The state is constitutionally mandated to provide health benefits to state and county employees, retirees and their dependents. However, the state does not have to provide retirees with a health plan similar to the one it provides active government employees, the Hawaii Supreme Court ruled yesterday.

The ruling stems from a recent change to state law over the administration of health benefits for state and county workers, retirees and their dependents.

State lawmakers approved legislation in 2001 to replace the Public Employees Health Fund with the new Employer-Union Health Benefits Trust Fund. The reason, they said, was “;to establish a single health benefits delivery system for state and county employees,”; and to deal with the “;spiraling cost”; of health care.

Under the earlier fund, the state contributed to health benefits plans established and administered by public employee worker unions.

With the newer fund, lawmakers allowed only the Hawaii State Teachers Association to administer the health benefits plan for its members.

In 2006 a group of retired state and county government employees, including former Judge James Dannenberg, filed a class-action lawsuit against the state, all four counties and Employer-Union Trust Fund to get health benefits equal to those of active employees.

The state Circuit Court sent the dispute to the EUTF Board of Trustees, which said the state does not have to provide retirees the same plan as active employees.

The group appealed back to Circuit Court, which reversed the board's findings.

The state then appealed the court's ruling to the Hawaii Supreme Court.

The justices ruled yesterday that when the Legislature established the EUTF, it also changed the law to give the EUTF board flexibility to deal with the spiraling cost of health care so as not to “;create significant financial hardships for state taxpayers.”;