Tag Archives: Hawaii Employer-Union Health Benefits Trust Fund

HSTA members upset by health insurance transfer back to the EUTF

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A friend sent this inquiry a week or so ago:

You must be aware that the teachers have lost their medical coverage through the VEBA Trust and benefits will convert automatically to reduced coverage through the EUTF (Employer-Union Health Benefits Trust Fund) system. Since I am a fixed income retiree supporting a family of four this is a HUGE deal for us.

Three big concerns:

1. the reduced benefits

2. the conversion comes in less that six weeks and no one has contacted us about the change except for a confusing 10/21 notice about enrolling in another drug plan or paying a late fee.

3. this .pdf answers all the questions except the ones that we the the beneficiaries may have, there will be no information sessions, and the EUTF says they will not take our calls OR EMAILS to answer our questions.

My question: WTF?

I can certainly see why my friend is confused and upset. That pdf from the EUTF says the agency “does not have the resources to conduct open enrollment sessions”, where member questions are normally answered, nor to take telephone inquiries or emails.

According to an explanation of the EUTV-VEBA issue by the UH faculty union, EUTF’s inability to conduct proper information sessions or respond to member inquiries is the result of Gov. Lingle’s refusal to release increased funds budgeted by the legislature for EUTF administrative costs.

But this issue has a long history.

The EUTF was created in 2003 after it was decided that there would be an overall improvement if previously fragmented health insurance offerings were brought under one umbrella program. EUTF then replaced the former public employees health fund.

But HSTA immediately began lobbying to again split its members off to cut separate insurance deals, and they finally succeeded in the 2005 legislative session.

In July 2005, the State Legislature enacted HB 1608 which authorized and set forth the requirements for the establishment of a Voluntary Employee Beneficiary Association (VEBA) trust by public employee organizations to provide health benefits for its members. HB1608 established a VEBA trust three-year pilot program to allow for the analysis of the costs and benefits of a VEBA trust against those of the Trust Fund. Effective March 1, 2006, the Hawaii State Teachers Association (HSTA) implemented the three-year pilot program. As a result, all active HSTA employees were enrolled in the VEBA trust and subsequently canceled from the Trust Fund’s health benefits plans. [Source: EUTF Annual Report 2006-2007]

Although HSTA was able to get a somewhat better health plan for its members by splitting off from the other public sector unions, the union was also seen as undermining the other unions by skimming off lower risk members.

This view was confirmed by a 2009 audit conducted by State Auditor Marion Higa as part of the Legislature’s evaluation of the pilot program.

We found that the VEBA trust pilot program: 1) promotes adverse selection and increases premium costs for EUTF emrollees; 2) dupblicates administrative costs borne by the State employer; and 3) cannot ensure transparency and accountability in providing health benefits for teachers and teacher retirees. Overall, the HSTA VEBA trust breaks up the EUTF health plan and negatively impacts the EUTF.

Both the audit and UHPA’s analysis are really required reading to get a better sense of the situation.

Of course, there’s a whole additional layer of concerns based on the history of our public employee unions and insurance contracts. I wrote about the issue last December, and that entry still provides a quick refresher course in relevant political history.

Questions remain after Hawaii Supreme Court ruling on retiree health benefits

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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.

Hawaii Supreme Court hears case challenging EUTF health plan costs and coverage for retired public employees

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Attorney General Mark Bennett told the Hawaii Supreme Court last month that health benefits provided retired state and county workers are not among the retirement benefits the State Constitution protects from being “diminished or impaired”.

Bennett said health benefits are not administered by the Employee Retirement System and therefore fall outside of the benefits provided constitutional protection.

The health benefit plan when it came into existence…was not administered by the Employee Retirement System, was never part of the Employee Retirement System, and is not so now.”

But attorney Paul Alston, representing a group of retirees, said health benefits are constitutionally protected because they are part of a bargain struck between public employees and the state that provided a system of benefits, both cash pensions and health benefits, “both of which are conditioned on membership (in the ERS).”

Public employees took less in salary in exchange for the promise of long-term financial security, including health benefits, Alston argued.

Bennett and Alston appeared before the Supreme Court in a case brought by a group of retirees who say the Hawaii Employer-Union Health Benefits Trust Fund broke the law by failing to provide retirees with health benefits substantially equal to those of active workers.

The case takes on more immediate relevance in light of Governor Lingle’s proposal to cut Medicare reimbursements for spouses of state retirees as part of her plan to balance the state budget.

The lawsuit was filed in 2007 after the EUTF board rejected their claim. Last year, a ruling by Circuit Court Judge Eden Hifo sided with the retirees and overturned the EUTF decision.

In her ruling, Hifo determined that retiree health benefits are constitutionally protected, and must be similar to benefit plans for active employees. The state then appealed to the Supreme Court. Oral arguments were held on November 19.

Much of the argument by both sides focused on the Article 16 Section 2 of the State Constitution.

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.

Bennett argued the provision doesn’t apply because health benefits should not be considered “accrued benefits” and are not administered directly by the ERS.

Bennett also argued EUTF could not supplement the retirees’ benefits without passing the costs on to retirees.

We wanted to be able to continue past practice of providing coverage to retirees…at no cost.

It was this concern to avoid out-of-pocket costs that drove the EUTF decision, Bennett argued.

But Alston dismissed these concerns about higher retiree premium payments as “fear mongering”, and said the differences between the health plans for active members and retirees was the result EUTF action to separate the two groups.

EUTF contract with Kaiser includes a package of benefits that treats retirees and actives the same, Alston said.

Only for people covered by HMSA is there a difference.

And this only because EUTF decided it would negotiate different rates for active members and retirees, unlike what it did with Kaiser.

Alston argued that providing fewer health benefits or requiring higher fees for retirees is a form of discrimination and should not be allowed.

Alston told the Supreme Court that retirees have have a higher co-payment, higher deductables, and their plans differ in “the quality and breadth of coverage.”

“What the EUTF is arguing is that it can discriminate against retirees as long as all retirees get the same,” Alston told the court.

A second lawsuit seeking damages, including reimbursement for amounts that retirees would not have had to pay if their plans had been the same as active member plans, is on hold pending the outcome of this appeal.

Unions lobbying for EUTF changes

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The major public worker unions are are placing a special emphasis on bills to be introduced in the 2010 legislative session aimed at “reforming or changing” the Employer-Union Health Benefits Trust Fund, according to a UH Professional Assembly newsletter.

UHPA reports:

The language will allow for new structures for providing benefit packages and improve the organization of the EUTF.

A benefits consultant is assisting in the process, with UHPA, HGEA, and UPW splitting the cost.

UHPA directors also passed a motion “to accept language enabling health insurance to be negotiated by the bargaining unit and the employer as part of the legislative proposal.”

The newsletter also described an earlier joint request to the EUTF board to cancel the recent open enrollment period and extend current health plans until the usual April-May open enrollment.

The unions also requested that in 2010 active public union members be given the option to choose a Kaiser plan, an HMA 90/10 plan, an HMA 80/20 plan, an HMSA 90/10 plan, an HMSA 80/20 plan and an HMSA HMO plan. There would be no change to the retirement benefits plan. [Note: The EUTF Trustees rejected the recommendations of the unions and only extended the open enrollment into December. Employee initiated changes in EUTF coverage will be effective February 1, 2010.]

While pushing its proposals in advance of EUTF’s November meeting, union representatives met on November 18 with benefits consultant Paul Tom and EUTF trustees.

It isn’t clear how many trustees were present at the meeting. However, the sunshine law may have been violated if more than two trustees took part. More than two members are only allowed to discuss board business at a regular public meeting, or as part of a committee assigned to investigate a specific matter. (See Section 92-2.5 HRS).

UHPA also reports that while EUTF has hired temporary workers and accepted additional staff from health plan administrators to get through the large volume of paperwork generated by the open enrollment, it’s regular staff are being forced to take furlough Fridays.

The most recent minutes posted on the EUTF web site are for its September 30 meeting. October board minutes are not yet available, despite the requirement spelled out in the Sunshine Law that minutes be available within 30 days of the meeting.

§92-9 Minutes. (a) The board shall keep written minutes of all meetings. Unless otherwise required by law, neither a full transcript nor a recording of the meeting is required, but the written minutes shall give a true reflection of the matters discussed at the meeting and the views of the participants. The minutes shall include, but need not be limited to:

(1) The date, time and place of the meeting;

(2) The members of the board recorded as either present or absent;

(3) The substance of all matters proposed, discussed, or decided; and a record, by individual member, of any votes taken; and

(4) Any other information that any member of the board requests be included or reflected in the minutes.

(b) The minutes shall be public records and shall be available within thirty days after the meeting, except where such disclosure would be inconsistent with section 92-5; provided that minutes of executive meetings may be withheld so long as their publication would defeat the lawful purpose of the executive meeting, but no longer.

It’s possible that the October minutes have been approved but are late in being posted to the EUTF web site.

And should I mention that the EUTF dependent verification instructions mailed to all public employees and retirees contained the wrong fax number, so that attempts to fax supporting documents failed?