Hawaii increases employer contribution to health benefits fund starting January 2026

On February 10, 2025, the Hawaii Senate introduced Senate Bill 1359, a legislative proposal aimed at adjusting the employer contributions to the Hawaii Employer-Union Health Benefits Trust Fund (EUTF). This bill seeks to address the rising costs associated with health benefits for public employees by implementing a structured increase in employer contributions over the next few years.

The primary provision of SB1359 mandates a 5.2 percent increase in the employer base composite monthly contribution, effective January 1, 2026. This adjustment is based on the 2025 employer base composite monthly contribution. Furthermore, starting January 1, 2027, the bill stipulates that future contributions will be calculated based on changes in Medicare Part B premiums, utilizing a two-year lag for adjustments. This approach aims to create a more sustainable funding mechanism for the EUTF, which provides health benefits to state and county employees, retirees, and their dependents.

The introduction of this bill has sparked discussions among lawmakers and stakeholders regarding its potential impact on public sector budgets and employee health benefits. Proponents argue that the adjustments are necessary to ensure the long-term viability of the EUTF, especially in light of increasing healthcare costs. However, some critics express concern that the increased contributions could strain employer budgets, particularly for smaller public entities, and may lead to budget reallocations or cuts in other areas.

The economic implications of SB1359 are significant, as it directly affects the financial responsibilities of public employers in Hawaii. By linking contributions to Medicare Part B premiums, the bill attempts to create a more predictable and manageable funding structure. This could help stabilize the EUTF and ensure that public employees continue to receive adequate health benefits.

As the bill progresses through the legislative process, it will likely face further scrutiny and debate. Stakeholders, including public employee unions and government officials, will be closely monitoring its developments. The outcome of SB1359 could set a precedent for how health benefits are funded in Hawaii, influencing future legislative efforts related to public employee compensation and benefits.

In conclusion, SB1359 represents a proactive approach to managing the financial sustainability of health benefits for Hawaii's public workforce. As discussions continue, the bill's implications for both employers and employees will be a focal point in the ongoing dialogue about public sector health benefits in the state.