Most public school teachers will pay the same for health care coverage this fiscal year under a new contract, while other state workers have been paying higher premium rates since July and have sought relief in contract talks with the state.

The state's 13,000 teachers are in a separate health care fund from other state workers. Teachers who receive health care through HMA Inc. or Kaiser Permanente will pay the same premium rates through next June, according to the Hawai'i State Teachers Association, while the more than 2,000 teachers who switched back to a Hawaii Medical Service Association option for greater benefits starting in October will pay higher rates.

Health care costs have been a significant issue in contract talks between the Lingle administration and public-sector labor unions. State workers have been paying 23.4 percent more in interim premium rates since July while trustees of the state's Employer-Union Health Benefits Trust Fund consider permanent rates.

Teachers, however, have not had to pay the higher rates.

Teachers have since March 2006 received health care coverage through a self-insured Voluntary Employee Beneficiary Association as part of a pilot program approved by the state Legislature. The teachers' union has described the pilot as a cost-effective alternative to the state's health fund.

The Lingle administration and EUTF trustees have said that while VEBA may reduce health care costs for teachers, it has raised premiums for other state workers because it gives the state less leverage to negotiate with health care providers.

Teachers want to extend the pilot beyond its sunset date at the end of the fiscal year in June, but the Lingle administration and some state lawmakers want the pilot to end as scheduled. If the pilot is not extended, teachers would go back into the EUTF with other state workers and would likely face higher premiums.

"VEBA provides tremendous value for HSTA members, as well as the entire community by providing competition in the medical insurance market," Dwight Takeno, the HSTA's interim executive director, said in an e-mail. "With Kaiser and HMSA being the 800-pound gorillas in the market, having the ability to negotiate for our members separate from the EUTF community promotes competitive rates for both EUTF and VEBA members. Fortunately, VEBA has been creative in negotiating plans to meet our members' needs and budgets."

HIGHER RATES

The Lingle administration has sought to contain rising health care costs by freezing the state's contribution to state workers' coverage. The state had been covering 60 percent of premium costs, with state workers paying 40 percent, but now state workers have to absorb any rate increases from health care providers.

"We didn't ask for more. We didn't ask for less," Marie Laderta, the director of the state Department of Human Resources Development, said of the state's position in contract talks.

The Hawai'i Government Employees Association, the state's largest public-sector union, has asked the state to consider the higher premium rates when discussing potential salary cuts and furloughs. The higher rates, according to the union, already amount to a pay cut.

Health care coverage is not subject to binding arbitration, so for the HGEA and the United Public Workers' public safety unit — which are in arbitration with the state — cost sharing has to be resolved at the negotiating table or by state lawmakers. The University of Hawai'i Professional Assembly has also raised concern about higher premium rates in its contract talks with the state.

"It's of grave concern to us because whatever results from negotiations with respect to a furlough and then the wage reduction that comes from it, it's not as if people just face the furlough. There will also be continuing increases in the medical premiums that we're all going to face," said Randy Perreira, HGEA's executive director.

Perreira said the union has believed over the years that the state's health fund should be uniform for all state workers. "Right now, the agreement that the state has reached with the HSTA offers a substantial advantage cost-wise to their members versus what we expect for ours," he said.

The Lingle administration has held that a single health benefit delivery system for all state and county workers is the most cost-effective and sustainable option. An EUTF consultant has estimated, for example, that health care premiums would have been 4.3 percent lower in 2008 had teachers remained in the state health fund.

The HSTA has argued that the VEBA pilot program has been an effective retention tool for teachers because it provides lower health care costs. The teachers' union also wants the state to complete a study comparing the pilot to the state health fund, which may help answer which approach is more effective.

CHANGING INSURERS

The VEBA program has not been trouble-free, however. The HSTA Member Benefits Corp., a for-profit subsidiary of the teachers' union that handled administrative tasks, filed for bankruptcy this year after under-reporting its tax liability.

In June, the teachers' union — citing insurance losses and anticipating rate increases — dropped HMSA as its claims administrator in favor of HMA. Under the HMA plan, teachers pay a higher copayment for medical services — 20 percent instead of the 10 percent under HMSA — but their premium rates remain the same.

In August, the teachers' union announced that it would bring back HMSA as an option, although teachers have to pay substantially higher premium rates, a 21 percent increase for the individual plan and a 16 percent increase for the family plan.

State lawmakers considered a bill last session to move up the sunset date for the pilot program and ensure that the teachers' union, not the state, would be held liable if the VEBA fund became insolvent. The bill failed. But several lawmakers remain concerned and may not be inclined to extend the pilot after this fiscal year.

"I think we've given it the time to run its course," said state Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), a labor attorney.

Takeno, the HSTA's interim executive director, said the union would ask for an extension. "Absolutely," he said. "If VEBA is not extended, it will hurt all employees since HSTA members will be forced back into the EUTF. HMSA and Kaiser would have the monopoly on the medical insurance market again since we cannot negotiate our own separate rates with them, as well as with other carriers like HMA."