S.C.R. NO.



S.D. 1








WHEREAS, in 1974, in an effort to ensure that the working people of Hawaii had access to adequate health care, the Legislature passed Act 210, Session Laws of Hawaii 1974, which has been codified as chapter 393, Hawaii Revised Statutes, and is known as the Hawaii Prepaid Health Care Act (PHCA); and

WHEREAS, the PHCA mandates employers to provide adequate prepaid health care coverage to employees working at least twenty hours per week; and

WHEREAS, since its enactment, the PHCA has accomplished a great deal in terms of providing adequate health care coverage for the working people of Hawaii, defining a basic health care coverage benefits package long before the idea became a standard, and enfranchising thousands of people; and

WHEREAS, notwithstanding its accomplishments, the history of the PHCA has not always been filled with universal enthusiastic support; and

WHEREAS, an example of this is when the U.S. Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA) only three months after the enactment of the PHCA; and

WHEREAS, with the enactment of ERISA, mandatory employee health care coverage in Hawaii soon found itself on a collision course with federal law; and

WHEREAS, in 1977, Standard Oil Company of California, a self-insured employer with workers in Hawaii, filed suit in federal court, essentially questioning whether self-insured employers were subject to state regulation of employee benefits; and

WHEREAS, the court found in favor of Standard Oil and held that ERISA preempted the PHCA; and

WHEREAS, Hawaii sought and successfully obtained a waiver exempting the PHCA from ERISA preemption when President Ronald Reagan signed a bill into law that approved the exemption in 1983; and

WHEREAS, although the waiver exempted the PHCA from ERISA, it also specifically prohibited any changes to the Act after September 2, 1974, other than those changes that might improve "effective administration"; and

WHEREAS, this exemption essentially froze the PHCA in the form it was passed in 1974; and

WHEREAS, the frozen status of the PHCA has generated controversy to the extent that some argue that the federal exemption does not allow the PHCA to evolve with the times; and

WHEREAS, during public hearings of the Mandated Benefits Advisory Task Force (Task Force), which was convened pursuant to H.C.R. No. 129 (2001), the Task Force was made aware of the problems associated with the PHCA; and

WHEREAS, the Task Force found that these issues merit an in-depth examination and review of the PHCA, and some of the specific issues raised in its deliberations include:

(1) The requirement that the employee's share for health care premiums is fixed at 1.5 percent of the employee's wages; provided that if the employee's contribution is less than one-half of the premium, the employer is liable for the remaining portion of the premium;

(2) The requirement that the employee not have to pay a premium higher than what is provided by the contractor providing the prevailing coverage of the type of health care plan; and

(3) The process by which the Prepaid Health Care Advisory Council recommends the approval of prepaid health care plans; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-first Legislature of the State of Hawaii, Regular Session of 2002, the House of Representatives concurring, that the Insurance Commissioner is requested to convene a task force to review and examine the effectiveness of the PHCA (PHCA Task Force); and

BE IT FURTHER RESOLVED that the Insurance Commissioner be a member of the PHCA Task Force, serve as chair of the PHCA Task Force, and appoint no more than sixteen PHCA Task Force members; and

BE IT FURTHER RESOLVED that at least one representative from each of the following interests be appointed as a member of the PHCA Task Force; provided that members of other groups may also be appointed:

(1) The Department of Labor and Industrial Relations;

(2) The Department of Health;

(3) Hawaii's congressional delegation;

(4) A mutual benefit society that provides health insurance under chapter 432, Hawaii Revised Statutes;

(5) A health maintenance organization that holds a certificate of authority under chapter 432D, Hawaii Revised Statutes;

(6) A business organization that represents small businesses with twenty or fewer employees;

(6) An organization that represents sole proprietor business interests;


(7) A business organization that represents larger businesses with more than twenty employees;

(8) A labor union that represents public sector employees;

(9) A labor union that represents private sector employees;

(10) A consumer health advocacy organization;

(11) An organization that represents licensed physicians;

(12) An organization that represents alternate complementary care service providers;

(13) The Hawaii Uninsured Project; and

(14) The Healthcare Association of Hawaii; and

BE IT FURTHER RESOLVED that the PHCA Task Force also examine the feasibility of:

(1) Amending the PHCA and the possible effects the amendments could have on Hawaii's ERISA exemption;

(2) Identifying or developing a process to ensure that any amendment to the PHCA does not jeopardize Hawaii's ERISA exemption (e.g., having a federal agency review any proposed amendment and certifying that it will not result in Hawaii losing its ERISA exemption); or

(3) Repealing the Act and alternatives for its replacement; and

BE IT FURTHER RESOLVED that the PHCA Task Force also conduct a comprehensive study on:

(1) The cost and impact of various scenarios and amendments to the PHCA; and

(2) Historical and trend analysis of insurance coverage, wages, employer/employee contributions, cost of health insurance, cost of health care and other local and national factors related to the efficacy and impact of the PHCA; and

BE IT FURTHER RESOLVED that the PHCA Task Force convene a community-based and statewide PHCA Policy Summit consisting of a broad cross-section of business, labor, government, health organizations, community organizations, and health care consumers to solicit feedback and recommendations from those who are directly impacted by the PHCA; and

BE IT FURTHER RESOLVED that the PHCA Task Force submit a report of its findings and recommendations to the Legislature no later than 20 days before the convening of the Regular Session of 2003; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Director of Labor and Industrial Relations, the Insurance Commissioner, and Hawaii's congressional delegation, the Hawaii Uninsured Project, and the Healthcare Association of Hawaii.


Report Title:

Task force to examine the effectiveness of the PHCA.