The Employer-Union Trust Fund (EUTF) that by law sets health insurance benefits and premium rates for all Hawaii public employees has extended the current benefit packages, without any increase in premiums, from July 1st to October 1st. As a result of a change in state law, the Department of Education (DOE) teachers will become part of the EUTF on January 1, 2011, and will no longer receive their health insurance through the HSTA’s Voluntarily Employee Benefits Association (VEBA). The teachers were the only public employees that were not covered by the EUTF and the inclusion of another 14,000 public employees plus their dependents should have the effect of reducing the rate of future increases for health insurance by expanding the EUTF “risk pool.”
EUTF currently offers public employees a choice of programs which are either self-insured by the Trust or others which are purchased as insurance. The medical and drug programs administered by HMA, HMSA, and InformedRx are all self-insured. The EUTF is responsible for payment of all the benefits offered under these plans. If the established premiums are insufficient to cover the benefits paid out each month, the monies must be taken from the reserves of the EUTF. If the reserves fall below an actuarially prudent level, premiums are increased to both to cover the payment of benefits and the stability of the reserve fund. Kaiser, Hawaii Dental Service (HDS), Vision Service Plan (VSP) and the term life insurance are all purchased insurance policies. For any plan year, the insurance companies assume the payments for all benefits for the life of the contract (usually one year) regardless if premiums collected are less than the benefits being paid. Companies then readjust the proposed contract rates in successive years based on the prior experience.
Historically, the public employer paid 60% of the premium costs for the insurance plans selected by public employees. The employee then paid the remaining 40% of the premium costs for the plan(s) which were selected. In 2009, Governor Lingle refused to increase the employer’s EUTF premium contribution made through the collective bargaining agreements, which resulted in public employees having to pay the entire 24+% increase for health insurance premiums. Public employees are now paying more than 50% of the total premiums, and should the premiums increase, the state-county public employers will be paying closer to 40%; a complete reversal of the percentage split between employee and employer just two years ago*.
When it came time this year to establish the benefit plans and premiums for the EUTF self-insured health insurance benefits, the Trust’s consultants recommended another 26+% increase, which again would have been entirely put on the backs of public employees. The Union Trustees on the EUTF refused to accept that rate increase, despite the plan year ending on June 30, 2010. They proposed extending the old rates and benefits until October 1st, giving the consultants time to re-calculate the needed premium rates based on the DOE teachers returning to the EUTF on January 1, 2011. Therefore, there was no open enrollment period held last spring. When benefit plans are established and premium rates accepted, there will be an open enrollment period that will allow public choose from at least four different medical insurance plan options and premium rates. Until those decisions have been made, all the EUTF beneficiaries, whether active employees, retirees, or dependents, will continue to receive coverage under their present insurance plans.
This week, the EUTF Trustees received another report from the consultants. The projected required premium increases for self-insured, HMA and HMSA administered, plans had fallen from 26.2% to 17.2% (For comparison, Kaiser’s insurance rates have been proposed to increase in a range between 15-19%). This was wonderful news. However, the EUTF Employer Trustees still indicate that the Governor would not authorize any additional employer contributions to the EUTF to off-set a portion of this higher premium. In fact, the legislative appropriations for the EUTF had increased but the Department of Budget & Finance (the administrative agency for the EUTF—the lack of funding is also the reason you can’t reach the EUTF by phone) would not release any additional money.
Ultimately, there will be a need for an increase in medical and drug plan premiums, and it will have a substantial impact on public employees. The public sector unions, and their EUTF Trustees, are trying to mitigate the increased costs and they are also looking at less costly benefit packages. However, reducing benefits only shifts costs from healthy to sick employees & their families. Such a reduced benefit plan would likely have the greatest aggregated impact on retirees, but then someone at any age could suffer a catastrophic and expensive medical crisis. Still, public employees must be given the choices of medical insurance they can afford, even if it means risking greater out-of-pocket costs when you are sick or injured.
On a related issue, there have been a number of inquiries concerning the impact of the recently passed federal legislation on medical insurance plans, particularly the coverage of dependent children up to the age of 26. There is some misconception on when plans are required to make the change in coverage to allow these dependents to be covered even if they are no longer in school. The federal law calls for the change to be made by June 30, 2011, but some large plans that are grandfathered have until 2014 to adopt the coverage. EUTF has not yet changed the current benefit plan, and therefore, still only covers dependents enrolled in post-secondary education up to the age of 24. Should the EUTF change the benefit plan on October 1st, this new federally mandated extension of benefits may be included. However, changing the benefit plan to include dependents up to age 26 will increase the projected premium rates already quoted for the EUTF self-insured HMA and HMSA administered plans for everyone in the EUTF plans.
The EUTF Trustees are scheduled to reconvene their meeting next Monday, July 26th at 1:30 p.m. The meeting will be held in the EUTF office located on the 15th floor of the City Financial Tower.
*The county mayors continued the 60% premium contribution for police & fire fighters per the last two years of their existing contract, and extended the 60% employer contribution to other county employees for the last fiscal year.