THE SENATE

S.B. NO.

437

THIRTY-FIRST LEGISLATURE, 2021

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO HEALTH CARE INSURANCE.

 

 

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

 


PART I

SECTION 1. The legislature finds that it is in the best interest of the State of Hawaii for each and every state citizen to have publicly provided, high quality, affordable health care. Health care is more than just medical insurance payouts ─ it includes cost-saving, preventive, and early intervention measures to prohibit medical conditions from becoming chronic, permanently disabling, or fatal.

The legislature further finds that Hawaii's current health care insurance system is a disjointed, costly, inefficient, and unnecessarily complicated, multi-payer, private medical insurance model.

Additionally, health care rates are skyrocketing, creating an affordability and accessibility crisis for Hawaii's residents. The two largest cost-drivers of health care in the United States and Hawaii are:

(1) Excessive administrative costs; and

(2) The high cost of prescription drugs.

The legislature further finds that, for more than a quarter of a century, Hawaii was far ahead of most other states and often called itself "the health state" because of the 1974 Hawaii Prepaid Health Care Act. Hawaii was once known for having a low uninsured population of between two and five per cent in 1994.

However, the crisis in health care in the United States has also befallen Hawaii. Today, thousands of Hawaii citizens lack health care coverage, many of whom are children. Many other Hawaii residents are underinsured, unable to use their insurance properly, or even at all, because of increasingly expensive deductibles and out-of-pocket co-payments for outpatient visits, diagnostic tests, and prescription drugs, among other factors under the Patient Protection and Affordable Care Act plans purchased on the individual market and medicare plans. Even well-insured individuals experience problems with their insurers denying, or very reluctantly dispensing, expensive medicines and treatments. About half of all bankruptcies are due to extremely expensive, catastrophic illnesses that are not covered after a certain cap is reached. Other persons are near bankruptcy with their quality of life seriously impacted.

The legislature further finds that a universal, publicly administered, health care-for-all insurance model with one payout agency for caregivers and providers, adapted to meet the unique conditions in Hawaii, would be beneficial for the following reasons:

(1) For union members and their employers, it means taking health care off the negotiating table;

(2) For patients, as taxpayers and insurance premium-payers, it means significant reductions in overall costs, increases in benefits, and the slowing of annual inflation cost increases. It also means a comeback from increasingly uncaring, profit-driven health care to the restoration of human need-driven, mutually respectful and caring patient-doctor-nurse-and other caregiver relationships, which, in earlier times, were fundamental to meaningful health care;

(3) For businesses, large and small, it reduces significant overhead expenses;

(4) For the local economy, it means keeping almost all health care dollars in the State;

(5) For government, it means having one integrated, electronic, health information database for unprecedented planning and cost-containment capabilities. It also means relief from the perceived emerging problem of unfunded liabilities associated with long-term funding of government retiree health care benefits; and

(6) For physicians, nurses, and other caregivers, it means less paperwork, less work stress, and more time with patients.

The legislature further finds that, since 2009, the Hawaii health authority has been working with minimal support from other government agencies to pave the way for adoption of a universal, publicly administered, health care-for-all insurance model with a single payout agency for caregivers and providers, adapted for Hawaii, and that the Hawaii health authority is in great and urgent need of additional support at this time.

The legislature further commends the Hawaii health authority for the authority's research on:

(1) The causes, consequences, and means to mitigate burn-out by physicians and other providers of medical services in the State of Hawaii;

(2) The need to respond to and revise certain compensation practices adopted by health insurers in the State of Hawaii; and

(3) Revisions to other current financial practices relating to healthcare to prepare for adoption of a universal, publicly administered, health care-for-all insurance model with a single payout agency for Hawaii.

SECTION 2. The Hawaii health authority is hereby authorized to continue planning for the adoption of a universal, publicly-administered, health-care-for-all insurance model with a single payout agency for Hawaii and to report to the governor, the legislature, and to the general public at intervals as it finds necessary and appropriate.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $350,000 or so much thereof as may be necessary for fiscal year 2021-2022 and the same sum or so much thereof as may be necessary for fiscal year 2022-2023 for general administration of the Hawaii health authority under this part, including the hiring of an executive director and other staff of the Hawaii health authority, exempt from civil service, as it may deem necessary for the fulfillment of executive functions.

The sums appropriated shall be expended by the Hawaii health authority for the purposes of this part.

PART II

SECTION 4. The legislature finds that, according to the National Conference of State Legislatures, in 2010, forty-six states self-insured or self-funded at least one of their employee health care plans, and at least twenty-nine states self-funded all of their employee health care offerings.

The legislature also finds that self-insured or self-funded plans have a number of potential advantages over fully insured plans. The legislature further finds that many states administering self-insured or self-funded employee health care plans have been able to lower costs, while still maintaining a high level of health benefits.

Hawaii's employer-union health benefits trust fund is currently fully insured, rather than self-insured. However, health care premiums have risen rapidly over the last decade. Therefore, the legislature believes that it is both prudent and essential that the State examine whether converting the employer-union health benefits trust fund to a self-insured model will result in cost savings.

The purpose of this part is to authorize and direct the Hawaii health authority to contract for the provision of healthcare benefits to state and county employees using a self-insured model.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2021-2022 and the same sum or so much thereof as may be necessary for fiscal year 2022-2023 for the purposes of this part.

The sums appropriated shall be expended by the Hawaii health authority for the purposes of this part.

PART III

SECTION 6. The legislature finds that, as of July 2, 2015, the unfunded portion of the actuarial accrued liability of the Hawaii employer-union health benefits trust fund was $11,772,008,000. This is $969,745,000 more than the total revenues for the State for fiscal year 2015.

To address this unfunded liability, Act 268, Session Laws of Hawaii 2013, requires the State and counties to prefund other post-employment health and other benefit plan costs for retirees and their beneficiaries by making annual contributions to the other post-employment benefits trust fund. State, county, and other public employers' annual contributions to the other post-employment benefits trust fund totals $427,299,249, while all assets of the trust fund total $2,370,481,565, for fiscal year 2018.

Meanwhile, the State, counties, and other public employers are also required to make payments to cover a portion of pay-as-you-go Hawaii employer-union health benefits trust fund costs. Clearly, given current and projected revenues, the State and the counties cannot afford to prefund both health and pension unfunded liabilities, which are projected to total more than $800,000,000 per year in later years. A more affordable and less painful solution is necessary.

Furthermore, the Hawaii employer-union health benefits trust fund projects a seven per cent investment return on funds in the other post-employment benefits trust fund, which amounts to an estimated $140,000,000 that will be deposited into the rate stabilization reserve fund each year. By not requiring other post-employment benefits prefunding through 2049, this part will free up moneys for important state, county, and other public employee services, projects, and needs.

Accordingly, the purpose of this part is to:

(1) Cap public employer prefunding to the other post-employment benefits trust fund once the separate accounts for each public employer have a combined subaccount balance of at least $2,000,000,000;

(2) Thereafter, transfer any investment income and interest from the other post-employment benefits trust fund to a newly established rate stabilization reserve fund, which will provide reserve funding to stabilize the Hawaii employer-union health benefits trust fund at times when that trust fund has insufficient moneys to cover the costs of providing health and other benefits plans for active employees and retirees and their beneficiaries; and

(3) Provide for the use of a portion of the transient accommodations tax revenues to supplement deficient county public employer contribution amounts, if necessary.

SECTION 7. Chapter 87A, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"87A- Rate stabilization reserve fund; establishment; purpose. (a) There is established a rate stabilization reserve fund to be placed within the employer-union health benefits trust fund for administrative purposes.

(b) The rate stabilization reserve fund may cover the increasing costs of providing health and other benefit plans for active employees and retirees and their beneficiaries, as required by this chapter. A separate account for each public employer shall be established and maintained to accept and account for each public employer's contributions. Unless otherwise specified by law, the rate stabilization reserve fund shall not be subject to appropriation for any purpose and shall not be subject to claims by creditors of employers or the board.

(c) The rate stabilization reserve fund shall consist of:

(1) Moneys transferred from the Hawaii employer-union health benefits trust fund established by section 87A‑30 and the other post-employment benefits trust fund established by section 87A-42;

(2) Interest from the separate trust fund established to prefund other post-employment health and other benefits plan costs for members and their beneficiaries pursuant to section 87A-42 and interest from the rate stabilization reserve fund; and

(3) Appropriations from the legislature.

(d) The rate stabilization reserve fund shall meet the requirements of the Governmental Accounting Standards Board regarding employment benefits trusts."

SECTION 8. Section 87A-42, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) Notwithstanding sections 87A-31 and 87A-31.5, the board, upon terms and conditions set by the board, shall establish and administer a separate trust fund for the purpose of receiving employer contributions that will prefund other post-employment health and other benefit plan costs for retirees and their beneficiaries. The separate trust fund shall meet the requirements of the Governmental Accounting Standards Board regarding other post-employment benefits trusts. The board shall establish and maintain a separate account for each public employer within the separate trust fund to accept and account for each public employer's contributions. Employer contributions to the separate trust fund shall be irrevocable, all assets of the fund shall be dedicated exclusively to providing health and other benefits to retirees and their beneficiaries, and assets of the fund shall not be subject to appropriation for any other purpose and shall not be subject to claims by creditors of the employers or the board or plan administrator. The board's powers under section 87A-24 shall also apply to the fund established pursuant to this section. Notwithstanding any law to the contrary, once the separate accounts for each public employer within the separate trust fund have a combined balance of at least $2,000,000,000, any earnings from the $2,000,000,000 remaining in the separate trust fund at the end of each fiscal year shall be transferred to the separate public employer accounts within the rate stabilization reserve fund established in section 87A- . Unless otherwise specified by law, the $2,000,000,000 and the separate trust fund shall not be subject to appropriation for any purpose and shall not be subject to claims by creditors of employers or the board."

2. By amending subsection (d) to read:

"(d) In any fiscal year subsequent to the 2017-2018 fiscal year in which a county public employer's contributions into the fund are less than the amount of the annual required contribution, the amount that represents the excess of the annual required contribution over the county public employer's contributions shall be deposited into the applicable fund pursuant to this section from a portion of all transient accommodations tax revenues collected by the department of taxation under section 237D-6.5(b)(4). The director of finance shall deduct the amount necessary to meet the county public employer's annual required contribution from the revenues derived under section 237D-6.5(b)(4) and transfer the amount to the board for deposit into the appropriate account of the separate trust fund."

3. By amending subsection (f) to read:

"(f) For the purposes of this section, "annual required contribution" means a public employer's required contribution to the trust fund established in this section [that is sufficient to cover:

(1) The normal cost, which is the cost of other post-employment benefits attributable to the current year of service; and

(2) An amortization payment, which is a catch-up payment for past service costs to fund the unfunded actuarial accrued liability over the next thirty years]."

PART IV

SECTION 9. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on July 1, 2021.

 

INTRODUCED BY:

_____________________________

 

By Request


 


 

Report Title:

Hawaii State Association of Counties Package; Hawaii Health Authority; EUTF; Unfunded Liability; Appropriations

 

Description:

Authorizes the Hawaii Health Authority to continue planning for the adoption of a universal, publicly-administered health-care-for-all insurance model with a single payout agency. Establishes a rate stabilization reserve fund for the Hawaii Employer-Union Health Benefits Trust Fund. Transfers funds from the other post-employment benefits trust fund to the rate stabilization reserve fund. Makes appropriations.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.