Privatization sought
for state health fundUnions are urging the change,
but the state has concerns about it
Problems with the new state health fund are forcing an odd role reversal for state management and public employee unions.
The unions are demanding more efficiency and are looking to replace unionized state workers with a private company, while state managers say the health fund must also consider the workers' rights and job conditions.
The bureaucratic tempest started in 2001 when the Legislature scrapped the previous health fund -- which handles at least $240 million in medical insurance -- and replaced it with a single health benefits program for public employees, retirees and their dependents.
Health insurance costs were growing at such a rate that consultants estimated that by 2013 the state would spend nearly $1 billion on state employee health care. The Employer Union Trust Fund in 2001 was estimated to save the state an estimated $81.6 million over the first four years.
Before the change, the unions provided their own medical insurance for members, while the former state health fund, with 13 employees, handled the details for workers who had not joined a union plan.
Now, the state's entire 90,000 workers, retirees and dependents are all in one plan, and those same 13 workers are forced to handle the extra load.
One of the private firms under consideration to run the health fund is Royal State Insurance, the Hawaii Government Employees Association's own insurance company. The private contract is expected to be worth about $3 million, according to Mark Fukuhara, the trust fund's executive director.
Will Miyake, an HGEA executive and trust fund chairman, said the unions' members were used to a level of service that they are not getting from employees of the new health fund.
Also, state rules are forcing the Employer Union Trust Fund to file reams of paperwork to do the simplest job.
"It took an executive order from the Governor's Office for them to buy a rubber stamp," Miyake said. "They needed a new fax machine, and it took three months."
To solve the problem, the board is considering putting the health fund contract in the hands of a private company and letting the health fund workers take other unspecified jobs in state government. They are expected to take the matter up at their Oct. 22 meeting.
The Employer Union Trust Fund board has 10 trustees, split evenly between management and labor. For a decision to pass the board, a majority of both the union and management trustees must approve it.
Management, however, isn't likely to quickly support a change.
Bob Awana, Gov. Linda Lingle's chief of staff and the trust fund management spokesperson, says the board looked at the change to save money and improve service to union members.
"I don't see the savings that we talked about, and the 13 workers being transferred have to go someplace," Awana said. "We outsource and bring in all these high-powered computers, calling systems and statewide coverage, but I am still worried about the 13."
However, several trust fund board members, who asked not to be named, said the health fund workers are "deadwood who won't produce."
The state law that created the trust fund allows the board to outsource or privatize the administration of the health fund, but trust fund executive director Fukuhara said another confusing legal footnote has popped up.
While the trust fund law says it's OK to privatize, another state law, also passed in 2001, strictly spells out which state functions can be privatized. And the trust fund is not among them.
"There are conflicting statutes," Fukuhara said.
"It is not clear if they follow privatization rules," he added. "Do they bump other workers? Do you create positions for them?"
