STAND. COM. REP. 1084

Honolulu, Hawaii

, 2003

RE: S.B. No. 789

S.D. 1

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Labor and Public Employment, to which was referred S.B. No. 789, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO PUBLIC EMPLOYEE HEALTH BENEFITS,"

begs leave to report as follows:

The purpose of this bill is to allow more time for an orderly transition from the Hawaii Public Employees Health Fund (Employees Health Fund) to the Hawaii Employer Union Health Benefits Trust Fund (Employer Trust Fund) established under Act 88, Session Laws of Hawaii 2001, by extending from July 1, 2003, to July 1, 2004, the date at which various transfers from the Employees Health Fund to the Employer Trust Fund are required to take place.

Your Committee circulated a proposed House Draft 1 for public review and comment. The proposed S.B. No. 789, H.D. 1 would:

    1. Restore health fund benefits to retirees that were previously adjusted pursuant to the enactment of Act 88, SLH 2001, which created the Employer Trust Fund;
    2. Require annual audits of employee organization health benefit plans; and

(3) Require the employer contribution cap on monthly contributions for retiree health benefit plans under the Employer Trust Fund to be adjusted annually, beginning July 1, 2002.

The Employer Trust Fund, Retirees Unit HGEA-AFSCME Local 152, Hawaii State Teachers Association, Hawaii State Retired Teachers Association, and a concerned citizen supported this bill. The Department of Budget and Finance submitted testimony in opposition to the bill. Oahu Retired Teachers Association offered comments.

Your Committee has learned from the Employer Trust Fund that it is on schedule to begin providing health benefits on July 1, 2003, and your Committee therefore finds it unnecessary to amend related sections of the Employees Health Fund to provide a transitional delay.

The Employer Trust Fund has informed your Committee that on March 13, 2003, its Board of Trustees approved health benefits and corresponding premium rates for plans effective July 1, 2003, and July 1, 2004. Your Committee has also been informed that the Employer Trust Fund contribution caps for retiree health benefits for plans taking effect on July 1, 2003, are sufficient and will cover 100 per cent of retiree premium costs.

However, with respect to plans taking effect on July 1, 2004, the Employer Trust Fund testified that retiree premium rates could increase by as much as 21 per cent. With the current employer contribution caps in place, it is likely that retirees will face either paying a portion of the increased premium rates or a reduction in health benefits. Your Committee is extremely concerned about the absorption of a 21 per cent increase by retirees, most of whom may be living on a fixed income.

Accordingly, your Committee has determined that an adjustment to the Employer Trust Fund contribution caps for retiree health benefits is needed beginning July 1, 2004. Thereafter, beginning July 1, 2005, your Committee finds that the contribution caps should be adjusted annually. Your Committee believes the adjustments are needed to ensure that the contribution caps remain commensurate with the rising costs of health care.

However, bearing in mind the cost containment objectives of Act 88, SLH 2001, your Committee also wishes to adopt the amendments proposed by the Department of Budget and Finance.

Upon further consideration, your Committee has amended this measure by deleting its contents and inserting the provisions concerning employer contributions for health benefit plans. As amended, this bill, among other things:

    1. Establishes a schedule of caps on the base monthly employer contribution rates for employee-beneficiary health benefit plans to take effect on July 1, 2004;

(2) Prohibits monthly contributions by the State or county from exceeding the actual cost of the health benefit plan or plans;

(3) Establishes that the monthly contributions by the State or county shall not be required to cover benefits above those initially contracted for by the Employer Trust Fund for plan year 2004-2005;

(4) Clarifies that the employer’s base composite monthly contribution shall be adjusted annually, beginning July 1, 2005;

(5) Requires the adjusted base monthly contribution to be computed using the actual contracted premium rate as of July 1, 2004, for Medicare and non-Medicare, self and family health benefit plans with the highest actual contracted premium rate as of July 1, 2004; and

(6) Appropriates $12,500,000 for additional state employer contributions for state retiree health benefit plans.

As affirmed by the record of votes of the members of your Committee on Labor and Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 789, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 789, S.D. 1, H.D. 1, and be referred to the Committee on Finance.

 

Respectfully submitted on behalf of the members of the Committee on Labor and Public Employment,

 

____________________________

MARCUS R. OSHIRO, Chair