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The Honolulu Advertiser
Posted on: Wednesday, April 14, 2010

Trust-fund remedy left to lawmakers

BY Greg Wiles
Advertiser Staff Writer

Gov. Linda Lingle is urging legislators to find a quick fix for a daunting financial gap facing the agency that handles health plans for 161,000 state and county workers, dependents and retirees.

Lingle yesterday sent a letter to the heads of labor committees in the House and Senate asking them to take up money-saving measures in the remaining three weeks of the legislative session.

The series of actions seek to lower benefits and make other changes so that the fund doesn't run out of cash sometime this year.

"I cannot stress enough to you that you have the authority and the responsibility to stop the collapse of the EUTF (Employer Union Health Benefit Trust Fund) system," Lingle wrote in the letter. "I urge you to act promptly and decisively."

The EUTF oversees the medical benefits for state and county workers with the exception of teachers and has been facing a troubling drain on its reserves as healthcare usage and costs rise. The EUTF has been paying out more money than it is taking in, and at the end of December had burned through $77.4 million in its main reserve fund during an 18-month period.

It's forecast to deplete another reserve fund sometime this year unless steps are taken to increase state funding, cut benefits or raise premiums charged to members who have preferred provider plans. The EUTF trustees have worked to pare losses in the past year by offering less costly plans, implementing a controversial pharmacy benefits program and conducting an audit of dependents.

But the plan still has been losing $1.3 million a month recently and losses could go higher depending on medical usage and other factors. A recent Hawai'i Supreme Court decision on retirement benefits could also add to costs.

EUTF adviser Aon Consulting recommended a 26.2 percent increase in rates for PPO plans last month to keep the plan from running out of money.

However, the increase would come atop a 24 percent rate hike for PPO subscribers last year and is seen as an unpalatable alternative.

Linda Smith, Lingle's senior policy adviser, touted alternatives yesterday that would cut benefits and reconfigure the EUTF's board of trustees to make it more effective. Currently there are five trustees who come from government and county employers and five that represent workers who are mostly heads of unions.

That make-up has produced stalemates at times. Lingle's plan calls for an 11-member board with trustees, with the 11th member chosen by current trustees. If they cannot agree, the governor would make the selection.

Lingle also is proposing the Legislature take action on bills she proposed that would make life insurance optional, eliminate Medicare Part B for spouses of beneficiaries and coordination of Medicare benefits. She also would like the Legislature to stipulate that public sector benefit plans can't be better than the basic plan found in the private sector.

"These problems can be solved," Smith maintained.

She said the administration has identified two bills in which the proposed changes can be incorporated. It also is asking the Legislature to gut other bills that would affect savings under the new pharmacy benefits program.

Senate Labor Committee Chairman Dwight Takamine could not be reached immediately for comment.

But Karl Rhoads, head of the House Labor and Public Employment Committee, said acting on Lingle's request would be difficult given that deadlines for having non-money and money bills ready to send to the governor's office is only eight and nine days away, respectively.

Rhoads said he was aware of the EUTF's financial and structural problems and had supported SB2849, which would have restructured the agency to have a seven-member board and had medical coverage for most public workers decided through collective bargaining.

He said Lingle had been taking a hard line with the EUTF in holding the line on more funding for the agency. That has forced premium increases and may result in another, he said.

"If the state doesn't come up with any more money, then the beneficiaries' rates will go up," Rhoads said. "These are people who've also taken a pay cut and a furlough this past year; it's a pretty tough situation for them."