Hawaii State Retirees Lose Health Coverage Legal Battle

March 26, 2010 (PLANSPONSOR.com) –The state of Hawaii is constitutionally mandated to provide health benefits to state and county employees, retirees and their dependents, but does not have to provide retirees with a health plan like the one for active state workers, the Hawaii Supreme Court ruled.

A news report in the Honolulu Star-Bulletin said the ruling stems from a recent change to state law over the administration of health benefits for state and county workers, retirees and their dependents.

According to the newspaper, Hawaii lawmakers approved 2001 legislation to replace the Public Employees Health Fund with the new Employer-Union Health Benefits Trust Fund. The reason, they said, was “to establish a single health benefits delivery system for state and county employees,” and to deal with the “spiraling cost” of health care.

Under the earlier fund, the state contributed to health benefits plans established and administered by public employee worker unions.With the newer fund, lawmakers allowed only the Hawaii State Teachers Association to administer the health benefits plan for its members.

However, the news report said that in 2006 a group of retired state and county government employees, filed suit against the state, all four counties and the Employer-Union Trust Fund to get health benefits equal to those of active employees.

After several lower-court decisions, the case ended up with the state’s high court. The justices ruled 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.”