
 2 the 1997 Regular Session, no report was submitted.  In subsequent
 3 years, legislation has been introduced to alter the composition
 4 of the committee and to extend its term to allow for continued
 5 discussion on the issue with the hope of someday obtaining a
 6 recommendation.  Meanwhile, the legislature is keenly aware that
 7 a large number of "baby boomers" are approaching retirement, the
 8 increasing cost of health care, and the retirees' increased life
 9 expectancy threatens the future financial stability of the
10 current "pay-as-you-go" funding method.  Based on these findings,
11 the legislature believes that the time has come to effectuate
12 significant change in the provision of health care benefits for
13 its employees, retirees, and beneficiaries.
14      In the meantime, the legislature is committed to making the
15 health benefits plan of the public employees health fund more
16 competitive with other health benefits plans.  To accomplish
17 this, the porting of Medicare Part B reimbursements is crucial to
18 evening out the actuarial experience of the public employees
19 health fund's pool of beneficiaries.  By authorizing the porting
20 of Medicare Part B reimbursements to employee organizations'
21 health benefits plans, retirees have more of an incentive to
22 switch to employee organization health benefits plans if allowed
23 to retain the Medicare Part B reimbursement.

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 1      The purpose of this Act is to establish an employer-union
 2 trust fund pilot project and to allow for the porting of Medicare
 3 Part B reimbursements to employee organization health benefits
 4 plans.
 5      SECTION 2.  (a)  For the purposes of this Act:
 6      "Health fund" means the public employees health fund under
 7 chapter 87, Hawaii Revised Statutes.
 8      "Pilot project" means an employer-union trust fund pilot
 9 project established by the public employees health fund pursuant
10 to this Act.
11      (b)  There is established an employer-union trust fund pilot
12 project to be administered by the health fund.  The pilot project
13 shall commence on July 1, 2002, and shall cease to exist on
14 June 30, 2004, unless otherwise extended by the legislature.
15      (c)  No later than December 31, 2000, the health fund shall
16 establish criteria for the selection of the public sector union
17 for the pilot project and cost-performance guidelines by which
18 the pilot project is to be evaluated.  The health fund, prior to
19 selecting a public sector union to participate in the pilot
20 project, shall submit a report containing the selection criteria
21 and cost-performance guidelines to the legislature prior to the
22 convening of the 2001 regular session.  By June 30, 2001, the
23 health fund shall select one public sector union to establish the

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 1 employer-union trust fund under the pilot project.
 2      (d)  Upon the selection of the public sector union as
 3 provided under subsection (c), the health fund shall allocate to
 4 the employer-union trust fund the total sum of money owing to its
 5 employee-beneficiaries from any rate credits or reimbursements
 6 from any carrier or self-insured plan or any earning or interest
 7 derived therefrom.  The employee-beneficiaries of the employer-
 8 union trust fund shall include all the members of the selected
 9 public sector union, including retirees.
10      (e)  Notwithstanding the contribution deposit requirements
11 of chapter 87, Hawaii Revised Statutes, for the purposes of
12 effectuating the pilot project, the health fund, for the time
13 period in which the pilot project is in effect, shall port to the
14 employer-union trust fund all contributions made by public
15 employers and employee-beneficiaries to the health fund for
16 employee-beneficiaries who are members of the selected public
17 sector union.
18      (f)  At least twenty days prior to the 2003 and 2004 regular
19 sessions, the health fund shall report to the legislature on the
20 status and efficacy of the pilot project.  These reports shall
21 include information on cost/benefit comparisons between health
22 fund plans and the pilot project plans and employee-beneficiary
23 satisfaction with the health benefits plans offered by the pilot

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 1 project.
 2      (g)  Upon completion of the pilot project, the provision of
 3 health benefits of the employee-beneficiaries participating in
 4 the pilot project shall revert to the employee-beneficiaries'
 5 choice of health benefits plans offered by the health fund."
 6      SECTION 3.  Section 87-22, Hawaii Revised Statutes, is
 7 amended by amending subsection (b) to read as follows:
 8      "(b)  The board may contract for the following health
 9 benefits plans[; provided that benefits provided under any
10 respective plan shall be equally available to all employee-
11 beneficiaries and dependent-beneficiaries selecting the plan
12 regardless of age,] as provided for below:
13      (1)  An indemnity benefit plan or plans under which a
14           carrier agrees to pay certain sums of money not in
15           excess of the actual expenses incurred for health
16           services;
17      (2)  A service benefit plan or plans under which payment is
18           made by a carrier under contracts with physicians,
19           hospitals, or other providers of health services or,
20           under certain conditions, payment is made by a carrier
21           to an employee-beneficiary;
22      (3)  Health maintenance organization plans, which provide or
23           arrange health services for members on a prepaid basis,

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 1           with professional services provided by physicians
 2           practicing individually or as a group in a common
 3           center or centers;
 4      (4)  Plans to offer dental benefits through an indemnity
 5           plan or plans, a service benefit plan or plans, dental
 6           maintenance organization plans, or combinations
 7           thereof;
 8      (5)  Plans to offer prescription drug benefits through an
 9           indemnity plan or plans, a service benefit plan or
10           plans, health maintenance organization plans, or
11           combinations thereof;
12      (6)  Plans to offer vision care benefits through an
13           indemnity plan or plans, a service benefit plan or
14           plans, health maintenance organization plans, or
15           combinations thereof; or
16      (7)  A noninsured schedule of benefits similar to any of the
17           schedule of benefits set forth in the health benefits
18           plans authorized in paragraphs (1) to (6)."
19      SECTION 4.  Section 87-27, Hawaii Revised Statutes, is
20 amended to read as follows:
21      "87-27  Supplemental plan to federal Medicare.  Any other
22 provision of this chapter notwithstanding, the board of trustees
23 shall establish, effective July 1, [[]1966[]], a health benefit

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 1 plan which takes into account benefits available to an employee-
 2 beneficiary and spouse under the federal Medicare plan, subject
 3 to the following conditions:
 4      (1)  There shall be no duplication of benefits payable under
 5           federal Medicare but the plan so established by the
 6           board shall be supplemental to the federal Medicare
 7           plan;
 8      (2)  The contribution for voluntary medical insurance
 9           coverage under federal Medicare may be paid by the
10           fund, in such manner as the board shall specify, in the
11           case of an employee-beneficiary who is a retired
12           employee, and spouse while the employee-beneficiary is
13           living, including members of the old pension system and
14           after death the employee-beneficiary's spouse provided
15           the spouse qualifies as an employee-beneficiary;
16           provided that the counties, through their respective
17           departments of finance, shall reimburse the fund for
18           any contributions made for county employee-
19           beneficiaries under this paragraph[;].  In the case of
20           an employee-beneficiary who is a retired employee, and
21           spouse who participates in the supplemental plan to
22           federal Medicare of an employee organization, the
23           employee-beneficiary shall be entitled to the same

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 1           amount paid by the fund to employee-beneficiaries who
 2           participate in the supplemental plan to federal
 3           Medicare established by the fund and who have enrolled
 4           in the voluntary medical insurance coverage under the
 5           federal Medicare plan;
 6      (3)  The benefits available under the plan, when taken
 7           together with the benefits available under the federal
 8           Medicare plan shall, as nearly as is possible,
 9           approximate the benefits available under the plans set
10           forth in section 87-22.  If, for any reason, a
11           situation develops where the benefits available under
12           the supplemental plan and the federal Medicare plan
13           substantially differ from those that would otherwise be
14           available, the board is authorized to correct this
15           inequity to assure substantial equality of benefits;
16      (4)  Notwithstanding any other law to the contrary, all
17           employee-beneficiaries or dependent-beneficiaries who
18           are eligible to enroll in the federal Medicare Part B
19           medical insurance plan shall enroll in that federal
20           plan as a requirement to receive the contributions and
21           to participate in the employee benefit plans described
22           in this chapter.  This paragraph shall pertain to
23           retired employees and their spouses and the surviving

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 1           spouses of deceased retirees and employees killed in
 2           the performance of duty; and
 3      (5)  The board of trustees shall determine which employee-
 4           beneficiaries and dependent-beneficiaries, who are not
 5           enrolled in the federal Medicare Part B medical
 6           insurance plan, may participate in such other plans as
 7           are set forth in section 87-22."
 8      SECTION 5.  Statutory material to be repealed is bracketed.
 9 New statutory material is underscored.
10      SECTION 6.  This Act shall take effect on July 1, 2000;
11 provided that sections 1 and 2 shall be repealed on June 30,
12 2004.
14                           INTRODUCED BY:  _______________________