Opinion ID: 2518920
Heading Depth: 2
Heading Rank: 2

Heading: Deciding on a Rate Structure

Text: The EUTF Trustees began meeting in January 2002. On June 28, 2002, Garner Consulting [hereinafter, Garner] was hired as a benefits plan consultant, and was asked to determine the economic effect that various rate structures would have on future participants in the EUTF plans. Garner determined that at that time, United Public Workers utilized a four-tier plan i.e., one premium rate for single employees (individual rate), a second premium rate for employees with one dependent, a third rate for employees with two dependents, and a family rate for employees with three or more dependentsand the Hawai`i Government Employees Association utilized a three-tier plan i.e., individual rate, individual plus one dependent rate, and family rate for employees with two or more dependents. Two-tier rate structures i.e., an individual rate and a family rate for employees with one or more dependentswere being used by the PEHF, the Hawai`i State Teachers' Association, the University of Hawai`i Professional Assembly, the State of Hawai`i Organization of Police Officers, and the Hawai`i Fire Fighters Association (HFFA). Garner prepared charts for the Board, comparing the effects of implementing a two-tier structure as opposed to three-or four-tier structures. The charts showed that the smallest percentage of employees would be adversely affected by the EUTF using plans with a two-tier rate structure, i.e., approximately 92% would have the same or lower rates and 9% would have higher rates. On or about August 8, 2002, the EUTF Board sent to the public employers and unions a Summary of Health Benefits Plan for their review and comment. The summary stated that the EUTF benefits committee had recommended that the EUTF adopt a two-tier rate structure. In response, it appears that only the County of Maui expressed concern over the use of a two-tier structure. Just prior to issuing the request for proposals, the Board again considered the rate structure issue at a Board meeting. While at least one Trustee argued that a four-tier structure would be more equitable, other Trustees relied on the chart prepared by Garner and asserted, in relevant part, that: (1) a four-tier structure would increase the costs for those least able to afford it, i.e., families with two or more dependents; (2) it would be more prudent to stick with the current 2-tier structure because collective bargaining was geared to a 2-tier structure and a move to a 4-tier structure may change the way collective bargaining is done; and (3) all plans are subject to inequity; large families are subsidized by others, high users are subsidized by lower users, etc. After public meetings and consultation with public employers and unions, the EUTF Trustees established health benefits plans, effective July 1, 2003, with two tiers of insurance premium rates. In or about April 2003, collective bargaining agreements setting forth public employer contributions to the EUTF health benefits plans were reached. The agreements provided for employer contributions on a two-tier basis. In or about September 2003, the EUTF Board requested Garner to determine the effect of moving to a three-or four-tier rate structure. Garner requested proposed rates from the insurance carriers providing the EUTF health plans. One or more of the insurance carriers advised Garner that the proposed rates for three-or four-tier plans were dependent on all public employers and public sector unions agreeing to the same rate structure. If some chose different rate structures, the proposed rates would be different. Further, the current two-tier rates could also change if some public sector unions wanted to implement three-or four-tier plans for their members. Additionally, the Board sent a letter to the public employers and unions to see if they were interested in moving to a three-or four-tier rate structure. Only HFFA responded, stating that the existing two-tier structure should be maintained because the unions have negotiated contribution rates based on the two-tier structure.