BP BHEAD INT H

AN ACT Relating to health care insurance for employees and retirees of school districts and educational service districts; amending RCW 28A.400.391, 41.04.205, 41.04.235, 41.05.011, 41.05.021, 41.05.055, 41.05.065, 41.05.075, and 41.05.140; adding a new section to chapter 28A.400 RCW; adding new sections to chapter 41.05 RCW; creating a new section; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. It is the legislature's intent to increase access to health insurance for retired and disabled school employees and also to improve equity between state employees and school employees by providing for the reduction of health insurance premiums charged to retired school employees through a subsidy charged against health insurance allocations for active employees. It is further the legislature's intent to improve the cost-effectiveness of state-purchased health care by managing programs for public employees, in this case retired school employees, through the state health care authority.

Sec. 2. RCW 28A.400.391 and 1992 c 152 s 1 are each amended to read as follows:

(1) Every group disability insurance policy, health care service contract, health maintenance agreement, and health and welfare benefit plan obtained or created to provide benefits to employees of school districts and their dependents shall contain provisions that permit retired and disabled employees to continue medical, dental, or vision coverage under the group policy, contract, agreement, or plan until ((~~June~~)) September 30, 1994, or until the employee becomes eligible for federal medicare coverage, whichever occurs first. The terms and conditions for election and maintenance of such continued coverage shall conform to the standards established under the federal consolidated omnibus budget reconciliation act of 1985, as amended. The period of continued coverage provided under this section shall run concurrently with any period of coverage guaranteed under the federal consolidated omnibus budget reconciliation act of 1985, as amended.

(2) This section applies to:

(a) School district employees who retired or lost insurance coverage due to disability after July 28, 1991;

(b) School district employees who retired or lost insurance coverage due to disability within the eighteen-month period ending on July 28, 1991; and

(c) School district employees who retired or lost insurance coverage due to disability prior to January 28, 1990, and who were covered by their employing district's insurance plan on January 1, 1991.

(3) For the purposes of this section "retired employee" means an employee who separates from district service and is eligible at the time of separation from service to receive, immediately following separation from service, a retirement allowance under chapter 41.32 or 41.40 RCW.

(4) The superintendent of public instruction shall adopt administrative rules to implement this section.

Sec. 3. RCW 41.04.205 and 1992 c 199 s 1 are each amended to read as follows:

(1) Notwithstanding the provisions of RCW 41.04.180, the employees, with their dependents, of any county, municipality, or other political subdivision of this state shall be eligible to participate in any insurance or self-insurance program for employees administered under chapter 41.05 RCW if the legislative authority of any such county, municipality, or other political subdivisions of this state determines a transfer to an insurance or self-insurance program administered under chapter 41.05 RCW should be made. In the event of a special district employee transfer pursuant to this section, members of the governing authority shall be eligible to be included in such transfer if such members are authorized by law as of June 25, 1976 to participate in the insurance program being transferred from and subject to payment by such members of all costs of insurance for members.

(2) When the legislative authority of a county, municipality, or other political subdivision determines to so transfer, the state health care authority shall:

(a) Establish the conditions under which the transfer may be made, which shall include the requirements that:

(i) All the eligible employees of the political subdivision transfer as a unit, and

(ii) The political subdivision involved obligate itself to make employer contributions in an amount at least equal to those provided by the state as employer; and

(b) Hold public hearings on the application for transfer; and

Approval of the application by the state health care authority shall effect a transfer of the employees involved to the insurance, self-insurance, or health care program applied for.

(3) Any application of this section to members of the law enforcement officers' and fire fighters' retirement system under chapter 41.26 RCW is subject to chapter 41.56 RCW.

(4) The requirements in subsection (2)(a) (i) and (ii) of this section need not be applied to school districts, except that all eligible employees in a bargaining unit of a school district may transfer only as a unit and all nonrepresented employees in a district may transfer only as a unit.

Sec. 4. RCW 41.04.235 and 1983 c 3 s 89 are each amended to read as follows:

Participants in a health care benefit plan approved pursuant to RCW 41.04.180, ((~~41.05.025~~)) 41.05.065, or 28A.400.350, whichever is applicable, who are retired public employees, may authorize the deduction from their retirement allowances, of the amount or amounts of their subscription payments, premiums, or contributions to any person, firm, or corporation furnishing or providing medical, surgical, and hospital care or other health care insurance upon the approval by the retirement board of an application for such deduction on the prescribed form, and the treasurer of the state shall duly and timely draw and issue proper warrants directly to and in favor of the person, firm, or corporation, or organization named in the authorization for the amount authorized to be deducted.

Sec. 5. RCW 41.05.011 and 1990 c 222 s 2 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section shall apply throughout this chapter.

(1) "Administrator" means the administrator of the authority.

(2) "State purchased health care" or "health care" means medical and health care, pharmaceuticals, and medical equipment purchased with state and federal funds by the department of social and health services, the department of health, the basic health plan, the state health care authority, the department of labor and industries, the department of corrections, the department of veterans affairs, and local school districts.

(3) "Authority" means the Washington state health care authority.

(4) "Insuring entity" means an insurance carrier as defined in chapter 48.21 or 48.22 RCW, a health care service contractor as defined in chapter 48.44 RCW, or a health maintenance organization as defined in chapter 48.46 RCW.

(5) "Flexible benefit plan" means a benefit plan that allows employees to choose the level of health care coverage provided and the amount of employee contributions from among a range of choices offered by the authority.

(6) "Employee" includes all full-time and career seasonal employees of the state, whether or not covered by civil service; elected and appointed officials of the executive branch of government, including full-time members of boards, commissions, or committees; and includes any or all part-time and temporary employees under the terms and conditions established under this chapter by the authority; justices of the supreme court and judges of the court of appeals and the superior courts; and members of the state legislature or of the legislative authority of any county, city, or town who are elected to office after February 20, 1970. "Employee" also includes employees of a county, municipality, or other political subdivision of the state if the legislative authority of the county, municipality, or other political subdivision of the state seeks and receives the approval of the authority to provide any of its insurance programs by contract with the authority, as provided in RCW 41.04.205, and employees of a school district if the board of directors of the school district seeks and receives the approval of the authority to provide any of its insurance programs by contract with the authority as provided in RCW 28A.400.350.

(7) "Board" means the state employees' benefits board established under RCW 41.05.055.

(8)(a) "Retired or disabled school employee" includes employees who, as of September 30, 1993, receive a retirement allowance under chapter 41.32 or 41.40 RCW, and who (i) are eligible for federal medicare coverage, or (ii) are ineligible for insurance coverage under RCW 28A.400.391.

(b) "Retired or disabled school employee" also includes employees who separate from school district or educational service district service on or after October 1, 1993, and are eligible to receive, immediately following separation from service, a retirement allowance under chapter 41.32 or 41.40 RCW. From October 1, 1993, to September 30, 1994, a retired or disabled employee must be eligible for federal medicare coverage to be included in the definition of "retired or disabled school employee" in this subsection (8)(b).

(c) "Retired or disabled school employee" does not include retired or disabled employees of school districts or educational service districts covered by this chapter under RCW 41.05.080 because their employing district contracts with the authority under RCW 28A.400.350 to provide insurance for employees of the district.

Sec. 6. RCW 41.05.021 and 1990 c 222 s 3 are each amended to read as follows:

The Washington state health care authority is created within the executive branch. The authority shall have an administrator appointed by the governor, with the consent of the senate. The administrator shall serve at the pleasure of the governor. The administrator may employ up to seven staff members, who shall be exempt from chapter 41.06 RCW, and any additional staff members as are necessary to administer this chapter. The primary duties of the authority shall be to administer state employees' insurance benefits and retired or disabled school employees' insurance benefits and to study state-purchased health care programs in order to maximize cost containment in these programs while ensuring access to quality health care. The authority's duties include, but are not limited to, the following:

(1) To administer ((a)) health care benefit programs for employees and retired or disabled school employees as specifically authorized in RCW 41.05.065 and in accordance with the methods described in RCW 41.05.075, 41.05.140, and other provisions of this chapter;

(2) To analyze state-purchased health care programs and to explore options for cost containment and delivery alternatives for those programs that are consistent with the purposes of those programs, including, but not limited to:

(a) Creation of economic incentives for the persons for whom the state purchases health care to appropriately utilize and purchase health care services, including the development of flexible benefit plans to offset increases in individual financial responsibility;

(b) Utilization of provider arrangements that encourage cost containment and ensure access to quality care, including but not limited to prepaid delivery systems, utilization review, and prospective payment methods;

(d) Development of recommendations and methods for purchasing medical equipment and supporting services on a volume discount basis; and

(e) Development of data systems to obtain utilization data from state-purchased health care programs in order to identify cost centers, utilization patterns, provider and hospital practice patterns, and procedure costs, utilizing the information obtained pursuant to RCW 41.05.031;

(3) To analyze areas of public and private health care interaction;

(4) To provide information and technical and administrative assistance to the board;

(5) To review and approve or deny applications from counties, municipalities, other political subdivisions of the state, and school districts to provide state-sponsored insurance or self-insurance programs to their employees in accordance with the provisions of RCW 41.04.205 and 28A.400.350, setting the premium contribution for approved groups as outlined in RCW 41.05.050;

(6) To appoint a health care policy technical advisory committee as required by RCW 41.05.150; ((~~and~~))

(7) To establish billing procedures and collect funds from school districts and educational service districts under section 11 of this act in a way that minimizes the administrative burden on districts; and

(8) To promulgate and adopt rules consistent with this chapter as described in RCW 41.05.160.

Sec. 7. RCW 41.05.055 and 1989 c 324 s 1 are each amended to read as follows:

(1) The state employees' benefits board is created within the authority. The function of the board is to design and approve insurance benefit plans for state employees and retired or disabled school employees.

(2) The board shall be composed of seven members appointed by the governor as follows:

(a) Three representatives of state employees, one of whom shall represent an employee association certified as exclusive representative of at least one bargaining unit of classified employees, one of whom shall represent an employee union certified as exclusive representative of at least one bargaining unit of classified employees, and one of whom is retired, is covered by a program under the jurisdiction of the board, and represents an organized group of retired public employees;

(b) Three members with experience in health benefit management and cost containment; and

(3) The governor shall appoint the initial members of the board to staggered terms not to exceed four years. Members appointed thereafter shall serve two-year terms. Members of the board shall be compensated in accordance with RCW 43.03.250 and shall be reimbursed for their travel expenses while on official business in accordance with RCW 43.03.050 and 43.03.060. The board shall prescribe rules for the conduct of its business. The administrator shall serve as chair of the board. Meetings of the board shall be at the call of the chair.

Sec. 8. RCW 41.05.065 and 1988 c 107 s 8 are each amended to read as follows:

(1) The board shall study all matters connected with the provision of health care coverage, life insurance, liability insurance, accidental death and dismemberment insurance, and disability income insurance or any of, or a combination of, the enumerated types of insurance for employees and their dependents on the best basis possible with relation both to the welfare of the employees and to the state: PROVIDED, That liability insurance shall not be made available to dependents.

(2) The state employees' benefits board shall develop employee benefit plans that include comprehensive health care benefits for all employees. In developing these plans, the board shall consider the following elements:

(a) Methods of maximizing cost containment while ensuring access to quality health care;

(b) Development of provider arrangements that encourage cost containment and ensure access to quality care, including but not limited to prepaid delivery systems and prospective payment methods;

(c) Wellness incentives that focus on proven strategies, such as smoking cessation, exercise, and automobile and motorcycle safety;

(d) Utilization review procedures including, but not limited to prior authorization of services, hospital inpatient length of stay review, requirements for use of outpatient surgeries and second opinions for surgeries, review of invoices or claims submitted by service providers, and performance audit of providers; and

(e) Effective coordination of benefits.

(3) The board shall design benefits and determine the terms and conditions of employee participation and coverage, including establishment of eligibility criteria.

(4) The board may authorize premium contributions for an employee and the employee's dependents. Such authorization shall require a vote of five members of the board for approval.

(5) Employees may choose participation in only one of the health care benefit plans developed by the board.

(6) The board shall review plans proposed by insurance carriers that desire to offer property insurance and/or accident and casualty insurance to state employees through payroll deduction. The board may approve any such plan for payroll deduction by carriers holding a valid certificate of authority in the state of Washington and which the board determines to be in the best interests of employees and the state. The board shall promulgate rules setting forth criteria by which it shall evaluate the plans.

(7) The board shall develop benefit plans that provide health care benefits for retired or disabled school employees and their dependents, and shall establish terms and conditions of coverage under the plans. The board shall make available separate and appropriate plans that supplement medicare for retired or disabled school employees who are eligible for federal medicare coverage. In developing plans for retired or disabled school employees, the board shall consult with an advisory committee, appointed by the administrator, whose members have knowledge and interest in matters pertaining to school districts and retired or disabled school employees. The board shall also consider the elements referenced in subsection (2) of this section in developing the plans.

Sec. 9. RCW 41.05.075 and 1988 c 107 s 9 are each amended to read as follows:

(1) The administrator shall provide ((~~employee~~)) benefit plans designed by the board through a contract or contracts with insuring entities, through self-funding, self-insurance, or other methods of providing insurance coverage authorized by RCW 41.05.140.

(2) The administrator shall establish a contract bidding process that encourages competition among insuring entities, is timely to the state budgetary process, and sets conditions for awarding contracts to any insuring entity.

(3) The administrator shall establish a requirement for review of utilization and financial data from participating insuring entities on a quarterly basis.

(4) The administrator shall centralize the enrollment files for all employee and retired or disabled school employee health plans and develop enrollment demographics on a plan-specific basis.

(5) The administrator shall establish methods for collecting, analyzing, and disseminating to covered individuals information on the cost and quality of services rendered by individual health care providers.

(6) All claims data shall be the property of the state. The administrator may require of any insuring entity that submits a bid to contract for coverage all information deemed necessary to fulfill the administrator's duties as set forth in this chapter.

(7) All contracts with insuring entities for the provision of health care benefits shall provide that the beneficiaries of such benefit plans may use on an equal participation basis the services of practitioners licensed pursuant to chapters 18.22, 18.25, 18.32, 18.53, 18.57, 18.71, 18.74, 18.83, and 18.88 RCW. However, nothing in this subsection may preclude the administrator from establishing appropriate utilization controls approved pursuant to RCW 41.05.065(2) (a)(i), (b), and (d).

(8) Beginning in January 1990, and each January thereafter, the administrator shall publish and distribute to each school district a description of health care benefit plans available through the authority and the estimated cost if school district employees were enrolled.

Sec. 10. RCW 41.05.140 and 1988 c 107 s 12 are each amended to read as follows:

(1) The authority may self-fund, self-insure, or enter into other methods of providing insurance coverage for insurance programs under its jurisdiction except property and casualty insurance. The authority shall contract for payment of claims or other administrative services for programs under its jurisdiction. If a program does not require the prepayment of reserves, the authority shall establish such reserves within a reasonable period of time for the payment of claims as are normally required for that type of insurance under an insured program.

(2) Reserves established by the authority for employee benefit programs shall be held in a separate trust fund by the state treasurer and shall be known as the state employees' insurance reserve fund. The state investment board shall act as the investor for the funds and, except as provided in RCW 43.33A.160, one hundred percent of all earnings from these investments shall accrue directly to the state employees' insurance reserve fund.

((~~(2)~~)) (3) Reserves established by the authority for programs for retired or disabled school employees shall be held in a separate trust fund by the state treasurer and shall be known as the retired school employees' insurance reserve fund hereby created. The state investment board shall act as the investor for the funds and, except as provided in RCW 43.33A.160, one hundred percent of all earnings from these investments shall accrue directly to the retired school employees' insurance reserve fund.

(4) Any savings realized as a result of a program created for employees under this section shall not be used to increase benefits unless such use is authorized by statute.

((~~(3)~~)) (5) Any program created under this section shall be subject to the examination requirements of chapter 48.03 RCW as if the program were a domestic insurer. In conducting an examination, the commissioner shall determine the adequacy of the reserves established for the program.

((~~(4)~~)) (6) The authority shall keep full and adequate accounts and records of the assets, obligations, transactions, and affairs of any program created under this section.

((~~(5)~~)) (7) The authority shall file a quarterly statement of the financial condition, transactions, and affairs of any program created under this section in a form and manner prescribed by the insurance commissioner. The statement shall contain information as required by the commissioner for the type of insurance being offered under the program. A copy of the annual statement shall be filed with the speaker of the house of representatives and the president of the senate.

NEW SECTION. Sec. 11. A new section is added to chapter 28A.400 RCW to read as follows:

(1) In a manner prescribed by the state health care authority and subject to the limitations in subsection (2) of this section, school districts and educational service districts shall remit to the health care authority for deposit in the retired school employees' subsidy account established in section 13 of this act:

(a) For the period beginning October 1, 1993, and ending September 30, 1994:

(i) For each full-time employee of the district, an amount equal to four and two-tenths percent times the insurance benefit allocation rate in the appropriations act for a certificated or classified staff, for each month of the school year; and

(ii) For each part-time employee of the district who, at the time of the remittance, is employed in an eligible position as defined in RCW 41.32.010 or 41.40.010 and is eligible for employer fringe benefit contributions for basic benefits as defined in RCW 28A.400.270, an amount equal to four and two-tenths percent times the insurance benefit allocation rate in the appropriations act for certificated or classified staff, prorated by the proportion of employer fringe benefit contributions for a full-time employee that the part-time employee receives, for each month of the school year.

(b) Beginning October 1, 1994:

(i) For each full-time employee of the district, an amount equal to four and seven-tenths percent times the insurance benefit allocation rate in the appropriations act for certificated or classified staff, for each month of the school year; and

(ii) For each part-time employee of the district who, at the time of the remittance, is employed in an eligible position as defined in RCW 41.32.010 or 41.40.010 and is eligible for employer fringe benefit contributions for basic benefits as defined in RCW 28A.400.270, an amount equal to four and seven-tenths percent times the insurance benefit allocation rate in the appropriations act for certificated or classified staff, prorated by the proportion of employer fringe benefit contributions for a full-time employee that the part-time employee receives, for each month of the school year.

(2) School districts and educational service districts are not required to remit the amounts provided under subsection (1) of this section for employees who are covered under chapter 41.05 RCW because their employing district contracts with the state health care authority under RCW 28A.400.350 to provide insurance for the employees.

(3) The legislature reserves the right to increase or decrease the percent or amount required to be remitted in this section.

NEW SECTION. Sec. 12. A new section is added to chapter 41.05 RCW to read as follows:

(1) Retired or disabled school employees and their dependents may purchase health care insurance coverage from the authority under terms and conditions established by this chapter and by the board.

(2) Retired or disabled school employees may enroll in benefit plans under the authority during enrollment periods established by the board.

(3) Retired or disabled school employees and their dependents shall pay the cost of coverage offered by the authority, including any amounts necessary for reserves and administration; however, the premiums charged to a retired or disabled school employee shall be reduced as provided in section 13 of this act.

NEW SECTION. Sec. 13. A new section is added to chapter 41.05 RCW to read as follows:

(1) The retired school employees' subsidy account is hereby established in the custody of the state treasurer, to be used by the administrator for the deposit of the remittance paid by school districts and educational service districts under section 11 of this act.

(2) Moneys available in the account, as determined by the administrator, shall be used to reduce the health care insurance premiums charged to retired or disabled school employees under this chapter and, through September 30, 1994, premiums charged to retired or disabled employees under RCW 28A.400.391. The amount of any premium reduction shall be established by the board in consultation with the advisory committee. However, use of moneys from the account shall not result in a premium reduction for retired or disabled school employees of more than fifty percent. Moneys from the account may be used to reduce premiums charged to dependents at the discretion of the board.

(3) Moneys to reduce premiums for retired or disabled employees under RCW 28A.400.391 shall be paid to the appropriate insurance carrier, or in the case of self-insurance, to the district. Payments shall be made subject to submission of information to the satisfaction of the administrator that the recipient of the premium reduction is eligible to receive the reduction and that the moneys are used for their intended purpose.

(4) Should the legislature revoke or reduce any remuneration or benefits granted under this section, an affected retired or disabled employee shall not be entitled thereafter to receive such benefits as a matter of contractual right.

(5) Moneys from the account shall be disbursed by the state treasurer by warrants on vouchers duly authorized by the administrator.

(6) The state treasurer and the state investment board may invest moneys in the retired school employees' subsidy account. All such investments shall be in accordance with RCW 43.84.080 or 43.84.150, whichever is applicable. The administrator shall determine whether the state treasurer or the state investment board or both shall invest moneys in the account.

NEW SECTION. Sec. 14. A new section is added to chapter 41.05 RCW to read as follows:

(1) The retired school employees' insurance account is hereby established in the custody of the state treasurer, to be used by the administrator for the deposit of contributions, premium payments from retired or disabled school employees, subsidy amounts from the retired school employees' subsidy account, reserves, dividends, and refunds, and for payment of premiums for retired or disabled school employee benefit contracts and operating expenses incurred by the authority in the administration of benefit plans for retired or disabled school employees. Moneys from the account shall be disbursed by the state treasurer by warrants on vouchers duly authorized by the administrator. (2) Disbursements from the account are not subject to appropriation, but shall be subject to the allotment procedure provided under chapter 43.88 RCW.

(3) The state treasurer and the state investment board may invest moneys in the retired school employees' insurance account. All such investments shall be in accordance with RCW 43.84.080 or 43.84.150, whichever is applicable. The administrator shall determine whether the state treasurer or the state investment board or both shall invest moneys in the account.

NEW SECTION. Sec. 15. This act shall take effect October 1, 1993.