Bill Text: HI HB1459 | 2013 | Regular Session | Introduced

Hawaii House Bill 1459 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Captive Insurance

Spectrum: Partisan Bill (Democrat 10-0)

Status: (Engrossed - Dead) 2013-03-07 - Referred to CPN/JDL, WAM. [HB1459 Detail]

Download: Hawaii-2013-HB1459-Introduced.html

HOUSE OF REPRESENTATIVES	H.B. NO.	1459
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO INSURANCE.

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

PART I

SECTION 1. The legislature finds that the State is facing a potential fiscal crisis due to unfunded liabilities for public employee health benefits. Currently, the employer-union health benefits trust fund has approximately $15,000,000,000 in unfunded liabilities. These unfunded liabilities can potentially drive the State into bankruptcy. To pay down this liability would require the State to put down $500,000,000 per year for the next thirty years. In 2001, the total amount of premiums for public employee health benefits was approximately $218,000,000. Currently, the total amount of premiums for public employee health benefits are approximately $760,000,000 and the amount is increasing yearly. In order prevent bankruptcy, protect the State's bond rating, and protect the State's reputation with investors, proactive measures to deal with the unfunded liabilities need to occur.

Recently, other states have attempted to address their unfunded liability concerns. Wisconsin passed legislation to curtail collective bargaining rights of public employees and is currently in a legal battle over the legislation. California decreased public-sector employee pensions and increased employee contributions to pension funds. In Hawaii, common proposed solutions include an increase in the general excise tax, a decrease in health benefits, or an increase in employee contributions to the employer-union health benefits trust fund. The easiest way to address the unfunded liabilities for public employee health benefits is to increase the general excise tax by over one per cent. However, an increase of the general excise tax will essentially place the burden of funding on the private sector and the State at large. Further, a decrease in health benefits or an increase in employee contribution will not be acceptable because public employees deserve to maintain the benefits they've been promised.

The State needs a more affordable and less painful solution. Therefore, the legislature finds that it is in the best interest of the State to establish a captive insurance company that contains the provisions of the current Hawaii employer-union health benefits trust fund (EUTF) in a captive insurance company to effectively manage the administration and financing of the current and potential future employee health benefit obligations of the State and the counties. Subsequently, a member of the counties shall be appointed to the board of the captive insurance company to represent the significant number of county public employees. The captive insurance company will not compete with the private sector because it will only manage the administration and financing of the current and potential future employee health benefit obligations of the State and the counties. Further, a captive insurance company will address the unfunded liabilities for public employee health benefits because there would be a commitment from the public employees' employers to cover the employees' health benefits going forward. This would improve the financial well being of the State by, among other things:

(1) Reducing operating costs by eliminating agents' commissions, insurer profit margins, and stockholder dividends;

(2) Retaining investment income and underwriting profits;

(3) Establishing reserves to pre-fund the unfunded public employee health benefit liabilities;

(4) Establishing a board for transparency purposes so that the public can be informed and involved;

(5) Contracting out health plans using the request for proposal procedure under the Hawaii public procurement code;

(6) Increasing the probability of price stability;

(7) Allowing the State to deal directly with reinsurers because a captive is a licensed insurer and typical insureds can only approach the wholesale market if they own an insurance company; and

(8) Establishing a reserve account to accumulate ten per cent of the unfunded liabilities, which will have the effect of fully funding the liabilities.

The goal of the captive insurance company is to slow the growth of unfunded liabilities for public employee health benefits, stabilize the liabilities, reduce the unfunded liabilities, and restore the confidence of the investing public. Therefore, the legislature finds that the understanding and support of the people of Hawaii is necessary to prevent a fiscal crisis that could ultimately bankrupt the State. The State must take control of its destiny because its fiscal survival is at stake.

Accordingly, the purpose of this Act is to authorize the State to form a captive insurance company to more effectively manage the administration and financing of the current and potential future employee health benefit obligations of the State and county governments.

SECTION 2. The Hawaii Revised Statutes, is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

HAWAII EMPLOYER-UNION HEALTH BENEFITS TRUST FUND CAPTIVE INSURANCE COMPANY

ARTICLE 1: GENERAL PROVISIONS

§ 1:101 Establishment of the Hawaii employer-union health benefits trust fund captive insurance company. (a) There shall be a captive insurance company, established pursuant to article 19 of chapter 431, to be known as the "Hawaii Employer-Union Health Benefits Trust Fund Captive Insurance Company".

(b) The captive insurance company shall be funded by surplus contributions, premiums, interest and investment income, refunds, rate credits, legislative initiatives, and other returns, and shall consist of a board and an administrator.

(d) The Hawaii employer-union health benefits trust fund captive insurance company shall be exempt from all taxes and fees levied by the State on other insurers.

§ 1-102 Purposes. (a) The primary purpose of the captive insurance company shall be to:

(1) Provide its various subscribers with an effective means of financing and managing their current and potential future liabilities arising from contractual and or other obligations to provide health insurance, group life insurance, and other benefits to its respective employees; and

(2) Provide other insurance coverage and other risk financing plans as may be determined by the board.

(b) The captive insurance company may implement other plans or programs as may be allowed, pursuant to article 19 of chapter 431, for the benefit of the subscribers.

§ 1:103 Definitions. For the purposes of this chapter:

"Administrator" means the administrator of the Hawaii employer-union health benefits trust fund insurance company appointed by the board or the duly authorized representative of the administrator.

"Board" means the board of trustees of the Hawaii employer-union health benefits trust fund captive insurance company.

"Captive insurance company" means the Hawaii employer-union health benefits trust fund captive insurance company described in section 1:101.

"Carrier" means a voluntary association, corporation, partnership, or organization engaged in providing, paying for, arranging for, or reimbursing the cost of health benefits or long-term care benefits under group insurance contracts.

"Commissioner" means the insurance commissioner of the State of Hawaii.

"Contribution" means monetary payments made to the fund or reserve account by the State, the counties, an employee-beneficiary, or a qualified-beneficiary.

"County" means the counties of Hawaii, Kauai, and Maui and the city and county of Honolulu, including their respective boards of water supply and other quasi-independent boards, commissions, and agencies.

"Credited service" means service as an officer or employee paid by the State or county, service during the period of leave of absence or exchange if the individual is paid by the State or county during the leave of absence or exchange, and service during the period of unpaid leave of absence or exchange if the individual is engaged in the performance of a governmental function or if the unpaid leave of absence is an approved leave of absence for professional improvement.

"Dependent-beneficiary" means an employee-beneficiary's:

(1) Spouse;

(2) Unmarried child deemed eligible by the board, including a legally adopted child, stepchild, foster child, or recognized natural child who lives with the employee-beneficiary; and

(3) Unmarried child regardless of age who is incapable of self-support because of a mental or physical incapacity, which existed prior to the unmarried child's reaching the age of nineteen years.

"Employee" means an employee or officer of the State, county, or legislature,

(1) Including:

(A) An elective officer;

(B) An officer or employee under an authorized leave of absence;

(D) A retired member of the employees' retirement system; the county pension system; or the police, firefighters, or bandsmen pension system of the State or a county;

(E) A salaried and full-time member of a board, commission, or agency appointed by the governor or the mayor of a county; and

(F) A person employed by contract for a period not exceeding one year, where the director of human resources development, personnel services, or civil service has certified that the service is essential or needed in the public interest and that, because of circumstances surrounding its fulfillment, personnel to perform the service cannot be obtained through normal civil service recruitment procedures,

(2) But excluding:

(A) A designated beneficiary of a retired member of the employees' retirement system; a county pension system; or a police, firefighters, or bandsmen pension system of the State or a county;

(B) Except as allowed under paragraph (1)(F), a person employed temporarily on a fee or contract basis; and

"Employee-beneficiary" means:

(1) An employee;

(2) The beneficiary of an employee who was killed in the performance of the employee's duty;

(3) An employee who retired prior to 1961;

(4) The beneficiary of a retired member of the employees' retirement system; a county pension system; or a police, firefighters, or bandsmen pension system of the State or a county, upon the death of the retired member;

(5) The surviving child of a deceased retired employee, if the child is unmarried and under the age of nineteen; or

(6) The surviving spouse of a deceased retired employee, if the surviving spouse does not subsequently remarry;

provided that the employee, the employee's beneficiary, or the beneficiary of the deceased retired employee is deemed eligible by the board to participate in a health benefits plan or long-term care benefits plan under this chapter.

"Employer" means the State; the judiciary; the respective counties of Hawaii, Maui, Kauai, and the city and county of Honolulu; the department of education; the University of Hawaii; Honolulu authority for rapid transportation, and any instrumentality of the State or its political subdivisions except the Honolulu authority for rapid transportation

"Fund" means the Hawaii employer-union health benefits trust fund captive insurance company fund pursuant to part I of article 3.

"Health benefits plan" means:

(1) A group insurance contract or service agreement that may include medical, hospital, surgical, prescribed drugs, vision, and dental services, in which a carrier agrees to provide, pay for, arrange for, or reimburse the cost of the services as determined by the board; or

(2) A similar schedule of benefits established by the board and provided through the fund on a self-insured basis.

"Long-term care benefits plan" means:

(1) A group insurance contract or service agreement in which a carrier agrees to provide, pay for, arrange for, or reimburse the cost of long-term care benefits as determined by the board; or

(2) A similar schedule of benefits established by the board and provided through the fund on a self-insured basis.

"Part-time, temporary, and seasonal or casual employee" means a person employed for fewer than three months or whose employment is less than one-half of a full-time equivalent position.

"Periodic charge" means the periodic payment by the board to a carrier for any health benefits plan or long-term care benefits plan.

"Qualified-beneficiary" means, for purposes of the long-term care benefits plan, a former employee or an employee who is not eligible for benefits due to a reduction in work hours, including the spouse, divorced spouse, parents, grandparents, in-law parents, and in-law grandparents of an employee or retiree; provided that the beneficiary was enrolled in the plan before the employee or former employee became ineligible for benefits.

"Reserve account" means the Hawaii employer-union health benefits trust fund captive insurance company reserve account.

"State agency" includes the office of Hawaiian affairs.

"Trustee" means a trustee of the board of the Hawaii employer-union health benefits trust fund captive insurance company fund, as described in part II of article 2.

§ 1:104 Conflicts with insurance code. Where the provisions of this chapter and those of chapter 431 conflict, the provisions of chapter 431 are controlling.

§ 1:105 Exemptions. (a) The board and the administrator shall be exempt:

(1) From chapters 37, 46, 76, 77, 78, 87, 92, and 235; and

(2) From any requirement of law for competitive bidding for agreements or contracts for goods or services, including lease and sublease agreements.

(b) The board shall prepare reports as required by section 37-47, but shall be otherwise exempt from the requirements of chapter 37.

ARTICLE 2: ADMINISTRATION OF THE CAPTIVE INSURANCE COMPANY

PART I: ADMINISTRATION OF THE CAPTIVE INSURANCE COMPANY GENERALLY

§ 2:101 Administration of the captive insurance company. (a) The board shall be the governing body of the captive insurance company pursuant to part III.

(b) The administrator shall be the administrator of the captive insurance company pursuant to part III and shall be appointed by the board.

§ 2:102 Fiscal year. The captive insurance company's accounting shall be conducted on a fiscal year beginning July 1 of each year and ending the following June 30.

§ 2:103 Reports to the legislature. The board shall prepare reports in accordance with the requirements of section 37-47, but shall be otherwise exempt from the requirements of chapter 37.

PART II: THE BOARD

§ 2:201 Composition of board. The board of trustees of the Hawaii employer-union health benefits trust fund captive insurance company shall consist of eleven trustees appointed by the governor in accordance with the following procedure:

(1) Five trustees, one of whom shall represent retirees, to represent employee-beneficiaries, to be selected as follows:

(A) Three trustees shall be appointed from a list of two nominees per trustee selected by each of the three exclusive representatives that have the largest number of employee-beneficiaries;

(B) One trustee shall be appointed from a list of two nominees selected by mutual agreement of the remaining exclusive representatives; and

(C) One trustee representing retirees shall be appointed from a list of two nominees selected by mutual agreement of all eligible exclusive representatives; and

(2) Five trustees to represent public employers; and

(3) One trustee to represent the counties.

Section 26-34 shall not apply to board member selection and terms. Notwithstanding any other provision of this section, no exclusive representative of a bargaining unit that sponsors or participates in a voluntary employee beneficiary association shall be eligible to select nominees or to be represented by a trustee on the board.

As used in this section, the term "exclusive representative" shall have the same meaning as in section 89-2.

§ 2:202 Term of a trustee; vacancy. The term of office of each trustee shall be four years; provided that a trustee may be reappointed for one additional consecutive four-year term.

A vacancy on the board shall be filled in the same manner as the trustee who vacated that position was nominated and appointed; provided that the criteria used for nominating and appointing the successor shall be the same criteria used for nominating and appointing the trustee who vacated the position; provided further that vacancies on the board for each trustee position representing retirees and employee-beneficiaries appointed under section 2:201(1)(A and(B), or (C) shall be filled by appointment of the governor as follows:

(1) If a vacancy occurs in one of the trustee positions described in section 2:201(1)(A), then the vacancy shall be filled by appointment from a list of two nominees submitted by the exclusive representative from among the three largest exclusive employee representatives that does not have a trustee among the three trustee positions;

(2) If a vacancy occurs in a trustee position described in section 2:201(1)(B), then the vacancy shall be filled by appointment from a list of two nominees submitted by mutual agreement of the exclusive employee representatives described in section 2:201(1)(B); and

(3) If a vacancy occurs in the retiree position described in section 2:201(1)(C), then the vacancy shall be filled by appointment from a list of two nominees submitted by mutual agreement of all eligible exclusive employee representatives.

If by the end of a trustee's term the trustee is not reappointed or the trustee's successor is not appointed, the trustee shall serve until the trustee's successor is appointed.

§ 2:203 Decisions of board binding. The decisions of the board shall be binding upon all of the subscribers except where applicable law or rules adopted by the captive insurance company requires a vote by all the subscribers.

§ 2:204 Chair, vice-chair, and secretary-treasurer. The trustees shall elect from among themselves a chair, a vice-chair, and a secretary-treasurer.

§ 2:205 Compensation and expenses. Each trustee shall serve without compensation, but the trustees may be reimbursed from the fund for any reasonable expenses incurred in carrying out the purposes of the fund.

§ 2:206 Meetings; notice. Meetings may be scheduled, and notice of meetings shall be provided as follows:

(1) The chair may call a meeting of the board at any time by giving at least six calendar days' written notice of the time and place of the meeting to all other trustees; and

(2) A majority of the trustees may call a meeting of the board by giving at least ten calendar days' written notice of the time and place to all other trustees.

§ 2:207 Quorum; board actions; voting. (a) Seven trustees, three of whom represent public employers, three of whom represent employee-beneficiaries, and one who represents the counties shall constitute a quorum for the transaction of business.

(b) Trustees representing public employers shall collectively have one vote. Trustees representing employee-beneficiaries shall collectively have one vote. The trustee representing the counties shall have one vote.

For any vote of the trustees representing the public employers to be valid, three of these trustees must concur to cast such a vote. In the absence of concurrence, the trustees representing public employers shall be deemed to have abstained from voting.

For any vote of the trustees representing employee-beneficiaries to be valid, three of these trustees must concur to cast such a vote. In the absence of such concurrence, the trustees representing employee-beneficiaries shall be deemed to have abstained from voting.

An abstention shall not be counted as either a vote in favor or against a matter before the board.

(c) Any action taken by the board shall be by the concurrence of at least two votes. In the event of a tie vote on any motion, the motion shall fail. Upon the concurrence of six trustees, the board shall participate in dispute resolution.

§ 2:208 Records and minutes. The board shall keep records and minutes of all meetings of the board.

§ 2:209 Legal advisor. The attorney general shall serve as legal advisor to the board and shall provide legal representation for the Hawaii employer-union health benefits trust fund captive insurance company.

PART III: BOARD POWERS AND DUTIES

§ 2:301 Powers and duties of the board. The board shall:

(1) Establish a reciprocal captive insurance company pursuant to article 19 of chapter 431, and the provisions of this chapter to administer and carryout the purposes of this chapter;

(2) Appoint an administrator who shall be placed within the department of budget and finance for administrative purposes to carry out the day-to-day administration of the fund pursuant to part I of article III and captive insurance company pursuant to part I or article I;

(3) Supervise the finances of the captive insurance company;

(4) Supervise the captive insurance company's operations to assure conformity with the insurance and reinsurance policies issued through the captive insurance company and with the standards established by this chapter;

(5) Procure the audit of accounts and records of the captive insurance company, at the captive insurance company's expense;

(6) Adopt rules as may be necessary for the purpose of this chapter pursuant to chapter 91;

(7) Approve the selection of the third party administrators to which certain duties of the administrator may be delegated; and

(8) Have such additional powers and functions as provided by the power of attorney executed by the subscribers or rules adopted by the captive insurance company.

§ 2:302 Administration of the fund. The board shall administer and carry out the purpose of the fund established pursuant to section 3:101. Health and other benefits plans shall be provided at a cost affordable to both the public employers and the public employees.

§ 2:303 Health benefits plan; carriers. (a) The board shall establish the health benefits plan or plans, which shall be exempt from the minimum group requirements of chapter 431.

(b) The board may contract for health benefits plans or provide health benefits through a noninsured schedule of benefits.

§ 2:304 Group life insurance benefits or group life insurance program. The board may provide benefits under a group life insurance benefits program or group life insurance program to employees.

§ 2:305 Long-term care benefits plan; carrier or third-party administrator. (a) The board may establish a long-term care benefits plan or plans for employee-beneficiaries; the spouses, parents, grandparents, in-law parents, and in-law grandparents of employee-beneficiaries; and qualified-beneficiaries. The plan or plans shall be at no cost to employers and shall comply with article 10H of chapter 431.

(b) Notwithstanding any other law to the contrary, long-term care benefits shall be available only to:

(1) Employee-beneficiaries and their spouses, parents, and grandparents;

(2) Employee-beneficiary in-law parents and grandparents; and

(3) Qualified-beneficiaries who enroll between the ages of twenty and eighty-five,

who comply with the plan's age, enrollment, medical underwriting, and contribution requirements.

(c) The board may contract with a carrier to provide fully insured benefits or with a third-party administrator to administer self-insured benefits.

§ 2:306 Plans for part-time, temporary, and seasonal or casual employees. (a) The board may offer medical, hospital, or surgical benefits plans to part-time, temporary, and seasonal or casual employees at no cost to the employers. The board may determine eligibility for part-time, temporary, and seasonal or casual employees by rules exempt from chapter 91 as provided in section 2:312.

(b) The board shall establish the medical, hospital, or surgical benefits plan or plans, which shall be exempt from the minimum group requirements of article 10A of chapter 431. The medical, hospital, or surgical benefits plan or plans shall provide, pay for, arrange for, or reimburse the cost of medical, hospital, or surgical services, and may include prescribed hospital in-patient and out-patient service and medical benefits.

(c) The board may contract for the medical, hospital, or surgical benefits plan or plans. Each part-time, temporary, and seasonal or casual employee enrolled for medical, hospital, or surgical benefits shall pay monthly contributions directly to the board's designated carriers. The monthly contributions may include the carrier's administrative costs.

§ 2:307 Eligibility. (a) The board shall establish eligibility criteria to determine who can qualify as an employee-beneficiary, dependent-beneficiary, or qualified-beneficiary, consistent with the provisions of this chapter.

(b) A retired member of the employees' retirement system; a county pension system; or a police, firefighters, and bandsmen pension system of the State or county, shall be eligible to qualify as an employee-beneficiary:

(1) Regardless of whether the retired member was actively employed by the State or county at the time of the retired employee's retirement; and

(2) Without regard to the date of the retired member's retirement.

(1) Regardless of whether the retired member was actively employed by the State or county at the time of the retired employee's retirement; and

(2) Without regard to the date of the retired member's retirement.

§ 2:308 Benefits plan information and enrollment. (a) The board shall make information summarizing approved benefits plans available to each employee-beneficiary. The information shall, to the extent reasonably possible, be distributed to each employee-beneficiary at the same time and in the same manner.

(b) The board shall establish conditions and procedures for benefits plan enrollment.

§ 2:309 Health benefits plan supplemental to medicare. The board shall establish a health benefits plan, which takes into account benefits available to an employee-beneficiary and spouse under medicare, subject to the following conditions:

(1) There shall be no duplication of benefits payable under medicare. The plan under this section, which shall be secondary to medicare, when combined with medicare and any other plan to which the health benefits plan is subordinate under the National Association of Insurance Commissioners' coordination of benefit rules, shall provide benefits that approximate those provided to a similarly situated beneficiary not eligible for medicare;

(2) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a contribution equal to an amount not less than the medicare part B premium, for each of the following who are enrolled in the medicare part B medical insurance plan: (A) an employee-beneficiary who is a retired employee, (B) an employee-beneficiary's spouse while the employee-beneficiary is living, and (C) an employee-beneficiary's spouse, after the death of the employee-beneficiary, if the spouse qualifies as an employee-beneficiary. For purposes of this section, a "retired employee" means retired members of the employees' retirement system; county pension system; or a police, firefighters, or bandsmen pension system of the State or a county as set forth in chapter 88. If the amount reimbursed by the fund under this section is less than the actual cost of the medicare part B medical insurance plan due to an increase in the medicare part B medical insurance plan rate, the fund shall reimburse each employee-beneficiary and employee-beneficiary's spouse for the cost increase within thirty days of the rate change. Each employee-beneficiary and employee-beneficiary's spouse who becomes entitled to reimbursement from the fund for medicare part B premiums after July 1, 2006, shall designate a financial institution account into which the fund shall be authorized to deposit reimbursements. This method of payment may be waived by the fund if another method is determined to be more appropriate;

(3) The benefits available under this plan, when combined with benefits available under medicare or any other coverage or plan to which this plan is subordinate under the National Association of Insurance Commissioners' coordination of benefit rules, shall approximate the benefits that would be provided to a similarly situated employee-beneficiary not eligible for medicare;

(4) All employee-beneficiaries or dependent-beneficiaries who are eligible to enroll in the medicare part B medical insurance plan shall enroll in that plan as a condition of receiving contributions and participating in benefits plans under this chapter. This paragraph shall apply to retired employees, their spouses, and the surviving spouses of deceased retirees and employees killed in the performance of duty; and

(5) The board shall determine which of the employee-beneficiaries and dependent-beneficiaries, who are not enrolled in the medicare part B medical insurance plan, may participate in the plans offered by the fund.

§ 2:310 Other powers. In addition to the power to administer the fund, the board may:

(1) Collect, receive, deposit, and withdraw money on behalf of the fund;

(2) Invest moneys in the same manner specified in section 88-119(1)(A), (1)(B), (1)(C), (2), (3), (4), (5), (6), and (7);

(3) Hold, purchase, sell, assign, transfer, or dispose of any securities or other investments of the fund, as well as the proceeds of those investments and any money belonging to the fund;

(4) Make payments of periodic charges and pay for reasonable expenses incurred in carrying out the purposes of the fund;

(5) Contract for work to carry out the purpose of this chapter, including the performance of financial audits of the fund and claims audits of its insurance carriers;

(6) Retain auditors, actuaries, investment firms and managers, benefit plan consultants, or other professional advisors to carry out the purposes of this chapter;

(7) Establish health benefits plan and long-term care benefits plan rates that include administrative and other expenses necessary to effectuate the purposes of the fund; and

(8) Require any department, agency, or employee of the State or counties to furnish information to the board to carry out the purposes of this chapter.

§ 2:311 Other duties. The board shall:

(1) Authorize charges and payments from the fund only upon vouchers countersigned by the chairperson and any other person designated by the board;

(2) Maintain accurate records and accounts of all financial transactions of the fund that shall be audited annually and summarized in an annual report to the governor and legislature;

(3) Maintain suitable and adequate records and provide information requested by State and county public employers as necessary to carry out the purpose of the fund;

(4) Procure fiduciary liability insurance and error and omissions coverage for all trustees; and

(5) Procure a fidelity bond of a reasonable amount for the chairperson and any other person authorized to handle fund moneys.

§ 2:312 Rules; policies, standards, and procedures. (a) The board may adopt rules for the purposes of this chapter. Rules shall be adopted without regard to chapter 91. Rulemaking procedures shall be adopted by the board and shall minimally provide for:

(1) Consultation with employers and affected employee organizations with regard to proposed rules;

(2) Adoption of rules at open meetings that permit the attendance of any interested persons;

(3) Approval of rules by the governor; and

(4) Filing of rules with the lieutenant governor.

(b) The board may also issue policies, standards, and procedures consistent with its rules.

(c) The board may adopt rules, without regard to chapter 91, governing dispute resolution procedures in the event of impasse in decision-making; provided that the rules shall be adopted with the concurrence of six trustees.

PART IV: THE ADMINISTRATOR

§ 2:401 Powers and duties of administrator. (a) The administrator shall:

(1) Enter into captive insurance company reciprocal insurance or reinsurance contracts on behalf of the subscribers of the captive insurance company;

(2) Solicit, receive, and accept or reject applications for insurance or reinsurance to be issued by the captive insurance company;

(3) Investigate and pass upon the desirability of risks involved in the applications for insurance or reinsurance;

(4) Underwrite, classify, rate, and issue policies and binders of insurance or reinsurance for the captive insurance company, which are actuarially sound and in accordance with prudent insurance practices, and modify or cancel such policies in accordance with the terms of those policies;

(5) Establish and maintain for the captive insurance company and as the captive insurance company's property, complete and accurate records of all policies written by the captive insurance company;

(6) Collect, receive, and account for all surplus contributions and premiums paid for insurance issued or reinsurance assumed, and deposit all of said surplus and premiums in a bank or banks to the account of the captive insurance company as soon as practicable, and pay therefrom the expenses of the captive insurance company;

(7) Establish and maintain for the captive insurance company and as the property of the captive insurance company, all records required by law and prudent insurance and accounting practices, and prepare all reports required by governmental and non-governmental regulatory and supervisory authorities, including applicable income tax returns;

(8) Obtain such reinsurance, or other appropriate risk financing products as may be dictated by law, prudent insurance and business practices, and maintain necessary records for the captive insurance company in connection therewith;

(9) Handle and reserve for insurance claims and losses for the captive insurance company in accordance with reasonable standards approved by the board consistent with generally accepted insurance principles;

(10) Investigate and defend or settle all losses and claims under the policies of the captive insurance company, appoint and engage attorneys to defend against claims, and promptly recover all reinsurance due on claims paid;

(11) Make all delinquent premium installment payments due from any subscriber to the captive insurance company by deducting the necessary amounts from any of the subscriber's accounts or surplus contributions or any other amounts due the subscriber from the captive insurance company;

(12) Arrange for payment from the captive insurance company's accounts of all expenses of the captive insurance company operation, including, in addition to losses, expenses relating to the underwriting, claim management and investment activities of the captive insurance company;

(13) Make available to each public employee-beneficiary information which will help each public employee- beneficiary exercise an informed choice among the approved health benefits plans;

(14) Establish conditions under which employee beneficiaries may transfer enrollment from one health benefits plan to another; and

(16) Do any and all other things necessary to carry out the foregoing.

(b) There shall be no capital or stock in the captive insurance company. The administrator shall maintain separate, identifiable accounts for each employer open to inspection during reasonable business hours. All funds shall be deposited or invested by the administrator in the administrator's sole discretion with the administrator acting as trustee.

(c) The administrator shall pay out of an employer's accounts in the captive insurance company, the employers's proportionate share of any outlay for the payment and adjustment of losses, attorney fees, costs and expenses of lawsuits, reinsurance and excess insurance, taxes, and insurance department fees and expenses.

(d) All disbursements shall be paid by the administrator out of captive insurance company accounts, subject to the approval of the board.

§ 2:402 Delegation of duties. Subject to any notice requirement or approval under the laws of the State, or to the extent applicable, of any other jurisdiction, the administrator may delegate some or all of the administrator's duties hereunder to an appropriate third party, and may pay compensation and make reimbursement of cost to such third party for services rendered on behalf of the captive insurance company, subject to the approval of the board.

§ 2:403 Contributions to reserve account. The administrator shall issue a certificate of membership to each employer in receipt and as evidence for all contributions to the reserve account pursuant to article III.

§ 2:404 Computation of net profits and losses. On or before September 15 of each year, the administrator shall have computed the net profit or loss from the underwriting and investment activities of the captive insurance company during the fiscal year immediately preceding, and leave any net profits in the fund. Remaining profits shall be invested in the same manner specified in section 88-119(1)(A), (1)(B), (1)(C), (2), (3), (4), (5), (6), and (7).

§ 2:405 Exempt from chapter 92 requirements. Disclosure of records and meetings of the administrator shall be exempt from the requirements of chapter 92.

ARTICLE 3: HAWAII EMPLOYER-UNION HEALTH BENEFITS CAPTIVE INSURANCE FUND AND RESERVE ACCOUNT

PART I: HAWAII EMPLOYER-UNION HEALTH BENEFITS TRUST FUND CAPTIVE INSURANCE COMPANY FUND

§ 3:101 Establishment of the Hawaii employer-union health benefits captive insurance company fund. There shall be a Hawaii employer-union health benefits trust fund captive insurance company fund to be placed within the department of budget and finance for administrative purposes. The fund shall consist of contributions, interest, income, dividends, refunds, rate credits, legislative initiatives, and other returns. It is hereby declared that any and all sums contributed or paid from any source to the fund created by this part, and all assets of the fund including any and all interest and earnings on the same, are and shall be held in trust by the board for the exclusive use and benefit of the employee-beneficiaries and dependent-beneficiaries and qualified beneficiaries and shall not be subject to appropriation for any other purpose whatsoever. The fund shall be under the control of the board and placed under the department of budget and finance for administrative purposes.

§ 3:102 Trust fund; purpose. (a) The fund shall be used to provide employee-beneficiaries and dependent-beneficiaries with health and other benefit plans, and to pay administrative and other expenses of the fund. All assets of the fund are and shall be dedicated to providing health and other benefits plans to the employee-beneficiaries and dependent-beneficiaries in accordance with the terms of those plans and to pay administrative and other expenses of the fund, and shall be used for no other purposes except for those set forth in this section.

(b) The fund, including any earnings on investments, and rate credits or reimbursements from any carrier or self-insured plan and any earning or interest derived therefrom, may be used to stabilize health and other benefit plan rates; provided that the approval of the governor and the legislature shall be necessary to fund administrative and other expenses necessary to effectuate these purposes.

(c) The fund may be used to provide group life insurance benefits to employees to the extent that contributions are provided for group life insurance benefits in sections 3:104 and 3:110.

(d) The fund may assist the State and the counties to implement and administer cafeteria plans authorized under Title 26 United States Code section 125, the Internal Revenue Code of 1986, as amended, and section 78-30.

(e) At the discretion of the board, some or all of the fund may be used as a reserve against or to pay the fund's future costs of providing health and other benefits plans established under sections 2:309 and 3:110 and any other benefits plans the board establishes for retired employees and their beneficiaries. Such funds shall be deposited into the reserve account established under section 3:201.

§ 3:103 Employer contributions irrevocable. Notwithstanding any law to the contrary, all of the monthly contributions that the State and counties make to the fund under sections 3:104, 3:105, 3:106, 3:107, 3:108, and 3:109, and all other contributions that the State and counties may make to the fund, shall be irrevocable; provided that this shall not preclude the fund from returning contributions or payments made by the State or any county under a mistake of fact within one year after the payment of the contributions or payments.

§ 3:104 State and county contributions; active employees. (a) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a monthly contribution equal to the amount established under chapter 89C or specified in the applicable public sector collective bargaining agreements, whichever is appropriate, for each of their respective employee-beneficiaries and employee-beneficiaries with dependent-beneficiaries, which shall be used toward the payment of costs of a health benefits plan; provided that:

(1) The monthly contribution shall be a specified dollar amount;

(2) The monthly contribution shall not exceed the actual cost of a health benefits plan;

(3) If both husband and wife are employee-beneficiaries, the total contribution by the State or the county shall not exceed the monthly contribution for a family plan; and

(4) If the State or any of the counties establish cafeteria plans in accordance with Title 26, United States Code section 125, the Internal Revenue Code of 1986, as amended, and section 78-30, the monthly contribution for those employee-beneficiaries who participate in a cafeteria plan shall be made through the cafeteria plan, and the payments made by the State or counties shall include their respective contributions to the fund and their employee-beneficiary's share of the cost of the employee-beneficiary's health benefits plan.

(b) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a monthly contribution equal to the amount established under chapter 89C or specified in the applicable public sector collective bargaining agreement, whichever is applicable, for each of their respective employees, to be used toward the payment of group life insurance benefits for each employee.

(c) All moneys, including state and county contributions in the Hawaii employer-union health benefits trust fund shall be transferred and deposited into the Hawaii employer-union health benefits captive insurance fund established pursuant to this article.

§ 3:105 State and county contributions; retired employees. (a) Notwithstanding any law to the contrary, this section shall apply to state and county contributions to the fund for:

(1) The dependent-beneficiary of an employee who is killed in the performance of duty;

(2) A dependent-beneficiary, upon the death of the employee-beneficiary, except as provided in section 3:109;

(3) An employee-beneficiary who retired after June 30, 1984, due to a disability falling within sections 88-79 and 88-285;

(4) An employee-beneficiary who retired before July 1, 1984;

(5) An employee-beneficiary who:

(A) Was hired before July 1, 1996;

(B) Retired after June 30, 1984; and

(6) An employee-beneficiary who:

(A) Was hired after June 30, 1996; and

(B) Retired with twenty-five or more years of credited service, excluding sick leave, except as provided in section 3:109; and

(7) Employees who retired prior to 1961 and their dependent-beneficiaries.

(b) Effective July 1, 2003, there is established a base monthly contribution for health benefit plans that the State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund, up to the following:

(1) $218 for each employee-beneficiary enrolled in supplemental medicare self plans;

(2) $671 for each employee-beneficiary enrolled in supplemental medicare family plans;

(3) $342 for each employee-beneficiary enrolled in non-medicare self plans; and

(4) $928 for each employee-beneficiary enrolled in non-medicare family plans.

The monthly contribution by the State or county shall not exceed the actual cost of the health benefits plan or plans. If both husband and wife are employee-beneficiaries, the total contribution by the State or county shall not exceed the monthly contribution for a supplemental medicare family or non-medicare family plan, as appropriate.

(c) Effective July 1, 2004, there is established a base monthly contribution for health benefit plans that the State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund, up to the following:

(1) $254 for each employee-beneficiary enrolled in supplemental medicare self plans;

(2) $787 for each employee-beneficiary enrolled in supplemental medicare family plans;

(3) $412 for each employee-beneficiary enrolled in non-medicare self plans; and

(4) $1,089 for each employee-beneficiary enrolled in non-medicare family plans.

The monthly contribution by the State or county shall not exceed the actual cost of the health benefit plan or plans and shall not be required to cover increased benefits above those initially contracted for by the fund for plan year 2004-2005. If both husband and wife are employee-beneficiaries, the total contribution by the State or county shall not exceed the monthly contribution for a supplemental medicare family or non-medicare family plan, as appropriate.

(d) The base composite monthly contribution shall be adjusted annually, beginning July 1, 2005. The adjusted base composite monthly contribution for each new plan year (July 1 until June 30) shall be calculated by increasing or decreasing the base composite monthly contribution in effect through the end of the previous plan year by the percentage increase or decrease in the medicare part B premium rate for those years, which percentage shall be calculated by dividing the medicare part B premium rate in effect at the beginning of the new plan year by the rate in effect at the beginning of the previous plan year.

For the plan year beginning July 1, 2005, the adjusted base monthly contribution shall be computed using the actual contracted premium rate as of July 1, 2004, for medicare and non-medicare, self and family health benefits plans with the highest actual contracted premium rate as of July 1, 2004.

As used in this subsection, "medicare part B premium rate" means the rate published in the Federal Register each year on November 1 or on the business day closest to November 1 of each year after the medicare part B premium rate has been established by the Secretary of Health and Human Services and approved by the United States Congress.

(e) The base composite monthly contribution shall be adjusted annually, beginning January 1, 2013. The adjusted base composite monthly contribution for each new plan year (January 1 until December 31) shall be calculated by increasing or decreasing the base composite monthly contribution in effect through the end of the previous plan year by the percentage increase or decrease in the medicare part B premium rate for those years, which percentage shall be calculated by dividing the medicare part B premium rate in effect at the beginning of the new plan year by the rate in effect at the beginning of the previous plan year.

For the plan year beginning January 1, 2013, the adjusted base monthly contribution shall be computed using the base composite monthly contribution as of July 1, 2012.

As used in this subsection, "medicare part B premium rate" means the rate published in the Federal Register each year on November 1 or on the business day closest to November 1 of each year after the medicare part B premium rate has been established by the United States Secretary of Health and Human Services and approved by the United States Congress.

(f) If the board adopts a rate structure that provides for other than self and family rates for the health benefit plans, the base monthly contribution for the rate structure adopted by the board shall be adjusted to provide the equivalent underwriting cost as the base monthly contribution that is provided for in this section.

§ 3:106 State and county contribution; reimbursement for retired employees. An employee-beneficiary who retires and relocates outside of the State shall be reimbursed for the premiums paid by the employee-beneficiary for a personal health insurance policy; provided that the board shall determine which employee-beneficiaries and what types of personal health insurance policies shall be eligible for reimbursement and may set other conditions that shall be met for the employee-beneficiary to receive the reimbursements provided under this section.

The reimbursement shall be the lesser of:

(1) The actual cost of the personal health insurance policy; or

(2) The amount of the state or county contribution for the most comparable health benefits plan.

Reimbursements shall be paid by the fund on a quarterly basis upon the presentation of documentation that the premiums for the personal health insurance policy have been paid by the employee-beneficiary. This section shall apply to all employee-beneficiaries who retire and relocate outside of the State, regardless of their date of retirement.

§ 3:107 State and county contributions; retired employees with fewer than ten years of service. (a) This section shall apply to state and county contributions to the fund for employees specified in paragraph (1)(E) of the definition of "employee" in section 1:103 who:

(1) Were hired on or before June 30, 1996; and

(2) Retired after June 30, 1984, with fewer than ten years of credited service, excluding sick leave.

(b) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a monthly contribution equal to one-half of the base monthly contribution set forth under section 3:105(b) for retired employees enrolled in medicare or non-medicare health benefits plans. If both husband and wife are employee-beneficiaries, the total contribution by the State or county shall not exceed the monthly contribution for supplemental medicare family or non-medicare family plan, as appropriate.

§ 3:108 State and county contributions; employees hired after June 30, 1996, but before July 1, 2001, and retired with fewer than twenty-five years of service. (a) This section shall apply to state and county contributions to the fund for employees who were hired after June 30, 1996, but before July 1, 2001, and who retire with fewer than twenty-five years of credited service, excluding sick leave; provided that this section shall not apply to the following employees, for whom state and county contributions shall be made as provided by section 3:105:

(1) An employee hired prior to July 1, 1996, who transfers employment after June 30, 1996, and who cumulatively accrues at least ten years of credited service; and

(2) An employee hired prior to July 1, 1996, who has at least ten years of credited service prior to a break in service.

For the purposes of this section:

"Break in service" means to leave state or county employment for more than ninety calendar days before returning to state or county employment.

"Transfer" means to leave state or county employment and return to state or county employment within ninety calendar days.

(b) For purposes of this section, if an employee leaves state or county employment and returns to state or county employment after June 30, 1996, upon retirement, the employee's years of service shall be computed in the same manner as set forth in chapter 88.

(c) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund:

(1) For retired employees enrolled in medicare or non-medicare health benefit plans with ten or more years but fewer than fifteen years of service, a monthly contribution equal to one-half of the base monthly contribution set forth under section 3:105(b); and

(2) For retired employees enrolled in medicare or non-medicare health benefit plans with at least fifteen but fewer than twenty-five years of service, a monthly contribution of seventy-five per cent of the base monthly contribution set forth under section 3:105(b).

If both husband and wife are employee-beneficiaries, the total contribution by the State or county shall not exceed the monthly contribution for a supplemental medicare family or non-medicare family plan, as appropriate.

§ 3:109 State and county contributions; employees hired after June 30, 2001, and retired. (a) This section shall apply to state and county contributions to the fund for employees hired after June 30, 2001, and who retired, except that this section shall not apply to the following employees, for whom state and county contributions shall be made as provided by section 3:108:

(1) An employee hired after June 30, 1996, and prior to July 1, 2001, who transfers employment after June 30, 2001, and who cumulatively accrues at least ten years of credited service; and

(2) An employee hired after June 30, 1996, and prior to July 1, 2001, who has at least ten years of credited service prior to a break in service.

For purposes of this section:

"Break in service" means to leave state or county employment for more than ninety calendar days before returning to state or county employment.

"Transfer" means to leave state or county employment and return to state or county employment within ninety calendar days.

(b) For purposes of this section, if an employee leaves state or county employment and returns to state or county employment after July 1, 2001, upon retirement, the employee's years of service shall be computed in the same manner as set forth in chapter 88.

(c) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund:

(1) For retired employees based on the self plan with ten or more years but fewer than fifteen years of service, a monthly contribution equal to one-half of the base medicare or non-medicare monthly contribution set forth under section 3:105(b);

(2) For retired employees based on the self plan with at least fifteen but fewer than twenty-five years of service, a monthly contribution equal to seventy-five per cent of the base medicare or non-medicare monthly contribution set forth under section 3:105(b);

(3) For retired employees based on the self plan with twenty-five or more years of service, a monthly contribution equal to one-hundred per cent of the base medicare or non-medicare monthly contribution set forth under section 3:105(b); and

(4) One-half of the monthly contributions for the employee-beneficiary or employee-beneficiary with dependent-beneficiaries upon the death of the employee, as defined in paragraph (1)(E) of the definition of "employee" in section 1:103.

If both husband and wife are employee-beneficiaries, the total contribution by the State or county shall not exceed the monthly contribution for two supplemental medicare self or non-medicare self plans, as appropriate.

§ 3:110 Group life insurance benefits plans for retired employees; contributions. (a) The State, through the department of budget and finance, and the counties, through their respective departments of finance, shall pay to the fund a base monthly contribution as set forth in subsection (b) for each retired employee enrolled in the fund's group life insurance benefits plan under section 3:107, 3:108, and 3:109.

(b) Effective July 1, 2003, there is established a base monthly contribution of $4.16 for each retired employee enrolled in a group life insurance plan; provided that the monthly contribution shall not exceed the actual cost of the group life insurance benefits plan. The base composite monthly contribution shall be adjusted annually beginning July 1, 2004. The adjusted base composite monthly contribution for each new plan year shall be calculated by increasing or decreasing the base composite monthly contribution in effect through the end of the previous plan year by the percentage increase or decrease in the medicare part B premium rate for those years. The percentage shall be calculated by dividing the medicare part B premium rate in effect at the beginning of the new plan year by the rate in effect through the end of the previous plan year.

§ 3:111 State and county contributions not considered wages or salary. Contributions made by the State or the counties under this part shall not be considered wages or salary of an employee-beneficiary. No employee-beneficiary shall have any vested right in or be entitled to receive any part of any contribution made to the fund.

§ 3:112 Reimbursement for state contributions. (a) All state agencies having control of funds other than the general fund shall reimburse the State for contributions made by the State pursuant to sections 3:104, 3:105, 3:106, 3:107, 3:108, and 3-109 on account of agency employees whose compensation is paid in whole or part from funds other than the general fund.

(b) All state and county agencies receiving federal funds, which may be expended for the purpose of replacing the contribution payable by the State to the fund, shall set aside a portion of the federal funds sufficient to reimburse the State for contributions made by the State pursuant to sections sections 3:104, 3:105, 3:106, 3:107, 3:108, and 3-109, on account of the employees in the agencies whose compensation is paid in whole or part from federal funds.

§ 3:113 Employee-beneficiary contributions; health benefit plans. (a) Each employee-beneficiary shall make a monthly contribution to the fund amounting to the difference between the monthly charge of the health benefits plan selected by the employee-beneficiary and the contribution made by the State or county for the employee-beneficiary to the fund. Nothing in this section shall prohibit any employee-beneficiary from participating in a cafeteria plan authorized under Title 26 United States Code section 125, Internal Revenue Code of 1986, as amended, and section 78-30.

(b) During the period the health benefits plan selected by an employee-beneficiary is in effect, the employee-beneficiary, if allowed by law, shall authorize the employee-beneficiary's contribution to be withheld and transmitted to the fund monthly by the comptroller, employees' retirement system, or finance officer who disburses the employee-beneficiary's compensation, pension, or retirement pay. If an employee-beneficiary's contribution to the fund is not withheld and transmitted to the fund, the employee-beneficiary shall pay the monthly contribution:

(1) In the case of an employee-beneficiary who normally receives the employee-beneficiary's compensation from the comptroller or employees' retirement system, directly to the fund by the first day of each month; or

(2) In the case of all other employee-beneficiaries, to the respective finance officer from whom the employee-beneficiary normally receives compensation for transmittal to the fund by the first day of each month.

(c) Notwithstanding subsection (a), an employee-beneficiary's monthly contribution to the fund shall include the amount that would have been the employee-beneficiary's contribution if the employee-beneficiary had not elected to participate in the cafeteria plan.

§ 3:114 Employee-beneficiary or qualified-beneficiary contributions; long-term care benefits plan. (a) During the period the long-term care benefits plan is in effect, the employee-beneficiary, if allowed by law, shall authorize the employee-beneficiary's contribution to be withheld and transmitted to the fund monthly by the comptroller, employees' retirement system, or finance officer who disburses the employee-beneficiary's compensation, pension, or retirement pay. If an employee-beneficiary's monthly contribution to the fund is not withheld and transmitted to the fund, the employee-beneficiary shall pay the monthly contribution directly to the board's designated carrier or third-party administrator as specified by the board.

(b) Qualified-beneficiaries shall pay monthly contributions directly to the board's designated carrier or third-party administrator as specified by the board.

PART II: RESERVE ACCOUNT

§ -3:201 Establishment of Hawaii employer-union health benefits trust fund captive insurance company reserve account. There is established a Hawaii employer-union health benefits trust fund captive insurance company reserve account to be placed within the department of budget and finance for administrative purposes. The account shall consist of required employer contributions pursuant to this part and legislative initiatives. The reserve account shall meet the requirements of the Government Accounting Standards Board regarding employment benefits trusts.

§ -3:202 Reserve account; purpose; initial balance. (a) The reserve account shall be used as a reserve against or to pay the fund's future costs of providing health and other benefits plans established under section -2:309 and -3:111 and any other benefits plans the board establishes for retired employees and their beneficiaries.

(b) The initial balance, which shall be met within five years of the effective date of Act , Session Laws of Hawaii 2013, shall total $1,500,000,000. Each employer shall be responsible for a proportionate share of the initial balance as described in section -3:203.

§ -3:203 Employer contributions; mandatory. (a) The board in its sole discretion shall require each employer to make an annual contribution to the reserve account established under section -3:201. The amount of the contribution shall be as described under subsection (b) and neither the administrator nor any individual employer shall have the authority to increase the subscriber's liability as established by this section.

(b) Individual employers shall be liable for a proportional percentage of the initial balance established under section -3:202 equal to the percentage of total employees the employer employs as of the effective date of Act , Session Laws of Hawaii 2013. Any amounts an employer has previously contributed to any account established as a reserve against or to pay any future costs of providing health and other benefits plans shall be deposited to the reserve account and applied as a credit to such employer's liability under this section. Such amounts shall be due and payable by the first day of each fiscal year. The administrator shall calculate the total amount of liability attributable to each employer no later than December 31 of the preceding fiscal year.

(c) Employer contributions to the reserve account shall be irrevocable, all assets of the fund shall be dedicated exclusively to provide health and other benefits to retirees and their beneficiaries when there are insufficient monies to cover the current claims in the fund and to pre-fund health and other benefits to retirees and their beneficiaries, except as provided under section -3:205. 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, the board, or the administrators. The board's powers under part III of article II of this chapter shall apply to the reserve account established under section -3:201.

§ -3:204 Additional employer contributions. At any point subsequent to the establishment of the initial balance required in the reserve account pursuant to section -3:202, that the balance falls below $1,500,000,000, the board shall require each individual employer to make additional contributions to the reserve account in the manner described under section -3:203 until such point that the balance in the reserve account meets or exceeds the $1,500,000,000 threshold.

§ -3:205 Catastrophic health events. Notwithstanding section -3:203, moneys in the reserve account may be expended to fund claims resulting from a catastrophic health event as determined by the director of health as provided pursuant to section 3:203. Such expenditures shall be overseen by the administrator with the approval of the board.

§ 3:206 Other powers. In addition to the power to administer the reserve account, the board may:

(1) Collect, receive, deposit, and withdraw money on behalf of the account;

(2) Invest moneys in the same manner specified in section 88-119(1)(A), (1)(B), (1)(C), (2), (3), (4), (5), (6), and (7);

(3) Hold, purchase, sell, assign, transfer, or dispose of any securities or other investments of the fund, as well as the proceeds of those investments and any money belonging to the fund;

(4) Make payments of periodic charges and pay for reasonable expenses incurred in carrying out the purposes of the fund;

(5) Contract for the performance of financial audits of the fund and claims audits of its insurance carriers;

(6) Retain auditors, actuaries, investment firms and managers, benefit plan consultants, or other professional advisors to carry out the purposes of this chapter;

(7) Make payments necessary to cover public employee health benefit costs when the Hawaii employer-union health benefits trust fund captive insurance fund does not have the necessary funds; and

(8) Require any department, agency, or employee of the State or counties to furnish information to the board to carry out the purposes of this chapter.

§ 3:207 Accumulation of $1,500,000,000 in funds. (a) Upon written confirmation from the board that the reserve fund has secured $1,500,000,000, in the aggregate the Hawaii employer-union health benefits trust fund captive insurance company reserve fund shall end employer contributions until the balance of the reserve account falls below $1,500,000,000;

(b) When the balance of the net moneys accumulated totals $1,500,000,000, the fund may notify the insurance commissioner of that fact.

(c) In the event the balance of the net accumulated moneys falls below $500,000,000, the board shall require employer contributions.

(d) The Hawaii employer-union health benefits trust fund captive insurance company reserve account shall be exempt from all taxes and fees levied by the State on other insurers.

ARTICLE 4: INSURANCE PLANS AND BENEFITS

PART I: INSURANCE PLANS AND BENEFITS GENERALLY

§ 4:101 Compliance with state insurance code. All insurance plans provided by the captive insurance company shall comply with the provisions of chapters 431 and 432E."

PART II

SECTION 3. Section 88-9, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) A retirant may be employed without reenrollment in the system and suffer no loss or interruption of benefits provided by the system or under chapter [~~87A~~] if the retirant is employed:

(1) As an elective officer pursuant to section 88-42.6(c) or as a member of the legislature pursuant to section 88-73(d);

(2) As a juror or precinct official;

(3) As a part-time or temporary employee excluded from membership in the system pursuant to section 88-43, as a session employee excluded from membership in the system pursuant to section 88-54.2, as the president and chief executive officer of the Hawaii tourism authority excluded from membership in the system pursuant to section 201B-2, or as any other employee expressly excluded by law from membership in the system; provided that:

(A) The retirant was not employed by the State or a county during the six calendar months prior to the first day of reemployment; and

(B) No agreement was entered into between the State or a county and the retirant, prior to the retirement of the retirant, for the return to work by the retirant after retirement;

(4) In a position identified by the appropriate jurisdiction as a labor shortage or difficult-to-fill position; provided that:

(A) The retirant was not employed by the State or a county during the twelve calendar months prior to the first day of reemployment;

(B) No agreement was entered into between the State or a county and the retirant, prior to the retirement of the retirant, for the return to work by the retirant after retirement; and

(C) Each employer shall contribute to the pension accumulation fund the required percentage of the rehired retirant's compensation to amortize the system's unfunded actuarial accrued liability; or

(5) As a teacher or an administrator in a teacher shortage area identified by the department of education or in a charter school or as a mentor for new classroom teachers; provided that:

(A) The retirant was not employed by the State or a county during the twelve calendar months prior to the first day of reemployment;

(B) No agreement was entered into between the State or a county and the retirant prior to the retirement of the retirant, for the return to work by the retirant after retirement; and

(C) The department of education or charter school shall contribute to the pension accumulation fund the required percentage of the rehired retirant's compensation to amortize the system's unfunded actuarial accrued liability."

SECTION 4. Section 88-95, Hawaii Revised Statutes, is amended to read as follows:

"§88‑95 Withholding of dues and insurance premiums. A retired member, if the retired member requests in writing, may have withheld from the retired member's pension, annuity, or retirement allowance, payments to the Hawaii employer-union health benefits trust fund captive insurance company fund and employee organizations for dues and insurance premiums."

SECTION 5. Section 88-103.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The employees' retirement system shall:

(1) Disclose to the Hawaii employer-union health benefits trust fund captive insurance company and employee organizations information related to the administration of pension, annuity, or retirement allowance deductions, as follows: name, social security number, and amounts and dates of both voluntary and mandatory deductions remitted to the recipient; and

(2) Release the records of its retirants and beneficiaries to the Hawaii employer-union health benefits trust fund captive insurance company for the disbursement of payments authorized under section [~~87A-23.~~] 2:309."

SECTION 6. Section 89-2, Hawaii Revised Statutes, is amended by amending the definitions of "collective bargaining" and "employee organization" to read as follows:

""Collective bargaining" means the performance of the mutual obligations of the public employer and an exclusive representative to meet at reasonable times, to confer and negotiate in good faith, and to execute a written agreement with respect to wages, hours, amounts of contributions by the State and counties to the Hawaii employer-union health benefits trust fund captive insurance company fund, and other terms and conditions of employment, except that by any such obligation neither party shall be compelled to agree to a proposal or be required to make a concession. For the purposes of this definition, "wages" includes the number of incremental and longevity steps, the number of pay ranges, and the movement between steps within the pay range and between the pay ranges on a pay schedule under a collective bargaining agreement.

"Employee organization" means any organization of any kind in which public employees participate and which exists for the primary purpose of dealing with public employers concerning grievances, labor disputes, wages, hours, amounts of contributions by the State and counties to the Hawaii employer-union health benefits trust fund captive insurance company fund, and other terms and conditions of employment of public employees."

SECTION 7. Section 89-9, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) The employer and the exclusive representative shall meet at reasonable times, including meetings sufficiently in advance of the February 1 impasse date under section 89-11, and shall negotiate in good faith with respect to wages, hours, the amounts of contributions by the State and respective counties to the Hawaii employer-union health benefits trust fund captive insurance company fund to the extent allowed in subsection (e), and other terms and conditions of employment which are subject to collective bargaining and which are to be embodied in a written agreement as specified in section 89-10, but such obligation does not compel either party to agree to a proposal or make a concession; provided that the parties may not negotiate with respect to cost items as defined by section 89-2 for the biennium 1999 to 2001, and the cost items of employees in bargaining units under section 89-6 in effect on June 30, 1999, shall remain in effect until July 1, 2001."

2. By amending subsections (d) and (e) to read:

"(d) Excluded from the subjects of negotiations are matters of classification, reclassification, benefits of but not contributions to the Hawaii employer-union health benefits trust fund captive insurance company fund, recruitment, examination, initial pricing, and retirement benefits except as provided in section 88-8(h). The employer and the exclusive representative shall not agree to any proposal which would be inconsistent with the merit principle or the principle of equal pay for equal work pursuant to section 76-1 or which would interfere with the rights and obligations of a public employer to:

(1) Direct employees;

(2) Determine qualifications, standards for work, and the nature and contents of examinations;

(3) Hire, promote, transfer, assign, and retain employees in positions;

(4) Suspend, demote, discharge, or take other disciplinary action against employees for proper cause;

(5) Relieve an employee from duties because of lack of work or other legitimate reason;

(6) Maintain efficiency and productivity, including maximizing the use of advanced technology, in government operations;

(7) Determine methods, means, and personnel by which the employer's operations are to be conducted; and

(8) Take such actions as may be necessary to carry out the missions of the employer in cases of emergencies.

This subsection shall not be used to invalidate provisions of collective bargaining agreements in effect on and after June 30, 2007, and shall not preclude negotiations over the procedures and criteria on promotions, transfers, assignments, demotions, layoffs, suspensions, terminations, discharges, or other disciplinary actions as a permissive subject of bargaining during collective bargaining negotiations or negotiations over a memorandum of agreement, memorandum of understanding, or other supplemental agreement.

Violations of the procedures and criteria so negotiated may be subject to the grievance procedure in the collective bargaining agreement.

(e) Negotiations relating to contributions to the Hawaii employer-union health benefits [~~trust~~] captive insurance fund shall be for the purpose of agreeing upon the amounts which the State and counties shall contribute under section 87-4, toward the payment of the costs for a health benefits plan, as defined in section 87-1(8), and group life insurance benefits, and the parties shall not be bound by the amounts contributed under prior agreements; provided that section 89-11 for the resolution of disputes by way of arbitration shall not be available to resolve impasses or disputes relating to the amounts the State and counties shall contribute to the Hawaii employer-union health benefits trust fund."

SECTION 8. Section 89-11, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) The decision of the arbitration panel shall be final and binding upon the parties on all provisions submitted to the arbitration panel. If the parties have reached agreement with respect to the amounts of contributions by the State and counties to the Hawaii employer-union health benefits [~~trust~~] captive insurance fund by the tenth working day after the arbitration panel issues its decision, the final and binding agreement of the parties on all provisions shall consist of the panel's decision and the amounts of contributions agreed to by the parties. If the parties have not reached agreement with respect to the amounts of contributions by the State and counties to the Hawaii employer-union health benefits [~~trust~~] captive insurance fund by the close of business on the tenth working day after the arbitration panel issues its decision, the parties shall have five days to submit their respective recommendations for such contributions to the legislature, if it is in session, and if the legislature is not in session, the parties shall submit their respective recommendations for such contributions to the legislature during the next session of the legislature. In such event, the final and binding agreement of the parties on all provisions shall consist of the panel's decision and the amounts of contributions established by the legislature by enactment, after the legislature has considered the recommendations for such contributions by the parties. It is strictly understood that no member of a bargaining unit subject to this subsection shall be allowed to participate in a strike on the issue of the amounts of contributions by the State and counties to the Hawaii employer-union health benefits trust fund captive insurance company fund. The parties shall take whatever action is necessary to carry out and effectuate the final and binding agreement. The parties may, at any time and by mutual agreement, amend or modify the panel's decision.

Agreements reached pursuant to the decision of an arbitration panel and the amounts of contributions by the State and counties to the Hawaii employer-union health benefits trust fund captive insurance company fund, as provided herein, shall not be subject to ratification by the employees concerned. All items requiring any moneys for implementation shall be subject to appropriations by the appropriate legislative bodies and the employer shall submit all such items within ten days after the date on which the agreement is entered into as provided herein, to the appropriate legislative bodies."

SECTION 9. Section 269-2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Effective July 1, 2005, the chairperson of the commission shall be paid a salary set at eighty-seven per cent of the salary of the director of human resources development, and each of the other commissioners shall be paid a salary equal to ninety-five per cent of the chairperson's salary. The commissioners shall be exempt from chapters 76 and 89 but shall be members of the state employees retirement system and shall be eligible to receive the benefits of any state or federal employee benefit program generally applicable to officers and employees of the State, including those under chapter [~~87A.~~] .

The commission is placed within the department of budget and finance for administrative purposes."

SECTION 10. Section 323F-32, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) Employees of Kahuku hospital shall be exempt from chapters 76, [~~87A,~~] , 88, and 89, and shall not be considered as employees of the State."

SECTION 11. Chapter 87A, Hawaii Revised Statutes, is repealed.

PART III

SECTION 12. All rights, powers, functions, and duties of the Hawaii employer-union health benefits trust fund are transferred to the Hawaii employer-union health benefits trust fund captive insurance company.

All officers and employees whose functions are transferred by this Act shall be transferred with their functions and shall continue to perform their regular duties upon their transfer, subject to the state personnel laws and this Act.

No officer or employee of the State having tenure shall suffer any loss of salary, seniority, prior service credit, vacation, sick leave, or other employee benefit or privilege as a consequence of this Act, and such officer or employee may be transferred or appointed to a civil service position without the necessity of examination; provided that the officer or employee possesses the minimum qualifications for the position to which transferred or appointed; and provided that subsequent changes in status may be made pursuant to applicable civil service and compensation laws.

An officer or employee of the State who does not have tenure and who may be transferred or appointed to a civil service position as a consequence of this Act shall become a civil service employee without the loss of salary, seniority, prior service credit, vacation, sick leave, or other employee benefits or privileges and without the necessity of examination; provided that such officer or employee possesses the minimum qualifications for the position to which transferred or appointed.

If an office or position held by an officer or employee having tenure is abolished, the officer or employee shall not thereby be separated from public employment, but shall remain in the employment of the State with the same pay and classification and shall be transferred to some other office or position for which the officer or employee is eligible under the personnel laws of the State as determined by the head of the department or the governor.

SECTION 13. All appropriations, records, equipment, machines, files, supplies, contracts, books, papers, documents, maps, and other personal property heretofore made, used, acquired, or held by the department or Hawaii employer-union health benefits trust fund relating to the functions transferred to the department of Hawaii employer-union health benefits trust fund captive insurance company shall be transferred with the functions to which they relate.

SECTION 14. The members serving on the board of the Hawaii employer-union health benefits trust fund on the effective date of this Act shall serve as the initial members of the Hawaii employer-union health benefits trust fund captive insurance company board established pursuant to section 2 and shall continue to serve as members of the Hawaii employer-union health benefits trust fund captive insurance company board until their terms expire.

SECTION 15. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 16. This Act shall take effect on July 1, 2014.

INTRODUCED BY:	_____________________________

Report Title:

Captive Insurance

Description:

Addresses the unfunded liabilities for public employee health benefits without putting down $500,000,000 per year for the next thirty years. Calls for the formation and implementation of a captive insurance facility to effectively manage the administration and financing of the current and potential future employee benefit obligations of the state and county governments. Establishes the Hawaii employer-union health benefits captive insurance fund and reserve account that holds ten per cent of the unfunded liabilities, which has the effect of fully funding the liabilities.

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

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Bill Text: HI HB1459 | 2013 | Regular Session | Introduced

Hawaii House Bill 1459 (Prior Session Legislation)

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