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Rob Perez

Raising Cane

By Rob Perez

Sunday, May 6, 2001



Flawed state health
plan needed overhaul to
avert financial disaster

IT WAS ALL about bucks. Big bucks. Over the next decade, the state is projecting to save hundreds of millions of dollars by overhauling the way it provides health insurance for state and county workers and retirees.

Without the change, the insurance tab would have continued to soar, reaching nearly $1 billion annually by 2013.

But what exactly will Hawaii's government workers and retirees will get in return for the overhaul?

No one knows for sure.

"It could be a bunch of band aids and a bottle of aspirin," John Radcliffe, a University of Hawaii faculty union executive, says facetiously to underscore the point.

While no one expects that drastic of a change, workers and retirees are in for major adjustments.

The public-sector unions fear their members will face higher costs and reduced benefits once the new system is in place in 2003.

Proponents say such talk is premature. In fact, they believe the efficiencies resulting from the overhaul will enable the government to offer comparable benefits while saving the state's health fund from financial ruin.

"We needed to do something to keep the health fund solvent for the benefit of all employees and retirees in the long run," said Rep. Scott Saiki.

The switch to a single system for purchasing insurance will mean the end of separate plans run by the unions.

It also will mean an end to government payments to those union plans for the state's share of worker premiums. Sometimes the state's share covered more than the cost of the insurance, resulting in excess funds that the unions kept to enhance benefits or boost reserves.

The ability of workers to choose between state or union insurance was unique to Hawaii. No other state had such a system. Elsewhere the government or the union offered coverage -- not both.

Providing such choice was an attractive benefit for union members.

But it cost the state and counties plenty.

Because younger, healthier employees were switching to the union plans, the state health fund was left primarily with older workers and retirees, the most costly groups to insure.

For retirees, benefits currently are set by law, and the government in most cases pays the full cost of coverage. For workers, benefits are set by law or through labor negotiations, and the government pays a percentage of premiums. For both groups, the cost is driven by the benefits.

Under the new system, the government will contribute specific dollar amounts (those for workers will be negotiated), and an employer-union board will purchase the best coverage it can with that money.

The rub is in what those dollars will buy.

And that won't be known until after the amounts are negotiated and the board is able to shop for insurance contracts, probably in early 2003.

Proponents envision employees will have a range of benefit choices, depending on what coverage they want and how much they're willing to contribute.

Gov. Ben Cayetano applauded the Legislature for taking the politically risky action of reforming the health fund. The unions say they will try to get the law changed or repealed next session and will target reform supporters at election time.

While employees and retirees may face more out-of-pocket costs under the new system, legislators clearly had to take action. The health fund needed fixing, and delaying a solution would have forced the state to take even more drastic action later.





Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at: rperez@starbulletin.com.



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