Report Title:

PEHF; Union Benefit Plans; Ported Amount

 

Description:

Requires the health fund to port to the union plans an amount based on the rate for most cost effective plan offered by the fund or actual cost, whichever is less. Defines "actual cost" of plan. Allows rate credits to be used for financial audits of all benefit plans including union plans. (HD1)

 

HOUSE OF REPRESENTATIVES

H.B. NO.

1059

TWENTY-FIRST LEGISLATURE, 2001

H.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to the public employees health fund.

 

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

SECTION 1. The legislature finds that the public employees health fund has been placed at a disadvantage vis-à-vis employee organization health plans due to adverse selection. Smaller-sized families have tended to choose the union plans while larger sized-families receive benefits from the health fund's benefit plans. Costs are greater for active employees with larger families than for smaller families. Employer contribution costs for active employees are also higher because, on average, the employee population with family coverage under the health fund plans is older than those with family coverage under the union plans. In addition, at least two union plans offer "no-cost" options that do not require employee contributions. Instead, they use high-deductible health benefit coverage for the employee and dependents and are designed to be combined with spouse coverage from other than state or county employers. If families are covered under the spouse's employer plan, the combined coverages will generally provide one hundred per cent reimbursement of all costs.

As a result, the public employees health fund is experiencing higher employer costs. However, one area where this imbalance can be rectified involves the porting of moneys to the union plans to purchase coverage under the union's benefit plans pursuant to section 87-22.3(2), Hawaii Revised Statutes. According to the auditor in its 1999 Actuarial Study and Operational Audit of the Hawaii Public Employees Health Fund, the health fund's monthly premium for Hawaii Medical Service Association plan coverage as of June 30, 1998 was $413, as opposed to comparable union plan family coverage of $397 for a difference of $16. In addition, the age distribution of those employees that selected single coverage in a union plan has an expected cost that is lower than the cost of single coverage for those remaining in the health fund. As a result, union plans are expected to cost another $13 less for family coverage and $2 less for single coverage compared to the health fund. In total, there is a difference of $31 between the health fund plans and the union plans.

However, according to the auditor, employer contributions for active employees are generally fixed at sixty per cent of the rate for the plan with the highest enrollment in the health fund, which typically is the Hawaii Medical Service Association plan. It is this amount that is ported to the union plans to pay for benefit plans sponsored by the unions. That is, rather than the $382 cost, which is $31 dollars less than the Hawaii Medical Service Association rate of $413, the health fund ports over the entire amount of $413. Consequently, the union plans have been building up an unknown and as yet unverified amount of reserves at the expense of the health fund.

The purpose of this Act is to require the health fund to port to the union plans an amount based on the rate for the fund's most cost effective benefit plan rather than on the plan with the highest enrollment in the health fund.

SECTION 2. Section 87-22.3, Hawaii Revised Statutes, is amended to read as follows:

"§87-22.3 Determination of health benefits plans. Pursuant to section 87-4, the board of trustees shall provide health benefits to employee-beneficiaries in the following manner:

(1) For those employee-beneficiaries who are not participating in a health benefits plan of an employee organization (hereafter "nonparticipating employee-beneficiaries"), the board of trustees shall establish health benefits plans and the requirements for eligibility under the health benefits plans. Any rate credit or reimbursement from any carrier derived from employee-beneficiary rate contributions to health benefits plans of nonparticipating employee-beneficiaries or interest derived therefrom may be used to improve the respective health benefits plans of nonparticipating employee-beneficiaries or to reduce the employee-beneficiary's respective share of monthly contributions to a health plan[;]. Improving the respective health benefits plans includes the funding of methods and procedures to improve the financial soundness of the health benefits plans, which may include the carrying out of comprehensive financial audits of all health benefit plans, including the benefit plans of employee organizations; or

(2) For employee-beneficiaries who participate in the health benefits plan of an employee organization, the board of trustees shall pay to the employee organization a monthly contribution for the purchase of health fund benefits for each employee-beneficiary[, in the amount provided in section 87-4(a),] based on the most cost effective plan offered by the fund or the actual monthly cost of the coverage provided to employee-beneficiaries by the employee organization, whichever is less[, towards the purchase of health benefits under the health benefits plan of an employee organization]. The board of trustees shall determine which of the fund's plans is the most cost effective plan. The employer contribution shall provide for the same level of benefits, adjusted for demographics including but not limited to age and family size, between the employee-beneficiaries in the plans of the fund, excluding all retirees, and employee-beneficiaries enrolled in the plans of the employee organization. In no case shall the employer contribution exceed sixty per cent of the actual cost of the plan selected by the employee-beneficiary. "Actual cost of the plan" means premiums charged by the insurance carrier less any refunds or dividends paid to the employee organization or the actual claim cost plus administrative fees charged to the employee organization."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.