Public Worker Health Care At Risk

Larry Price
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Wednesday - April 21, 2010
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A hot letter has been bouncing around the Big Square Building among the legislative hierarchy like a hot potato for a couple of weeks now. It is a warning from the governor that urges the legislative leaders to take action on a couple of key bills before this year’s session ends in three weeks.

The subject: Hawaii’s government employee health coverage will run out of money unless premiums are increased or benefits reduced.

The letter is about the Employer-Union Health Benefits Trust Fund (EUTF) that covers about 161,000 employees, retirees and dependents. The problem is, this most important fund is losing more than $1 million a month, and won’t be able to pay doctors for medical bills if it runs out of money. A hired consultant to the fund has recommended a 26.2 percent increase in premiums beginning July 1.

It’s all a pretty straightforward problem, not much hocus pocus involved by either side; however, the EUTF trustees must agree to the increase. That’s where the political arithmetic gets a little blurred.

EUTA’s consultant, Aon Consulting, informed the trustees at the March 31 board meeting that, under generally accepted accounting principles, the EUTF was insolvent as of Dec. 31, 2009, and ran out of funds to cover expenses later this year. With the political clock running, Aon recommended a 26.2 percent premium rate increase effective July 1, 2010 for the self-funded plans.

Most members of the EUTA, including me, I should add, had to absorb an average 24 percent premium increase for the self-funded prevalent plans effective July 1, 2009. Trustees voted to institute an average 24 percent increase after the EUTF suffered a $69.7 million loss over the past year. In the six months after the July 2009 premium increase, EUTF’s self-funded plans lost an additional $7.7 million for an average monthly loss of $1.3 million. The EUTF has been paying its bills by using part of its $42 million in restricted reserves.

This is where the political arithmetic gets complicated. There are only two ways to stop the default of the EUTF: Raise premiums or change benefits to lower costs. The union members on the EUTF already have stated that they will not support either option, which is what you would expect from them, especially after they suffered a 24 percent premium increase last year.

The EUTF Board makeup makes a resolution even more difficult. It has five members from the unions and five from management. In order for the board to take action, it needs three votes from each side. There is proposed legislation that would add an 11th member be chosen by the 10 current members. If they fail to agree on a chair, then the governor would make the selection.

The facts and the arithmetic are indisputable that the cost of the EUTF has become a burden for both the employers and the employees. If they do nothing and no corrective legislation is enacted in the next week, the EUTF is destined to collapse.

It will be interesting to see how the Legislature responds to this problem. Granted, it is not as flashy as “Furlough Fridays,” but it is a problem where the political arithmetic (HB2461) cannot be denied.

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