HB888 HD1.DOC

SECTION 1. The legislature finds that, according to the National Conference of State Legislatures, in 2010, forty-six states self-insured or self-funded at least one of their employee health care plans, and at least twenty states self-funded all of their employee health care offerings.

The legislature also finds that self-insured or self-funded plans have a number of potential advantages over fully insured plans, including:

(1) Elimination of certain taxes and fees, including premium taxes and market share fees under the federal Patient Protection and Affordable Care Act;

(2) Lower administration costs;

(3) Savings from the elimination of profit margin and risk charges by insurance carriers;

(4) Lack of a need to pre-pay for coverage, which allows for improved cash flow;

(5) Greater control over health plan reserves, which allows for higher investment returns on the reserves;

(6) Greater flexibility with benefit design, provider networks, and add-on services; and

(7) Better data collection, which in turn allows for better management of financials.

The legislature further finds that many states administering self-insured or self-funded employee health care plans have been able to lower costs while still maintaining a high level of health benefits. For example, Mississippi's state and school employee's life and health insurance plan has not raised active employee premiums for the past six years, but has still been able to expand benefits and access to quality providers each year. Similarly, Utah's self-funded public employee health program has benefitted from more than $10,000,000 in pharmacy rebates, which the state paid back into the risk pools that earned the rebates. Also, Wisconsin's group insurance board recently voted to transition its employee trust fund from a fully insured plan to a self-funded plan by January 1, 2018. In doing so, Wisconsin estimates it will save more than $60,000,000 over the 2017-2019 biennium, and the state expects to see similar savings over subsequent bienniums. Finally, the City of Philadelphia has saved over $20,000,000 from fiscal years 2008 through 2013 on the cost of health benefits through a self-insured model.

Hawaii's employer-union health benefits trust fund is currently fully insured rather than self-insured. However, health care premiums have risen rapidly over the last decade. During fiscal year 2015-2016 alone, premiums rose from $900,700,000 to over $1,000,000,000, an increase of almost $100,000,000. Therefore, the legislature believes that it is both prudent and essential that the State examine whether converting the employer-union health benefits trust fund to a self-insured model will result in cost savings. Cost savings from this conversion could be reinvested toward the State's large unfunded liability in the other post-employment benefits trust fund, thus saving taxpayers large sums of money in the long run.

The purpose of this Act is to require the legislative reference bureau to study the feasibility of providing health benefits to state and county employees using a self-insured model.

SECTION 2. (a) The legislative reference bureau shall study the feasibility of providing health benefits to state and county employees using a self-insured model. In conducting the study, the legislative reference bureau shall collect and take into account thorough data on:

(1) Historical census;

(2) Health benefit premiums;

(3) Contributions;

(4) Plan documents;

(5) Claims information; and

(6) Any other information the legislative reference bureau deems to be appropriate.

(b) In conducting the study under subsection (a), the legislative reference bureau shall examine the potential impacts of transitioning health benefits to a fully self-insured model, partially self-insured model, or other risk retention model including:

(1) Risks to the State from acting as its own insurer, including but not limited to:

(A) Uncontrolled utilization; and

(B) Cost increases from catastrophic claims events;

(2) Investment returns on reserves in the employer-union health benefits trust fund;

(3) Administrative cost savings, including any federal tax or fee savings;

(4) Fiduciary and legal obligations of the State;

(5) Benefits available for employees and other insured persons;

(6) Changes in provider reimbursement levels, capitation, and care management practices;

(7) Any other factors or impacts the legislative reference bureau deems to be relevant; and

(8) Risk assumptions used and analysis of the assumptions.

(c) The legislative reference bureau may contract the services of another entity to perform any related services that may be required pursuant to this Act.

(d) The legislative reference bureau shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2018.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2017-2018 for the purposes of this Act.

The sum appropriated shall be expended by the legislative reference bureau for the purposes of this Act.

SECTION 4. This Act shall take effect on July 1, 2030.

HOUSE OF REPRESENTATIVES	H.B. NO.	888
TWENTY-NINTH LEGISLATURE, 2017		H.D. 1
STATE OF HAWAII