The Hawaii Supreme Court has ruled in a case involving the rights of retirees to health insurance coverage currently administered by the Hawaii Employer-Union Health Benefits Trust Fund, but the meaning of the decision remains unclear.

The decision was on the agenda of the Hawaii Employer-Union Health Benefits Trust Fund at its meeting yesterday, but they lost their quorum before going into executive session and had to call it quits before the matter came up.

The court’s ruling, issued last week, was mixed, upholding an earlier circuit court ruling in part, while reversing it in part.

A brief Star-Bulletin story last week, published without a byline, stressed the EUTF’s mandate to control costs to taxpayers.

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 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.”

But a later report by KHON2, relying on attorney Charles Khim, who represented the individual plaintiffs challenging the EUTF’s policy towards retirees, asserted the decision will require the state to reinstate all health benefits that have been reduced since 2003.

“For current retirees this is great news,” he said. “We’re talking about seven years worth of being short changed on chemotherapy, on dental coverage, on a whole host of things that we cited in the lawsuit.”

According to Khim roughly 80,000 retirees and their relatives are covered under the Supreme Court decision. He says the next step is to determine how the EUTF would reinstate coverage that was lost since the state began trimming health benefits in 2003.

Khim says retirees may also be reimbursed for out-of-pocket expenses they were forced to absorb under their diminished health plans.

Even after examining the Supreme Court’s decision, I can’t figure out whether Khim’s characterization of the case is accurate. The decision does not directly deal with the issue of whether particular benefits were more or less what they should have been. And Khim has a separate lawsuit pending which argues the issue of damages.

…we hold that health benefits for retired state and county employees constitute “accrued benefits pursuant to article XVI, section 2 of the Hawai’i Constitution.

And that provision reads:

Section 2. Membership in any employees’ retirement system of the State or any political subdivision thereof shall be a contractual relationship, the accrued benefits of which shall not be diminished or impaired.

So the court held health benefits, once accrued, can’t be taken away.

But then the court took on the second question of whether retirees have to be given the same or equivalent benefits as active employees.

The Circuit Court earlier had ruled EUTF violated state law by providing retirees fewer benefits, including a lower maximum dental benefit, lower coverage for endodontic treatments, and lower coverage for radiation therapy.

The Supreme Court rejected this finding and overturned this part of the lower court’s ruling, and held that state law:

…does not require the Board of the EUTF to provide health benefits plans to retirees whose benefits “reasonably approximate” those benefits provided to active employees.

I’m not a lawyer, but it does sound to me like Khim’s assessment goes beyond this court’s majority opinion but is consistent with the concurring opinion filed by Justice Acoba.

Acoba reasons health benefits are accrued during an employee’s years of service and are protected against “diminishment or impairment” by the Constitution. Therefore, he opines:

Because such benefits cannot be diminished, that array of health plan services most advantageous to the employee during his or her service must be deemed the “accrued benefits” under Article XVI, Section 2; otherwise, “diminishment or impairment” of accrued benefits would result.

With this case settled, I expect that the related lawsuit to establish damages now proceed as the question of just what level of benefits are due retirees is determined.

One other thing caught my attention. The court’s majority differentiates between the specific dollar contribution paid by the state to provide health benefits, and the “health benefits plan” offered the employees and retirees (see pages 34-35). The former, the court says, was not at issue in this case. The court’s conclusion is that the “health benefits plan” is what is protected.

Does this undermine the state’s current position that it will not increase the dollar amount of its contribution to EUTF because it cannot take action that would deminish or impair the “health benefits plan”? Or does it mean that it is free to maintain the level of health benefits but shift more of the cost to employees and retirees?

As the spouse of a state employee, I’ve got a vested interest in seeing these issues clarified further.