BP BHEAD INT S

AN ACT Relating to health care reform; amending RCW 70.47.030, 70.47.040, 70.47.050, 70.47.060, 70.47.070, 70.47.080, 70.47.090, 70.47.100, 70.47.110, 70.47.115, 70.47.130, 70.47.150, 41.05.031, 42.17.2401, 43.20.050, 50.20.210, 51.28.090, 74.04.033, 48.21.010, 48.21.050, 48.30.300, 48.44.220, 48.46.370, 41.05.021, 41.05.065, 41.05.006, 41.05.011, 41.05.021, 41.05.050, 41.05.055, 41.05.065, 41.05.075, 41.05.140, 70.170.010, 70.170.020, 70.170.030, 70.170.040, 70.170.050, 70.170.080, 70.170.100, 70.170.110, 7.70.070, 4.22.070, 43.20.050, and 28B.125.010; reenacting and amending RCW 28A.400.350; adding new sections to chapter 41.05 RCW; adding a new section to chapter 48.20 RCW; adding a new section to chapter 48.21 RCW; adding a new section to chapter 48.44 RCW; adding a new section to chapter 48.46 RCW; adding a new section to chapter 48.84 RCW; adding a new section to chapter 74.09 RCW; adding a new section to Title 51 RCW; adding a new section to chapter 70.170 RCW; adding a new section to chapter 7.70 RCW; adding new sections to chapter 7.06 RCW; adding new chapters to Title 48 RCW; adding a new chapter to Title 19 RCW; adding new chapters to Title 70 RCW; creating new sections; recodifying RCW 70.47.030, 70.47.040, 70.47.050, 70.47.060, 70.47.070, 70.47.080, 70.47.090, 70.47.100, 70.47.110, 70.47.115, 70.47.130, 70.47.140, 70.47.150, and 70.47.901; repealing RCW 43.131.355, 43.131.356, 70.47.010, 70.47.020, 70.47.120, and 70.47.900; making appropriations; prescribing penalties; providing effective dates; providing an expiration date; and declaring an emergency.

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

PARTS PAGE #

PART I - COMPETITIVE MANAGED HEALTH CARE INSURANCE...................................................................................... 4

PART II - EMPLOYER AND INDIVIDUAL HEALTH INSURANCE REFORM................................................................... 36

PART III - STATE EMPLOYEE AND K-12 HEALTH BENEFITS.......................................................................................... 42

PART IV - HEALTH DATA................................................................................................................................................................. 55

PART V - PROVIDER CONFLICT OF FINANCIAL INTEREST................................................................................................. 65

PART VI - UNIFORM ELECTRONIC CLAIMS PROCESSING.................................................................................................... 66

PART VII - HEALTH CARE MALPRACTICE REFORM............................................................................................................ 69

PART VIII - PRACTICE GUIDELINES............................................................................................................................................. 76

PART IX - POPULATION-BASED HEALTH CARE SERVICES............................................................................................... 77

PART X - HEALTH PERSONNEL RESOURCE PLAN............................................................................................................... 86

PART XI - TRUST ACCOUNT.............................................................................................................................................................. 90

PART XII - APPROPRIATIONS.......................................................................................................................................................... 90

PART XIII - MISCELLANEOUS......................................................................................................................................................... 91

PART I - COMPETITIVE MANAGED HEALTH CARE INSURANCE

NEW SECTION. Sec. 101. LEGISLATIVE INTENT. The legislature declares that:

(1) The intent of this act is to reform the health care delivery system to assure that reasonably priced, high quality health care services are available to the state's residents.

(2) The current health care system has weaknesses and strengths and health care reforms should build on the system's strengths while eliminating its weaknesses.

(3) Health care system reform will require major restructuring of the health care marketplace, which can only be successfully accomplished through a careful phased-in approach.

(4) The use of truly competitive managed health care has the potential to reduce health care costs. The goal of competitive managed care is to maximize the ability of consumers and purchasers of health care services to obtain medically appropriate amounts of high quality health care services at an affordable price. Health care reforms under this act have the goal of enrolling a substantial majority of the state's residents into competitive managed care systems.

(5) Government-imposed costs controls should be implemented if marketplace competitive managed care strategies fail to control health care costs.

(6) Individuals, employers, and government should all share in the cost of health care services. Individuals should be provided with relevant information to make intelligent health care choices. The individual's contribution should also be set in a manner to assure the appropriate and effective use of health care services but not be a barrier to such services.

(7) Efforts to control health care cost increases must be coordinated with efforts to monitor and assure the delivery of high quality health care services.

(8) The reformed health care system should strongly emphasize the maintenance of good health and towards this goal improvements should be made in the availability and delivery of disease and injury prevention services and health prevention strategies to help reduce morbidity and mortality.

NEW SECTION. Sec. 102. DEFINITIONS. In this chapter, unless the context clearly indicates otherwise:

(1) "Administrator" means the Washington health insurance purchasing cooperative administrator.

(2) "Board" means the governing board of the Washington health insurance purchasing cooperative established under this chapter.

(3) "Carrier" means an entity that provides health insurance benefits in Washington state as an insurance company, health services contractor, or health maintenance organization and is regulated by the state of Washington under chapter 48.20, 48.21, 48.44, or 48.46 RCW.

(4) "Certified health plans" means health benefit plans offered as managed care plans and certified by the board to provide the uniform benefit package.

(5) "Eligible individual" means a resident of the state of Washington who is eligible to receive the uniform benefit package.

(6) "Enrollee" means a resident who receives the uniform benefit package from a certified health plan for himself or herself and for his or her dependents.

(7) "Employee" means a resident who is actively employed with an employer, or is a proprietor, partner, or corporate officer of the employer of the state of Washington, is paid on a regular, periodic basis through the employer's payroll system, regularly works on a full-time basis and has a normal work week of twenty or more hours, and is expected to continue in this employment capacity.

(8) "Health benefit plan" means a hospital or medical policy, health care service contract, health maintenance organization subscriber contract, or plan provided by another benefit arrangement. The term does not include accident only, credit, dental only, vision only, medicare supplements, or disability income insurance coverage issued as a supplement to liability insurance, workers' compensation or similar insurance, or automobile medical payment insurance.

(9) "Individual point of service cost sharing" means moneys paid to a certified health plan by an enrollee for uniform benefit package health care services at the time of delivery of such services in an amount not to exceed limits established by the board.

(10) "Managed health care" means an integrated system of insurance and delivery system functions using a defined network of health care providers that provide the uniform benefit package in a cost-effective manner and on a prepaid capitated basis to a defined patient population according to provisions established under this chapter.

(11) "Premium" means the level of payment a certified health plan receives from an enrollee or sponsor on behalf of an enrollee for expenses, including administration, operation, and capital for providing the uniform benefit package to enrollees.

(12) "Preexisting condition" means a condition that would have caused an ordinarily prudent person to seek medical advice, diagnosis, care, or treatment immediately preceding the effective date of coverage or a condition for which medical advice, diagnosis, care, or treatment was recommended or received during the six months immediately preceding the effective date of coverage or a pregnancy existing on the effective date of coverage.

(13) "Resident" means an individual who lives in the state of Washington and who has not come to the state for the purpose of obtaining health services.

(14) "Small employer" means a person, firm, corporation, partnership, or association actively engaged in business, that, on at least fifty percent of its working days during the preceding calendar quarter, employed no more than one hundred employees, the majority of whom are residents.

(15) "Sponsor" means an employer, the state, or other persons or entities, other than the enrollee, who pays to the cooperative on behalf of the enrollee premiums in return for provision of the uniform benefit package to the enrollee.

(16) "Subsidized enrollee" means a resident, a resident plus the resident's spouse and dependent children, or a resident plus dependent children, all under the age of sixty-five and not otherwise eligible for medicare whose gross family income at the time of enrollment does not exceed two times the federal poverty level as adjusted for family size and determined annually by the federal department of health and human services, who chooses to obtain the uniform benefit package from a certified health plan through the cooperative and who receives a subsidy from the board for payment of the uniform benefit package.

(17) "Subsidy" means the difference between the amount of periodic payment the administrator makes, from funds appropriated from the Washington health insurance purchasing cooperative trust account, to a certified health plan on behalf of an enrollee plus the administrative cost to the cooperative of providing the uniform benefit package to that enrollee, and the amount determined to be the enrollee's responsibility under this chapter.

(18) "Uniform benefit package" means the uniform, appropriate, confidentially provided, and affordable set of personal health services to be made available to enrollees by certified health plans under the conditions provided under this chapter.

(19) "Washington health insurance purchasing cooperative" or "cooperative" means a state-wide health insurance purchasing agent that obtains the uniform benefit package for employers and individuals on a prepaid capitated basis from a certified health plan through a system of competitive bidding under terms established in this chapter.

NEW SECTION. Sec. 103. WASHINGTON HEALTH INSURANCE PURCHASING COOPERATIVE--CREATED--MEMBERSHIP. (1) There is created the Washington health insurance purchasing cooperative. The cooperative shall be composed of a five-member board appointed by the governor and confirmed by the senate. One of the members shall be selected by the governor to serve as chair of the board. The members shall serve five-year terms and the governor shall stagger the initial terms of the board.

(2) Members of the board shall have no fiduciary interest in a health service activity subject to this chapter while serving on the board.

(3) Members of the board shall serve full time and are exempt from the provisions of chapter 41.06 RCW. The initial salary of the board members shall be fixed by the governor in accordance with RCW 43.03.040.

(4) A majority of the board shall represent a quorum.

NEW SECTION. Sec. 104. WASHINGTON HEALTH INSURANCE PURCHASING COOPERATIVE BOARD--POWERS AND DUTIES. (1) The cooperative board shall be established for the purposes of performing the duties and responsibilities specifically assigned to it under the provisions of this chapter.

(2) The specific duties of the board include:

(a) To define and update the uniform benefit package as provided for in this chapter;

(b) To enforce the premium growth rate targets for the uniform benefit package established under this chapter;

(c) To coordinate the development of the uniform benefit package with the development of population-based health services as provided for under chapter 70.-- RCW (sections 901 through 904 of this act). The board, the department of health, the state board of health, and the local health jurisdictions shall establish principles, policies, and working agreements concerning the future financing and delivery of preventive personal health services that are currently provided by private providers and state or local health jurisdictions. Working agreements shall be established to assure that such services are delivered in the most efficient, cost-effective, and consumer responsive manner;

(d) To certify health benefit plans to provide the uniform benefit package.

(3) The board shall have the following duties for certified health plans offered through the cooperative:

(a) To set the maximum amount of individual premium payments and individual point of service cost-sharing, which includes, deductibles, coinsurance, and copayments to be paid by enrollees for uniform benefit package services. This includes:

(i) Setting the maximum premium amount sponsors may pay on behalf of enrollees and dependents for the uniform benefit package. The amount shall be established at no less than fifty percent and no more than ninety percent of the lowest bid premium received from a certified health plan among those certified health plans available to an enrollee. The enrollee shall be responsible for payment amounts in excess of these amounts;

(ii) Setting premiums for subsidized enrollees. These premiums are to be determined based upon the enrollee's gross family income, with appropriate consideration being given to the enrollee's family size as well as the ages of all the family members;

(iii) Determining individual point of service cost-sharing for enrollees, required cost-sharing shall be structured to discourage inappropriate enrollee utilization of health care services, but shall not be so costly to enrollees as to constitute a barrier to appropriate utilization of necessary health care services. Point of service cost-sharing requirements may be waived for preventive services for subsidized enrollees;

(b) To determine the methods by which certified health plans pay providers to deliver the uniform health benefit package services;

(c) To establish payment methods for reimbursing providers in certified health plans in a manner to encourage cost-effective delivery of health care services;

(d) To assess the need for, and if necessary, establish methods to assure fair distribution of high medical risk enrollees among certified health plans or fair financial compensation for certified health plans that have a disproportionately large number of high medical risk enrollees. This shall be done in a manner to ensure that costs associated with providing services to high medical risk enrollees is fairly distributed among the certified health plans in the cooperative;

(e) To establish rules of participation for employers and enrollees who obtain uniform benefit package services through the cooperative;

(f) To establish a schedule of uniform premium rate adjustments to be used by each certified health plan sold through the cooperative. The schedule shall allow certified health plans to adjust premium rates based upon the age and gender of individual enrollees and for the cost of providing the uniform benefit package within major geographic areas within the state;

(g) To establish an administrative fee as part of premiums charged for the uniform benefit package to support the cooperative activities required under this chapter;

(h) To conduct an annual open enrollment for the purpose of offering certified health plans to enrollees;

(i) To adopt practice guidelines identified by the department of health under chapter 70.-- RCW (sections 801 through 803 of this act) that the board deems appropriate for use in monitoring utilization and quality of health care services provided by certified health plans. When appropriate, the board may use practice guidelines in determining whether services should be eligible for reimbursement by a certified health plan;

(j) To monitor the performance of the certified health plans and to make recommendations to the governor and the legislature for needed statutory changes to improve the delivery and the quality of the uniform benefit package;

(k) To coordinate with the department of health, the state's local health jurisdictions, and others as required under chapter 70.-- RCW (sections 901 through 904 of this act) to develop and implement strategies to address barriers, other than insurance, that prevent residents from receiving uniform benefit package services;

(l) To form technical advisory committees from time to time for the purpose of receiving advice from technical experts and other interest groups on issues within the purview of the board;

(m) To determine, in consultation with the health care data, quality assurance, and cost control council under chapter 70.170 RCW, whether new high cost medical technologies and experimental procedures are cost-effective and efficacious and shall be included as reimbursable services as part of the uniform benefit package;

(n) To establish an outcome-based accountability and reporting system and a system of continuous quality improvement to monitor the appropriate utilization and quality of health care services provided by certified health plans; and

(o) To contract for consultation and actuarial services necessary to perform duties provided under this chapter.

NEW SECTION. Sec. 105. UNIFORM BENEFIT PACKAGE DESIGN. (1) The cooperative board, through a public process, shall design and update the uniform benefit package. The uniform benefit package shall be the minimum set of personal health services that must be provided by health benefit plans subject to this chapter. The initial uniform benefit package shall be adopted by March 1, 1994. In selecting and revising the services to be included in the uniform benefit package, the board shall consult with the services effectiveness committee authorized under this chapter. Services shall be selected and included in the uniform benefit package based upon an assessment of the cost-effectiveness of such services in the maintenance of the health of the public. The best available scientific evidence and cost utilization studies shall be used in the assessment.

(2) The legislature intends that the uniform benefit package be sufficient to meet the needs of state residents. The categories of coverage shall, at least, include the following:

(a) Personal health services, including inpatient and outpatient services;

(b) Wellness and disease and injury prevention services;

(d) Clinical preventive services;

(e) Emergency health services;

(f) Reproductive and maternity services;

(g) Clinical management and provision of treatment; and

(h) Therapeutic drugs, biologicals, supplies, and equipment.

(3) The cooperative shall determine which services will be excluded.

NEW SECTION. Sec. 106. APPLICABILITY. (1) Effective July 1, 1994, every carrier offering health benefit plans to individuals and small employers shall also offer the uniform benefit package as a certified health plan and shall offer such certified health plans through the cooperative in every area of the state where they provide health insurance benefits to any small employer or individual. Nothing in this subsection shall prevent a carrier from offering health benefit plans to individuals or small employers outside the cooperative, provided the benefits meet the requirements of chapter 48.-- RCW (sections 201 through 206 of this act).

(2) Effective January 1, 1996, every carrier offering health benefit plans to individuals or employers that includes any of the services in the uniform benefit package shall: (a) Be certified under this chapter to provide all of the uniform benefit package services and meet other requirements established in this chapter, or (b) meet the requirements of chapter 48.-- RCW (sections 201 through 206 of this act).

(3)(a) Effective July 1, 2000, every health benefit plan offered to residents of the state of Washington that includes any of the services in the uniform benefit package, shall: (a) Be certified under this chapter to provide all the uniform benefit services and meet other requirements of this chapter, or (b) meet the requirements of chapter 48.-- RCW (sections 201 through 206 of this act).

(b) Prior to the effective date established under this subsection, the board shall negotiate with the United States congress for a statutory exemption from provisions of the federal employer retirement income security act that would prohibit the state from implementing this subsection.

(4) Nothing in this section prohibits an individual or employer from voluntarily obtaining the uniform benefit package through the cooperative on a date earlier than required under this section, provided such individuals and employers meet participation requirements set forth under this chapter. The cooperative shall permit voluntary enrollment only to the extent that the cooperative has the capacity to provide certified health plans to such employers.

NEW SECTION. Sec. 107. CERTIFIED HEALTH PLANS. The uniform benefit package shall be provided through certified health plans. The board shall begin certification of health plans by July 1, 1994. To be certified, a health benefit plan shall meet the following requirements:

(1) Provide or assure the provision of health care services in the uniform benefit package.

(2) With respect to carriers, offer the uniform benefit package services in every geographic area of the state where the carrier provides any type of health benefit plan.

(3) Comply with data requirements of the board and the health data, quality assurance, and cost control council established under chapter 70.170 RCW.

(4) Comply with rules of participation under this chapter or provisions of chapter 48.-- RCW (sections 201 through 206 of this act).

NEW SECTION. Sec. 108. MANAGED COMPETITION--RULES OF PARTICIPATION. All certified health plans offered through the cooperative shall abide by the provisions in this section. A certified health plan shall:

(1) Not deny, exclude, or limit benefits for a covered individual for expenses incurred more than six months following the effective date of the eligible individual's coverage due to a preexisting condition. (2) Not modify, decrease, exclude, or restrict benefits through riders, conditions, restrictions, endorsements, or otherwise, on the basis of sex, age, or health status or health condition of the eligible individual.

(3) Not modify, decrease, or restrict coverage through riders, conditions, restrictions, endorsements, or otherwise, on the basis of category of business trade, employment skill, or vocation or profession of the eligible individual.

(4) Assume financial risk of providing the uniform benefit to all enrolled individuals subject to any medical risk sharing arrangements that may be authorized under this chapter.

(5) Determine and adjust annual premium rates based on the experience of the state as a community, except that adjustments in the premium rates may be made, following the schedule established by the board, for age and gender of individual enrollees and for the cost of providing the uniform benefit package within major geographic areas within the state. No coverage may be denied to an enrollee during the contract enrollment period provided that premium payments are made and other conditions of participation are met in accordance with this chapter.

(6) Provide the uniform health package in a manner to promote the use of cost-effective managed health care delivery.

(7) Participate in an open enrollment period each year at a time established by the board.

(8) Offer incentives to encourage providers to offer high quality, cost-effective health care services.

(9) Participate in a board-adopted uniform outcome-based accountability and reporting system to allow the board, employers, and other individuals to compare the price and best value of certified health plans.

(10) Provide such data as is requested by the board and the health data, quality assurance, and cost control council under chapter 70.170 RCW that is necessary to implement the provisions of this chapter.

NEW SECTION. Sec. 109. COOPERATIVE COMPETITIVE BIDDING PROCESS WITH MANAGED HEALTH CARE PROVIDERS. (1) By January 1, 1994, the board shall adopt rules for accepting competitive bids from certified health plans to offer the uniform benefit package through the cooperative. The rules shall assure that certified health plans compete based upon the best price, service, quality, and value of providing the uniform benefit package to enrollees.

(2) Beginning July 1, 1994, and on that date each year thereafter, the board shall accept the bids from certified health plans and make such plans available to cooperative enrollees according to the provisions of this chapter.

NEW SECTION. Sec. 110. SERVICES EFFECTIVENESS ADVISORY COMMITTEE. The board shall establish a services effectiveness advisory committee to advise it on technical issues under the board's purview. The board shall appoint a membership that shall assure that the advisory committee has the necessary expertise to perform the functions specified in this section. The services effectiveness advisory committee shall be composed of experts necessary to advise the board on:

(1) The cost-effectiveness and efficacy of the uniform benefit package;

(2) Revisions to the uniform benefit package;

(3) Limitations on services in the uniform benefit package based on considerations of cost-effectiveness and efficacy;

(4) The inclusion of high-cost medical technologies and experimental procedures in the uniform benefit package based on their cost-effectiveness and efficacy;

(5) Establishing an outcome-based accountability and reporting system and a system for continuous quality improvement; and

(6) The adoption by providers delivering services through certified health plans of practice guidelines based upon the appropriate and effective use of health services.

NEW SECTION. Sec. 111. HEALTH CARE INSURANCE PREMIUM GROWTH RATE TARGETS. To assure the cost of health care services in the state remains affordable, the board shall establish health insurance premium growth rate targets. The purpose of this section shall be to establish the maximum state-wide premium growth rate targets for insured health care services and to initiate activities to limit the growth of spending should the targets be exceeded. The targets shall be established as follows:

(1)(a) For the uniform benefit package health care services purchased through the cooperative, the initial base premium shall be established by the board. In establishing the initial base premium, the board shall conduct an analysis of the 1993 cost experience of health benefit plans offering health care benefits similar to the uniform benefit package to groups in the state of Washington whose enrollment size is similar to what the board anticipates for the cooperative. The board may also consider other factors in establishing the initial base premium such as, but not limited to, the expected use of managed care systems required under this chapter and the expected administrative savings resulting from implementation of the other provisions of chapter . . ., Laws of 1993 (this act). Annual premium growth rate targets established thereafter shall be at ten percent for 1995, nine percent for 1998, and seven percent for 2000. After 2000, the premium growth rate target shall increase at a rate no more than is generally consistent with the rate of growth in the state's gross domestic product adjusted for increased demand for services as the result of the aging of the general population.

(b) The board shall monitor premium growth rate increases and shall inform certified health plans if such increases exceed targets. If premium rate increases exceed the target rates established under this subsection after 1998, the board shall require that certified health plans reduce premium rate increases to no more than the target rate. In addition, the board may reduce premium rate increases by an additional one percent below the target rate for a period of one year.

(2)(a) For health benefit plans subject to section 106(2) of this act the board shall establish an initial premium base using the 1995 average premium rate of plans subject to subsection (1)(a) of this section. The premium growth rate targets thereafter shall be established at ten percent for 1998, nine percent for 2000, and seven percent for 2002. After 2002, the premium growth rate target shall grow at a rate no more than is generally consistent with the rate of growth in the state's gross domestic product adjusted for increased demand for services as the result of the aging of the general population.

(b) The board shall monitor premium rate increases and shall inform certified health plans if such increases exceed targets. If premium rate increases exceed the target rates established under this subsection after 2000, the board shall require that certified health plans reduce premium rate increases to no more than the target rate. In addition, the board may reduce premium rate increases by an additional one percent below the target rate for a period of one year.

(3)(a) For health benefit plans subject to section 106(3) of this act the board shall establish an initial premium base using the 1999 average premium rate of plans subject to subsection (1)(a) of this section. The premium growth rate targets thereafter shall be established at ten percent for 2002, nine percent for 2004, and seven percent for 2006. After 2006, the premium growth rate target shall grow at a rate no more than is generally consistent with the rate of growth in the state's gross domestic product adjusted for increased demand for services as the result of the aging of the general population.

(b) The board shall monitor premium rate increases and shall inform certified health plans if such increases exceed targets. If premium rate increases exceed the target rates established under this subsection after 2004, the board shall require that certified health plans reduce premium rate increases to no more than the target rate. In addition, the board may reduce premium rate increases by an additional one percent below the target rate for a period of one year.

(4) The annual premium growth targets established in subsections (1) through (3) of this section may be annually adjusted by the board to an amount equal to the United States consumer price index if the growth in the consumer price index exceeds the premium growth rate targets established under subsections (1) through (3) of this section.

(5) The board shall annually report to the governor and to the fiscal and health policy committees of the legislature concerning compliance with the targets and board activities undertaken to assure compliance when targets have been exceeded.

NEW SECTION. Sec. 112. COORDINATION OR CONSOLIDATION OF STATE AGENCY HEALTH PROGRAMS. (1) The legislature finds that the way state government purchases and delivers health care must be restructured to ensure that the uniform benefit package of health care services is provided to residents served by state government and that the growth in health care costs are consistent with the goals established under this chapter.

(2) By September 1, 1994, the board and the office of financial management shall prepare a detailed plan for determining whether, to what extent, and when the following programs shall be subject to the requirements of this chapter:

(a) Medical services under the state's workers' compensation program;

(b) Health care services in jails;

(d) Institutional and community services for individuals with developmental disabilities, mentally ill, aging, and physically disabled populations;

(e) State and federal veterans' health services;

(f) Civilian health and medical program for the uniformed services of the federal department of defense;

(g) Medicaid as provided under Title XIX of the federal social security act;

(h) Medicare as provided under Title XVIII of the federal social security act; and

(i) Health care insurance benefits purchased by counties, cities, municipalities, and special districts for their public employees.

The plan shall be submitted to the governor and fiscal and health policy committees of the legislature no later than September 15, 1994. The plan shall include recommendations for needed statutory changes, recommended implementation time table, and a list of needed federal waivers or changes in federal law.

NEW SECTION. Sec. 113. DEPARTMENT OF HEALTH COMMUNITY AND MIGRANT CLINIC STUDY. By July 1, 1994, the department of health shall report to the board and the health policy committees of the legislature on whether community and migrant clinics should be subject to the requirements of this chapter. The report shall:

(1) Analyze the populations that community clinics serve;

(2) Determine the impact on current populations served by clinics should clinics be subject to this chapter, or portions of this chapter;

(3) Analyze the expected costs to clinics of complying with this chapter;

(4) Analyze other factors that may serve as barriers to clinics, such as availability or access to facilities and providers, the need to comply with requirements under Title 48 RCW, and other requirements necessary to comply with the provisions of this chapter;

(5) Recommend needed statutory changes; and

(6) Analyze other relevant factors.

Sec. 114. RCW 70.47.030 and 1992 c 232 s 907 are each amended to read as follows:

(1) The ((~~basic health plan~~)) Washington health insurance purchasing cooperative trust account is hereby established in the state treasury. ((~~All~~)) Any nongeneral fund-state funds collected for this program shall be deposited in the ((~~basic health plan~~)) Washington health insurance purchasing cooperative trust account and may be expended without further appropriation. Moneys in the account shall be used exclusively for the purposes of this chapter, including payments to participating ((~~managed health care systems~~)) certified health plans on behalf of subsidized enrollees in the plan and payment of costs of administering the plan. ((~~After July 1, 1993,~~)) The administrator shall not expend or encumber for an ensuing fiscal period amounts exceeding ninety-five percent of the amount anticipated to be spent for ((~~purchased~~)) subsidized health care services during the fiscal year.

(2) The Washington health insurance purchasing cooperative subscription account is created in the custody of the state treasurer. All receipts from amounts due under RCW 70.47.060, as recodified by this act, shall be deposited into the account. Funds in the account shall be used exclusively for the purposes of this chapter, including payments to participating certified health plans on behalf of enrollees in the cooperative and payment of the administrative costs of operating the cooperative. The account is subject to allotment procedures under chapter 43.88 RCW, but no appropriation is required for expenditures.

(3) The administrator shall take every precaution to see that none of the funds in the separate accounts created in this section or that any premiums paid either by subsidized or nonsubsidized enrollees are commingled in any way, except that the administrator may combine funds designated for administration of the cooperative into a single administrative account.

Sec. 115. RCW 70.47.040 and 1987 1st ex.s. c 5 s 6 are each amended to read as follows:

(1) ((~~The Washington basic health plan is created as an independent agency of the state.~~)) The administrative head ((~~and appointing authority~~)) of the ((~~plan~~)) cooperative shall be the administrator who shall be appointed by the ((~~governor, with the consent of the senate~~)) board, and shall serve at the pleasure of the ((~~governor~~)) board. The salary for this office shall be set by the governor pursuant to RCW 43.03.040. The administrator shall appoint a medical director. The administrator, medical director, and up to five other employees shall be exempt from the civil service law, chapter 41.06 RCW.

(2) The administrator shall employ, with the approval of the board, such other staff as are necessary to fulfill the responsibilities and duties of the administrator((~~, such~~)). The staff ((~~to be~~)) is subject to the civil service law, chapter 41.06 RCW. In addition, the administrator may contract, with the approval of the board, with third parties for services necessary to carry out its activities where this will promote economy, avoid duplication of effort, and make best use of available expertise. Any such contractor or consultant shall be prohibited from releasing, publishing, or otherwise using any information made available to it under its contractual responsibility without specific permission of the ((~~plan~~)) board. The administrator may call upon other agencies of the state to provide available information as necessary to assist the administrator in meeting its responsibilities under this chapter, which information shall be supplied as promptly as circumstances permit.

(((3) The administrator may appoint such technical or advisory committees as he or she deems necessary. The administrator shall appoint a standing technical advisory committee that is representative of health care professionals, health care providers, and those directly involved in the purchase, provision, or delivery of health care services, as well as consumers and those knowledgeable of the ethical issues involved with health care public policy. Individuals appointed to any technical or other advisory committee shall serve without compensation for their services as members, but may be reimbursed for their travel expenses pursuant to RCW 43.03.050 and 43.03.060.

(4) The administrator may apply for, receive, and accept grants, gifts, and other payments, including property and service, from any governmental or other public or private entity or person, and may make arrangements as to the use of these receipts, including the undertaking of special studies and other projects relating to health care costs and access to health care.

(5) In the design, organization, and administration of the plan under this chapter, the administrator shall consider the report of the Washington health care project commission established under chapter 303, Laws of 1986. Nothing in this chapter requires the administrator to follow any specific recommendation contained in that report except as it may also be included in this chapter or other law.))

Sec. 116. RCW 70.47.050 and 1987 1st ex.s. c 5 s 7 are each amended to read as follows:

The ((~~administrator~~)) board may ((~~promulgate and~~)) adopt rules consistent with this chapter to carry out the purposes of this chapter. All rules shall be adopted in accordance with chapter 34.05 RCW.

Sec. 117. RCW 70.47.060 and 1992 c 232 s 908 are each amended to read as follows:

The administrator has the following powers and duties:

(1) ((To design and from time to time revise a schedule of covered basic health care services, including physician services, inpatient and outpatient hospital services, and other services that may be necessary for basic health care, which enrollees in any participating managed health care system under the Washington basic health plan shall be entitled to receive in return for premium payments to the plan. The schedule of services shall emphasize proven preventive and primary health care and shall include all services necessary for prenatal, postnatal, and well-child care. However, for the period ending June 30, 1993, with respect to coverage for groups of subsidized enrollees, the administrator shall not contract for prenatal or postnatal services that are provided under the medical assistance program under chapter 74.09 RCW except to the extent that such services are necessary over not more than a one-month period in order to maintain continuity of care after diagnosis of pregnancy by the managed care provider, or except to provide any such services associated with pregnancies diagnosed by the managed care provider before July 1, 1992. The schedule of services shall also include a separate schedule of basic health care services for children, eighteen years of age and younger, for those enrollees who choose to secure basic coverage through the plan only for their dependent children. In designing and revising the schedule of services, the administrator shall consider the guidelines for assessing health services under the mandated benefits act of 1984, RCW 48.42.080, and such other factors as the administrator deems appropriate.

(2) To design and implement a structure of periodic premiums due the administrator from enrollees that is based upon gross family income, giving appropriate consideration to family size as well as the ages of all family members. The enrollment of children shall not require the enrollment of their parent or parents who are eligible for the plan.

(3) To design and implement a structure of nominal copayments due a managed health care system from enrollees. The structure shall discourage inappropriate enrollee utilization of health care services, but shall not be so costly to enrollees as to constitute a barrier to appropriate utilization of necessary health care services.

(4) To design and implement, in concert with a sufficient number of potential providers in a discrete area, an enrollee financial participation structure, separate from that otherwise established under this chapter, that has the following characteristics:

~~(a) Nominal premiums that are based upon ability to pay, but not set at a level that would discourage enrollment;~~

~~(b) A modified fee-for-services payment schedule for providers;~~

(c) Coinsurance rates that are established based on specific service and procedure costs and the enrollee's ability to pay for the care. However, coinsurance rates for families with incomes below one hundred twenty percent of the federal poverty level shall be nominal. No coinsurance shall be required for specific proven prevention programs, such as prenatal care. The coinsurance rate levels shall not have a measurable negative effect upon the enrollee's health status; and

(d) A case management system that fosters a provider-enrollee relationship whereby, in an effort to control cost, maintain or improve the health status of the enrollee, and maximize patient involvement in her or his health care decision-making process, every effort is made by the provider to inform the enrollee of the cost of the specific services and procedures and related health benefits.

The potential financial liability of the plan to any such providers shall not exceed in the aggregate an amount greater than that which might otherwise have been incurred by the plan on the basis of the number of enrollees multiplied by the average of the prepaid capitated rates negotiated with participating managed health care systems under RCW 70.47.100 and reduced by any sums charged enrollees on the basis of the coinsurance rates that are established under this subsection.

~~(5)~~)) To limit enrollment of persons who qualify for subsidies so as to prevent an overexpenditure of appropriations for such purposes. Whenever the administrator finds that there is danger of such an overexpenditure, the administrator shall close subsidized enrollment until the administrator finds the danger no longer exists.

((~~(6) To adopt a schedule for the orderly development of the delivery of services and availability of the plan to residents of the state, subject to the limitations contained in RCW 70.47.080.~~

In the selection of any area of the state for the initial operation of the plan, the administrator shall take into account the levels and rates of unemployment in different areas of the state, the need to provide basic health care coverage to a population reasonably representative of the portion of the state's population that lacks such coverage, and the need for geographic, demographic, and economic diversity.

~~Before July 1, 1988, the administrator shall endeavor to secure participation contracts with managed health care systems in discrete geographic areas within at least five congressional districts.~~

(7) To solicit and accept applications from managed health care systems, as defined in this chapter, for inclusion as eligible basic health care providers under the plan. The administrator shall endeavor to assure that covered basic health care services are available to any enrollee of the plan from among a selection of two or more participating managed health care systems. In adopting any rules or procedures applicable to managed health care systems and in its dealings with such systems, the administrator shall consider and make suitable allowance for the need for health care services and the differences in local availability of health care resources, along with other resources, within and among the several areas of the state.

~~(8)~~)) (2) To receive periodic premiums from sponsors and enrollees, deposit them in the ((~~basic health plan operating~~)) appropriate account under RCW 70.47.030, as recodified by this act, keep records of enrollee status, and authorize periodic payments to ((~~managed health care systems~~)) certified health plans on the basis of the number of enrollees participating in the respective ((~~managed health care systems~~)) certified health plans.

((~~(9)~~)) (3) To accept applications from individuals residing in areas served by the ((~~plan~~)) cooperative, on behalf of themselves and their spouses and dependent children, for enrollment in a certified health plan offered through the Washington ((~~basic health plan, to establish appropriate minimum-enrollment periods for enrollees as may be necessary, and~~)) health insurance purchasing cooperative as a subsidized enrollee, to determine, upon application and at least annually thereafter, or at the request of any enrollee, eligibility due to current gross family income for sliding scale premiums. ((An)) A subsidized enrollee who remains current in payment of the sliding-scale premium((~~, as determined under subsection (2) of this section,~~)) and whose gross family income has risen above twice the federal poverty level, may continue enrollment ((~~unless and until the enrollee's gross family income has remained above twice the poverty level for six consecutive months,~~)) as a nonsubsidized enrollee by making payment at the unsubsidized rate required for the ((~~managed health care system~~)) certified health plan in which he or she may be enrolled plus the administrative cost of providing certified health plans to that enrollee. No subsidy may be paid with respect to any enrollee whose current gross family income exceeds twice the federal poverty level or, subject to RCW 70.47.110, as recodified by this act, who is a recipient of medical assistance or medical care services under chapter 74.09 RCW. ((If a number of enrollees drop their enrollment for no apparent good cause, the administrator may establish appropriate rules or requirements that are applicable to such individuals before they will be allowed to re-enroll in the plan.

(10) To determine the rate to be paid to each participating managed health care system in return for the provision of covered basic health care services to enrollees in the system. Although the schedule of covered basic health care services will be the same for similar enrollees, the rates negotiated with participating managed health care systems may vary among the systems. In negotiating rates with participating systems, the administrator shall consider the characteristics of the populations served by the respective systems, economic circumstances of the local area, the need to conserve the resources of the basic health plan trust account, and other factors the administrator finds relevant.

~~(11)~~)) (4) To accept applications from employers on behalf of themselves and their employees, spouses, and dependent children. The administrator may require all or the substantial majority of the eligible employees of such employers to enroll in certified health plans offered through the cooperative and establish those procedures necessary to facilitate the orderly enrollment of groups into certified health plans. Enrollment is available for employers who wish to obtain the uniform benefit package through certified health plans according to the provisions of this chapter and at no cost to the state. No enrollee of an employer shall be eligible for a subsidy from the cooperative and at no time shall the administrator allow the credit of the state or funds from the trust account to be used or extended on their behalf.

(5) To accept applications from individuals residing in areas serviced by the cooperative, on behalf of themselves and their spouses and dependent children who wish to obtain the uniform benefit package through certified health plans according to the provisions of this chapter and at no cost to the state.

(6) To monitor the provision of covered services to enrollees served in the cooperative by participating ((~~managed health care systems~~)) certified health plans in order to assure enrollee access to good quality basic health care, to require periodic data reports concerning the utilization of health care services rendered to enrollees in the cooperative as required by the board in order to provide adequate information for evaluation, and to inspect the books and records of participating ((~~managed health care systems~~)) certified health plans to assure compliance with the purposes of this chapter. In requiring reports from participating ((~~managed health care systems~~)) certified health plans, including data on services rendered enrollees, the administrator shall endeavor to minimize costs((~~, both to the managed health care systems and to the administrator~~)). The administrator shall coordinate any such reporting requirements with other state agencies, such as the insurance commissioner and the department of health, to minimize duplication of effort.

(((12) To monitor the access that state residents have to adequate and necessary health care services, determine the extent of any unmet needs for such services or lack of access that may exist from time to time, and make such reports and recommendations to the legislature as the administrator deems appropriate.

(13) To evaluate the effects this chapter has on private employer-based health care coverage and to take appropriate measures consistent with state and federal statutes that will discourage the reduction of such coverage in the state.

~~(14) To develop a program of proven preventive health measures and to integrate it into the plan wherever possible and consistent with this chapter.~~

~~(15) To provide, consistent with available resources, technical assistance for rural health activities that endeavor to develop needed health care services in rural parts of the state.~~))

(7) To perform such other duties the board determines are necessary to implement the provisions of this chapter.

Sec. 118. RCW 70.47.070 and 1987 1st ex.s. c 5 s 9 are each amended to read as follows:

The benefits available under ((~~the plan~~)) this chapter shall be subject to RCW 48.21.200 and shall be excess to the benefits payable under the terms of any insurance policy issued to or on the behalf of an enrollee that provides payments toward medical expenses without a determination of liability for the injury.

Sec. 119. RCW 70.47.080 and 1987 1st ex.s. c 5 s 10 are each amended to read as follows:

((~~On and after July 1, 1988,~~)) The administrator shall accept for enrollment applicants eligible to receive covered ((~~basic~~)) uniform benefit package health care services from the respective ((~~managed health care systems which~~)) certified health plans that are ((~~then~~)) participating in the ((~~plan. The administrator shall not allow the total enrollment of those eligible for subsidies to exceed thirty thousand~~)) cooperative.

((~~Thereafter, total~~)) The average monthly enrollment of those eligible for subsidies during any biennium shall not exceed the number established by the legislature in any act appropriating funds to the ((~~plan~~)) cooperative, and total subsidized enrollment shall not result in expenditures that exceed the total amount that has been made available by the legislature in any act appropriating funds to the cooperative.

((Before July 1, 1988, the administrator shall endeavor to secure participation contracts from managed health care systems in discrete geographic areas within at least five congressional districts of the state and in such manner as to allow residents of both urban and rural areas access to enrollment in the plan. The administrator shall make a special effort to secure agreements with health care providers in one such area that meets the requirements set forth in RCW 70.47.060(4).))

The administrator shall at all times closely monitor growth patterns of enrollment so as not to exceed that consistent with the orderly development of the ((~~plan~~)) cooperative as a whole, in any area of the state or in any participating ((~~managed health care system~~)) certified health plan. The annual or biennial enrollment limitations derived from operation of the cooperative under this section do not apply to nonsubsidized enrollees.

Sec. 120. RCW 70.47.090 and 1987 1st ex.s. c 5 s 11 are each amended to read as follows:

Any enrollee whose premium payments to the cooperative for certified health plans are delinquent or who moves his or her residence out of an area served by the ((~~plan~~)) cooperative may be dropped from enrollment status. An enrollee whose premium is the responsibility of the department of social and health services under RCW 70.47.110 (as recodified by this act) may not be dropped solely because of nonpayment by the department. The administrator shall provide delinquent enrollees with advance written notice of their removal from the ((~~plan~~)) cooperative and shall provide for a hearing under chapters 34.05 and 34.12 RCW for any enrollee who contests the decision to drop the enrollee from the ((~~plan~~)) cooperative. Upon removal of an enrollee from the ((~~plan~~)) cooperative, the administrator shall promptly notify the ((~~managed health care system~~)) certified health plan in which the enrollee has been enrolled, and shall not be responsible for payment for health care services provided to the enrollee (including, if applicable, members of the enrollee's family) after the date of notification. A ((~~managed health care system~~)) certified health plan may contest the denial of payment for coverage of an enrollee through a hearing under chapters 34.05 and 34.12 RCW.

Sec. 121. RCW 70.47.100 and 1987 1st ex.s. c 5 s 12 are each amended to read as follows:

((~~Managed health care systems~~)) Certified health plans participating in the ((~~plan~~)) cooperative shall do so by competitive bid contract with the ((~~administrator~~)) board and shall provide, directly or by contract with other health care providers, covered ((~~basic~~)) uniform benefit package health care services to each enrollee as long as payments from the administrator on behalf of the enrollee are current. ((~~A participating managed health care system may offer, without additional cost, health care benefits or services not included in the schedule of covered services under the plan.~~)) A participating managed health care ((~~system~~)) provider shall not give preference in enrollment to enrollees who accept such additional health care benefits or services. ((~~Managed health care systems participating in the plan shall not discriminate against any potential or current enrollee based upon health status, sex, race, ethnicity, or religion.~~)) The administrator may receive and act upon complaints from enrollees regarding failure to provide covered services or efforts to obtain payment, other than authorized ((~~copayments~~)) individual point of service cost-sharing, for covered services directly from enrollees, but nothing in this chapter empowers the administrator to impose any sanctions under Title 18 RCW or any other professional or facility licensing statute.

((The plan shall allow, at least annually, an opportunity for enrollees to transfer their enrollments among participating managed health care systems serving their respective areas. The administrator shall establish a period of at least twenty days in a given year when this opportunity is afforded enrollees, and in those areas served by more than one participating managed health care system the administrator shall endeavor to establish a uniform period for such opportunity. The plan shall allow enrollees to transfer their enrollment to another participating managed health care system at any time upon a showing of good cause for the transfer.

~~Any contract between a hospital and a participating managed health care system under this chapter is subject to the requirements of RCW 70.39.140(1) regarding negotiated rates.~~

Prior to negotiating with any managed health care system, the administrator shall determine, on an actuarially sound basis, the reasonable cost of providing the schedule of basic health care services, expressed in terms of upper and lower limits, and recognizing variations in the cost of providing the services through the various systems and in different areas of the state. In negotiating with managed health care systems for participation in the plan, the administrator shall adopt a uniform procedure that includes at least the following:

(1) The administrator shall issue a request for proposals, including standards regarding the quality of services to be provided; financial integrity of the responding systems; and responsiveness to the unmet health care needs of the local communities or populations that may be served;

~~(2) The administrator shall then review responsive proposals and may negotiate with respondents to the extent necessary to refine any proposals;~~

~~(3) The administrator may then select one or more systems to provide the covered services within a local area; and~~

(4) The administrator may adopt a policy that gives preference to respondents, such as nonprofit community health clinics, that have a history of providing quality health care services to low-income persons.))

Sec. 122. RCW 70.47.110 and 1991 sp.s. c 4 s 3 are each amended to read as follows:

The department of social and health services may make payments to the administrator or to participating ((~~managed health care systems~~)) certified health plans in the cooperative on behalf of any enrollee who is a recipient of medical care under chapter 74.09 RCW, at the maximum rate allowable for federal matching purposes under Title XIX of the social security act. Any enrollee on whose behalf the department of social and health services makes such payments may continue as an enrollee, making premium payments based on the enrollee's own income as determined under the sliding scale, after eligibility for coverage under chapter 74.09 RCW has ended, as long as the enrollee remains eligible under this chapter. Nothing in this section affects the right of any person eligible for coverage under chapter 74.09 RCW to receive the services offered to other persons under that chapter but not included in the schedule of ((~~basic~~)) uniform benefit package health care services ((~~covered by the plan~~)). The administrator shall seek to determine which enrollees or prospective enrollees may be eligible for medical care under chapter 74.09 RCW and may require these individuals to complete the eligibility determination process under chapter 74.09 RCW prior to enrollment or continued participation in the ((~~plan~~)) cooperative. The administrator and the department of social and health services shall cooperatively adopt procedures to facilitate the transition of ((~~plan~~)) cooperative enrollees and payments on their behalf between the ((~~plan~~)) cooperative and the programs established under chapter 74.09 RCW.

Sec. 123. RCW 70.47.115 and 1992 c 21 s 7 are each amended to read as follows:

(1) The administrator, when specific funding is provided and where feasible, shall make ((~~the basic health~~)) subsidized enrollments in certified health plans available in timber impact areas. The administrator shall prioritize making ((~~the plan~~)) subsidized enrollments available under this section to the timber impact areas meeting the following criteria, as determined by the employment security department: (a) A lumber and wood products employment location quotient at or above the state average; (b) a direct lumber and wood products job loss of one hundred positions or more; and (c) an annual unemployment rate twenty percent above the state average.

(2) Persons assisted under this section shall meet the requirements of subsidized enrollee as defined in ((~~RCW 70.47.020(4)~~)) this chapter.

(3) For purposes of this section, "timber impact area" means:

(a) A county having a population of less than five hundred thousand, or a city or town located within a county having a population of less than five hundred thousand, and meeting two of the following three criteria, as determined by the employment security department, for the most recent year such data is available: (i) A lumber and wood products employment location quotient at or above the state average; (ii) projected or actual direct lumber and wood products job losses of one hundred positions or more, except counties having a population greater than two hundred thousand but less than five hundred thousand must have direct lumber and wood products job losses of one thousand positions or more; or (iii) an annual unemployment rate twenty percent or more above the state average; or

(b) Additional communities as the economic recovery coordinating board, established in RCW 43.31.631, designates based on a finding by the board that each designated community is socially and economically integrated with areas that meet the definition of a timber impact area under (a) of this subsection.

Sec. 124. RCW 70.47.130 and 1987 1st ex.s. c 5 s 15 are each amended to read as follows:

The activities and operations of the Washington ((~~basic health plan~~)) health insurance purchasing cooperative under this chapter((~~, including those of managed health care systems to the extent of their participation in the plan,~~)) are exempt from the provisions and requirements of Title 48 RCW((~~, except as provided in RCW 70.47.070~~)).

Sec. 125. RCW 70.47.150 and 1990 c 54 s 1 are each amended to read as follows:

Notwithstanding the provisions of chapter 42.17 RCW, (1) records obtained, reviewed by, or on file with the ((~~plan~~)) cooperative containing information concerning medical treatment of individuals shall be exempt from public inspection and copying; and (2) actuarial formulas, statistics, and assumptions submitted in support of a rate filing by a ((~~managed health care system~~)) certified health plan or submitted to the administrator upon his or her request shall be exempt from public inspection and copying in order to preserve trade secrets or prevent unfair competition.

NEW SECTION. Sec. 126. SUNSET REPEALED. The following acts or parts of acts are each repealed:

(1) RCW 43.131.355 and 1987 1st ex.s. c 5 s 24; and

(2) RCW 43.131.356 and 1987 1st ex.s. c 5 s 25.

NEW SECTION. Sec. 127. REPEALERS. The following acts or parts of acts are each repealed:

(1) RCW 70.47.010 and 1987 1st ex.s. c 5 s 3;

(2) RCW 70.47.020 and 1987 1st ex.s. c 5 s 4;

(3) RCW 70.47.120 and 1987 1st ex.s. c 5 s 14; and

(4) RCW 70.47.900 and 1987 1st ex.s. c 5 s 1.

NEW SECTION. Sec. 128. RECODIFICATION. RCW 70.47.030, 70.47.040, 70.47.050, 70.47.060, 70.47.070, 70.47.080, 70.47.090, 70.47.100, 70.47.110, 70.47.115, 70.47.130, 70.47.140, 70.47.150, and 70.47.901 are each recodified into the new chapter in Title 48 RCW created under section 137 of this act. The code reviser is directed to correct all references to these sections in the Revised Code of Washington.

Sec. 129. RCW 41.05.031 and 1990 c 222 s 4 are each amended to read as follows:

The following state agencies and other entities are directed to cooperate with the authority to establish appropriate health care information systems in their programs: The department of social and health services, the department of health, the department of labor and industries, the ((~~basic health plan,~~)) Washington health insurance purchasing cooperative, the department of veterans affairs, the department of corrections, and the superintendent of public instruction.

The authority, in conjunction with these agencies, shall determine:

(1) Definitions of health care services;

(2) Health care data elements common to all agencies;

(3) Health care data elements unique to each agency; and

(4) A mechanism for program and budget review of health care data.

Sec. 130. RCW 42.17.2401 and 1991 c 200 s 404 are each amended to read as follows:

For the purposes of RCW 42.17.240, the term "executive state officer" includes:

(1) The chief administrative law judge, the director of agriculture, the administrator of the office of marine safety, ((~~the administrator of the Washington basic health plan,~~)) the director of the department of services for the blind, the director of the state system of community and technical colleges, the director of community development, the secretary of corrections, the director of ecology, the commissioner of employment security, the chairman of the energy facility site evaluation council, the director of the energy office, the secretary of the state finance committee, the director of financial management, the director of fisheries, the executive secretary of the forest practices appeals board, the director of the gambling commission, the director of general administration, the secretary of health, the administrator of the Washington state health care authority, the executive secretary of the health care facilities authority, the executive secretary of the higher education facilities authority, the director of the higher education personnel board, the executive secretary of the horse racing commission, the executive secretary of the human rights commission, the executive secretary of the indeterminate sentence review board, the director of the department of information services, the director of the interagency committee for outdoor recreation, the executive director of the state investment board, the director of labor and industries, the director of licensing, the director of the lottery commission, the director of the office of minority and women's business enterprises, the director of parks and recreation, the director of personnel, the executive director of the public disclosure commission, the director of retirement systems, the director of revenue, the secretary of social and health services, the chief of the Washington state patrol, the executive secretary of the board of tax appeals, the director of trade and economic development, the secretary of transportation, the secretary of the utilities and transportation commission, the director of veterans affairs, the director of wildlife, the president of each of the regional and state universities and the president of The Evergreen State College, each district and each campus president of each state community college;

(2) Each professional staff member of the office of the governor;

(3) Each professional staff member of the legislature; and

(4) Central Washington University board of trustees, board of trustees of each community college, each member of the state board for community and technical colleges ((~~education~~)), state convention and trade center board of directors, committee for deferred compensation, Eastern Washington University board of trustees, Washington economic development finance authority, The Evergreen State College board of trustees, forest practices appeals board, forest practices board, gambling commission, Washington health care facilities authority, higher education coordinating board, higher education facilities authority, higher education personnel board, horse racing commission, state housing finance commission, human rights commission, indeterminate sentence review board, board of industrial insurance appeals, information services board, interagency committee for outdoor recreation, state investment board, liquor control board, lottery commission, marine oversight board, oil and gas conservation committee, Pacific Northwest electric power and conservation planning council, parks and recreation commission, personnel appeals board, personnel board, board of pilotage ((~~[commissioners]~~)) commissioners, pollution control hearings board, public disclosure commission, public pension commission, shorelines hearing board, state employees' benefits board, board of tax appeals, transportation commission, University of Washington board of regents, utilities and transportation commission, Washington state maritime commission, Washington public power supply system executive board, Washington State University board of regents, Western Washington University board of trustees, and wildlife commission.

Sec. 131. RCW 43.20.050 and 1992 c 34 s 4 are each amended to read as follows:

(1) The state board of health shall provide a forum for the development of health policy in Washington state. It is authorized to recommend to the secretary means for obtaining appropriate citizen and professional involvement in all health policy formulation and other matters related to the powers and duties of the department. It is further empowered to hold hearings and explore ways to improve the health status of the citizenry.

(a) At least every five years, the state board shall convene regional forums to gather citizen input on health issues.

(b) Every two years, in coordination with the development of the state biennial budget, the state board shall prepare the state health report that outlines the health priorities of the ensuing biennium. The report shall:

(i) Consider the citizen input gathered at the health forums;

(ii) Be developed with the assistance of local health departments;

(iii) Be based on the best available information collected and reviewed according to RCW 43.70.050 and recommendations from the council;

(iv) Be developed with the input of state health care agencies. At least the following directors of state agencies shall provide timely recommendations to the state board on suggested health priorities for the ensuing biennium: The secretary of social and health services, the health care authority administrator, the insurance commissioner((~~, the administrator of the basic health plan~~)), the superintendent of public instruction, the director of labor and industries, the director of ecology, and the director of agriculture. In addition, the administrator of the Washington health insurance purchasing cooperative shall also provide recommendations to the state board of health on suggested health priorities for the ensuing biennium;

(v) Be used by state health care agency administrators in preparing proposed agency budgets and executive request legislation;

(vi) Be submitted by the state board to the governor by June 1 of each even-numbered year for adoption by the governor. The governor, no later than September 1 of that year, shall approve, modify, or disapprove the state health report.

(c) In fulfilling its responsibilities under this subsection, the state board shall create ad hoc committees or other such committees of limited duration as necessary. Membership should include legislators, providers, consumers, bioethicists, medical economics experts, legal experts, purchasers, and insurers, as necessary.

(2) In order to protect public health, the state board of health shall:

(a) Adopt rules necessary to assure safe and reliable public drinking water and to protect the public health. Such rules shall establish requirements regarding:

(i) The design and construction of public water system facilities, including proper sizing of pipes and storage for the number and type of customers;

(ii) Drinking water quality standards, monitoring requirements, and laboratory certification requirements;

(iii) Public water system management and reporting requirements;

(iv) Public water system planning and emergency response requirements;

(v) Public water system operation and maintenance requirements;

(vi) Water quality, reliability, and management of existing but inadequate public water systems; and

(vii) Quality standards for the source or supply, or both source and supply, of water for bottled water plants.

(b) Adopt rules and standards for prevention, control, and abatement of health hazards and nuisances related to the disposal of wastes, solid and liquid, including but not limited to sewage, garbage, refuse, and other environmental contaminants; adopt standards and procedures governing the design, construction, and operation of sewage, garbage, refuse and other solid waste collection, treatment, and disposal facilities;

(c) Adopt rules controlling public health related to environmental conditions including but not limited to heating, lighting, ventilation, sanitary facilities, cleanliness and space in all types of public facilities including but not limited to food service establishments, schools, institutions, recreational facilities and transient accommodations and in places of work;

(d) Adopt rules for the imposition and use of isolation and quarantine;

(e) Adopt rules for the prevention and control of infectious and noninfectious diseases, including food and vector borne illness, and rules governing the receipt and conveyance of remains of deceased persons, and such other sanitary matters as admit of and may best be controlled by universal rule; and

(f) Adopt rules for accessing existing data bases for the purposes of performing health related research.

(3) The state board may delegate any of its rule-adopting authority to the secretary and rescind such delegated authority.

(4) All local boards of health, health authorities and officials, officers of state institutions, police officers, sheriffs, constables, and all other officers and employees of the state, or any county, city, or township thereof, shall enforce all rules adopted by the state board of health. In the event of failure or refusal on the part of any member of such boards or any other official or person mentioned in this section to so act, he shall be subject to a fine of not less than fifty dollars, upon first conviction, and not less than one hundred dollars upon second conviction.

(5) The state board may advise the secretary on health policy issues pertaining to the department of health and the state.

Sec. 132. RCW 50.20.210 and 1987 1st ex.s. c 5 s 16 are each amended to read as follows:

The commissioner shall notify any person filing a claim under this chapter who resides in a local area served by the Washington ((~~basic health plan~~)) health insurance purchasing cooperative of the availability of basic health care coverage to qualified enrollees in the Washington ((~~basic health plan~~)) health insurance purchasing cooperative under chapter ((~~70.47~~)) 48.-- RCW((~~, unless the Washington basic health plan administrator has notified the commissioner of a closure of enrollment in the area~~)) (sections 101 through 113 and 609 of this act). The commissioner shall maintain a supply of Washington ((~~basic health plan~~)) health insurance purchasing cooperative enrollment application forms, which shall be provided in reasonably necessary quantities by the administrator, in each appropriate employment service office for the use of persons wishing to apply for enrollment in the Washington ((~~basic health plan~~)) health insurance purchasing cooperative.

Sec. 133. RCW 51.28.090 and 1987 1st ex.s. c 5 s 17 are each amended to read as follows:

The director shall notify persons receiving time-loss payments under this chapter of the availability of basic health care coverage to qualified enrollees under chapter ((~~70.47~~)) 48.-- RCW (sections 101 through 113 and 609 of this act), unless the Washington ((~~basic health plan~~)) health insurance purchasing cooperative administrator has notified the director of closure of enrollment in the plan. The director shall maintain supplies of Washington ((~~basic health plan~~)) health insurance purchasing cooperative enrollment application forms in all field service offices where the plan is available, which shall be provided in reasonably necessary quantities by the administrator for the use of persons wishing to apply for enrollment in the Washington ((~~basic health plan~~)) health insurance purchasing cooperative.

Sec. 134. RCW 74.04.033 and 1987 1st ex.s. c 5 s 18 are each amended to read as follows:

The department shall notify any applicant for public assistance who resides in a local area served by the Washington ((~~basic health plan~~)) health insurance purchasing cooperative and is under sixty-five years of age of the availability of basic health care coverage to qualified enrollees in the Washington ((~~basic health plan~~)) health insurance purchasing cooperative under chapter ((~~70.47~~)) 48.-- RCW (sections 101 through 113 and 609 of this act), unless the Washington ((~~basic health plan~~)) health insurance purchasing cooperative administrator has notified the department of a closure of enrollment in the area. The department shall maintain a supply of Washington ((~~basic health plan~~)) health insurance purchasing cooperative enrollment application forms, which shall be provided in reasonably necessary quantities by the administrator, in each appropriate community service office for the use of persons wishing to apply for enrollment in the Washington ((~~basic health plan~~)) health insurance purchasing cooperative.

NEW SECTION. Sec. 135. EFFECTIVE DATES. Sections 114 through 125 and 127 through 134 of this act shall take effect January 1, 1994.

NEW SECTION. Sec. 136. EMERGENCY CLAUSE. Sections 101 through 113, and 126 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately.

NEW SECTION. Sec. 137. CODIFICATION DIRECTIONS. Sections 101 through 113 and 609 of this act shall constitute a new chapter in Title 48 RCW.

PART II - EMPLOYER AND INDIVIDUAL HEALTH INSURANCE REFORM

NEW SECTION. Sec. 201. SHORT TITLE. This chapter shall be known and cited as the employer and individual health coverage act.

NEW SECTION. Sec. 202. DEFINITIONS. As used in this chapter:

(1) "Board" means the Washington health insurance purchasing cooperative board as established under chapter 48.-- RCW (sections 101 through 113 and 609 of this act).

(2) "Carrier" means an entity that provides a health insurance benefit plan to employers and individuals in Washington state as an insurance company, health services contractor, or health maintenance organization, and is regulated by the state of Washington under chapter 48.20, 48.21, 48.44, or 48.46 RCW.

(3) "Certified health plans" means health insurance plans offered by carriers and certified by the board to provide the uniform benefit package.

(4) "Enrollee" means an eligible individual who receives the uniform benefit package from a carrier.

(5) "Eligible individual" means (a) an individual person who elects to purchase a health benefit plan for himself or herself and his or her dependents, or (b) an active employee, proprietor, partner, or corporate officer of an employer group who elects to purchase a health benefit plan for himself or herself and his or her dependents where the eligible individual resides, is paid on a regular, periodic basis through the group's payroll system, regularly works on a full-time basis and has a normal work week of twenty or more hours, and is expected to continue in this employment capacity.

(6) "Health benefit plan" means a hospital or medical policy, health care service contract, health maintenance organization subscriber contract, or plan provided by any other benefit arrangement. The term does not include accident only, credit, dental only, vision only, medicare supplement, or disability income insurance coverage issued as a supplement to liability insurance, workers' compensation or similar insurance, or automobile medical payment insurance.

(7) "Preexisting condition" means a condition that would have caused an ordinarily prudent person to seek medical advice, diagnosis, care, or treatment immediately preceding the effective date of coverage or a condition for which medical advice, diagnosis, care, or treatment was recommended or received during the six months immediately preceding the effective date of coverage, or a pregnancy existing on the effective date of coverage.

(8) "Rating period" means the twelve-month period for which premium rates established by a carrier are presumed to be in effect.

(9) "Employer" means a person, firm, corporation, partnership, or association that is actively engaged in business that, on at least fifty percent of its working days during the preceding calendar quarter, employed eligible individuals, the majority of whom were employed within Washington state.

(10) "Uniform benefit package" means the uniform, appropriate, confidentially provided, and affordable set of personal health services to be made available to enrollees by certified health plans.

NEW SECTION. Sec. 203. SCOPE AND APPLICABILITY. Except for health benefit plans offered under chapter 48.-- RCW (sections 101 through 113 and 609 of this act), the provisions of this chapter shall apply to: (1) All health insurance benefits offered to individuals and employers in Washington state by state-regulated insurance companies under chapter 48.20 or 48.21 RCW, health services contractors under chapter 48.44 RCW, or health maintenance organizations under chapter 48.46 RCW, and (2) after July 1, 2000, all health benefit plans offered to residents of the state of Washington.

NEW SECTION. Sec. 204. GENERAL REQUIRED PRACTICES IN THE EMPLOYER AND INDIVIDUAL HEALTH BENEFIT PLAN MARKET. Health benefit plans subject to the provisions of this chapter:

(1) Shall not deny, exclude, or limit benefits for a covered individual for losses incurred more than six months following the effective date of the eligible individual's coverage due to a preexisting condition.

(2) Shall not modify, decrease, exclude, or restrict benefits through riders, conditions, restrictions, endorsements, or otherwise, on the basis of sex, age, or health status or health condition of the eligible individual.

(3) Shall not modify, decrease, or restrict coverage through riders, conditions, restrictions, endorsements, or otherwise, on the basis of category of business trade, employment skill, or vocation or profession of the eligible individual.

(4) Entities offering health benefit plans shall:

(a) Assume the full financial risk of providing the health benefit plan to all enrollees;

(b) Determine and adjust annual premium rates based on a community basis using the entire state as the community pool;

(d) Require that employers:

(i) Enroll at least eighty percent of individuals in the employer's group;

(ii) Pay between fifty and ninety percent of premiums on behalf of employees enrolled in the health benefit plan; and

(iii) Require point of service cost-sharing as established by the cooperative under chapter 48.-- RCW (sections 101 through 113 and 609 of this act);

(e) Adjust premium rates for a rating period based upon the average of actual or expected variation in claims costs or actual or expected variation in the health status of the state community pool;

(f) Comply with premium growth rate targets prescribed under chapter 48.-- RCW (sections 101 through 113 and 609 of this act); and

(g) Provide data as required by the health data, quality assurance, and cost control council under chapter 70.170 RCW.

NEW SECTION. Sec. 205. CERTIFICATION OF HEALTH BENEFIT PLANS REQUIRED. (1) Effective January 1, 1996, all health benefit plans subject to the provisions of this chapter must be certified by the board to offer the entire set of health services in the uniform benefit package if the plans offer any health services included in the uniform benefit package.

(2) The board shall certify that the carrier provides the entire uniform benefit package through managed care providers, abides by enrollee cost-sharing requirements prescribed in chapter 48.-- RCW (sections 101 through 113 and 609 of this act), and has paid a certification fee as established in rule by the board.

(3) Nothing in this chapter shall prohibit carriers from offering supplemental plans that include services not provided in the uniform benefit package.

NEW SECTION. Sec. 206. DUTIES OF THE INSURANCE COMMISSIONER. The commissioner shall adopt rules to implement sections 201 through 204 of this act.

Sec. 207. RCW 48.21.010 and 1992 c 226 s 2 are each amended to read as follows:

Group disability insurance is that form of disability insurance, including stop loss insurance as defined in RCW 48.11.030, provided by a master policy issued to an employer, to a trustee appointed by an employer or employers, or to an association of employers formed for purposes other than obtaining such insurance, except as authorized in chapter 48.-- RCW (sections 101 through 113 and 609 of this act), covering, with or without their dependents, the employees, or specified categories of the employees, of such employers or their subsidiaries or affiliates, or issued to a labor union, or to an association of employees formed for purposes other than obtaining such insurance, covering, with or without their dependents, the members, or specified categories of the members, of the labor union or association, or issued pursuant to RCW 48.21.030. Group disability insurance shall also include such other groups as qualify for group life insurance under the provisions of this code.

Sec. 208. RCW 48.21.050 and 1947 c 79 s .21.05 are each amended to read as follows:

Except as provided for in chapter 48.-- RCW (sections 101 through 113 and 609 of this act) and chapter 48.-- RCW (sections 201 through 206 of this act), every policy of group or blanket disability insurance shall contain in substance the provisions as set forth in RCW 48.21.060 to 48.21.090, inclusive, or provisions which in the opinion of the commissioner are more favorable to the individuals insured, or at least as favorable to such individuals and more favorable to the policyholder. No such policy of group or blanket disability insurance shall contain any provision relative to notice or proof of loss, or to the time for paying benefits, or to the time within which suit may be brought upon the policy, which in the opinion of the commissioner is less favorable to the individuals insured than would be permitted by the standard provisions required for individual disability insurance policies.

Sec. 209. RCW 48.30.300 and 1975-'76 2nd ex.s. c 119 s 7 are each amended to read as follows:

No person or entity engaged in the business of insurance in this state shall refuse to issue any contract of insurance or cancel or decline to renew such contract because of the sex or marital status, or the presence of any sensory, mental, or physical handicap of the insured or prospective insured. The amount of benefits payable, or any term, rate, condition, or type of coverage shall not be restricted, modified, excluded, increased or reduced on the basis of the sex or marital status, or be restricted, modified, excluded or reduced on the basis of the presence of any sensory, mental, or physical handicap of the insured or prospective insured. Except as provided for in chapter 48.-- RCW (sections 101 through 113 and 609 of this act) and chapter 48.-- RCW (sections 201 through 206 of this act), these provisions shall not prohibit fair discrimination on the basis of sex, or marital status, or the presence of any sensory, mental, or physical handicap when bona fide statistical differences in risk or exposure have been substantiated.

Sec. 210. RCW 48.44.220 and 1983 c 154 s 4 are each amended to read as follows:

No health care service contractor shall deny coverage to any person solely on account of race, religion, national origin, or the presence of any sensory, mental, or physical handicap. Except as provided for in chapter 48.-- RCW (sections 101 through 113 and 609 of this act) and chapter 48.-- RCW (sections 201 through 206 of this act), nothing in this section shall be construed as limiting a health care service contractor's authority to deny or otherwise limit coverage to a person when the person because of a medical condition does not meet the essential eligibility requirements established by the health care service contractor for purposes of determining coverage for any person.

No health care service contractor shall refuse to provide reimbursement or indemnity to any person for covered health care services for reasons that the health care services were provided by a holder of a license under chapter 18.22 RCW.

Sec. 211. RCW 48.46.370 and 1983 c 106 s 15 are each amended to read as follows:

No health maintenance organization may deny coverage to a person solely on account of the presence of any sensory, mental, or physical handicap. Except as provided for in chapter 48.-- RCW (sections 101 through 113 and 609 of this act) and chapter 48.-- RCW (sections 201 through 206 of this act), nothing in this section may be construed as limiting a health maintenance organization's authority to deny or otherwise limit coverage to a person when the person because of a medical condition does not meet the essential eligibility requirements established by the health maintenance organization for purposes of determining coverage for any person.

NEW SECTION. Sec. 212. CODIFICATION DIRECTIONS. Sections 201 through 206 of this act shall constitute a new chapter in Title 48 RCW.

NEW SECTION. Sec. 213. IMPLEMENTATION. Sections 201 through 206 of this act are effective for health benefit plans issued or renewed after July 1, 1994.

PART III - STATE EMPLOYEE AND K-12 HEALTH BENEFITS

A. STEP 1 REFORMS

Sec. 301. 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 to~~)), study state-purchased health care programs in order to maximize cost containment in these programs while ensuring access to quality health care, and model state initiatives, joint purchasing strategies, and efficient administration. The authority's duties include, but are not limited to, the following:

(1) To administer a health care benefit program for 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) Implement strategies to promote managed competition among the state employees' benefit plans by July 1, 1993, including but not limited to:

(a) Standardizing the health benefit package;

(b) Soliciting competitive bids for the benefit package;

(c) Limiting the state's premium contribution to a percent of the lowest priced sealed bid premium of a qualified plan within a geographical area;

(d) Ensuring access to quality health services;

(e) Monitoring the impact of the activities authorized under this subsection with regards to: Efficiencies in health care delivery, cost shifting to enrollees, access to and choice of managed care plans state-wide, and quality of health services. The authority shall also evaluate the benefit of maintaining a self-insured plan to serve as a benchmark to measure the effectiveness of competition among managed care plans. The authority shall submit a report on its findings to the fiscal and health policy committees of the legislature by January 1, 1996.

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

((~~(4)~~)) (5) To provide information and technical and administrative assistance to the board;

((~~(5)~~)) (6) 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, consistent with premium contribution limits set forth by the cooperative board for approved groups as outlined in RCW 41.05.050;

((~~(6)~~)) (7) To appoint a health care policy technical advisory committee as required by RCW 41.05.150; and

((~~(7)~~)) (8) To ((~~promulgate and~~)) adopt rules consistent with this chapter as described in RCW 41.05.160.

Sec. 302. 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;

(f) Minimum standards for health benefit carriers; and

(g) Minimum scope and content of standardized health benefit plans to be offered to enrollees participating in the state employees benefit board plans.

(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 majority 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.

NEW SECTION. Sec. 303. A new section is added to chapter 41.05 RCW to read as follows:

MANAGED CARE ENROLLMENT TARGETS. By July 1, 1994, at least sixty-five percent of employees shall be enrolled in managed health care plans and by July 1, 1995, at least seventy-five percent of employees shall be enrolled in managed health care plans.

NEW SECTION. Sec. 304. EFFECTIVE DATE. Sections 301 through 303 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately.

NEW SECTION. Sec. 305. EXPIRATION DATE. The 1993 amendments to RCW 41.05.021 and 41.05.065 made by sections 301 and 302 of this act shall expire on January 1, 1996.

B. STEP 2 REFORMS

Sec. 306. RCW 41.05.006 and 1988 c 107 s 2 are each amended to read as follows:

(1) The legislature recognizes that (a) the state is a major purchaser of health care services, (b) the increasing costs of such health care services are posing and will continue to pose a great financial burden on the state, (c) it is the state's policy, consistent with the best interests of the state, to provide comprehensive health care as an employer, to state employees and officials and their dependents and to those who are dependent on the state for necessary medical care, and (d) it is imperative that the state begin to develop effective and efficient health care delivery systems and strategies for procuring health care services in order for the state to continue to purchase the most comprehensive health care possible.

(2) It is therefore the purpose of this chapter to establish the Washington state health care authority whose purpose shall be to (a) ((~~develop health care benefit programs, funded to the fullest extent possible by the employer,~~)) purchase health care benefits that provide comprehensive, high quality, and cost-efficiently delivered health care for eligible state employees, officials, and their dependents, and (b) ((study all state-purchased health care, alternative health care delivery systems, and strategies for the procurement of health care services and make recommendations aimed at minimizing the financial burden which health care poses on the state, its employees, and its charges, while at the same time allowing the state to provide the most comprehensive health care possible)) adopt strategies with the aim of reducing health care costs to the state and employees through increased enrollment in managed health care plans, employee cost-sharing, the competitive purchasing of health care benefits, and the enactment of broader health care reforms.

Sec. 307. 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~~)) Washington health insurance purchasing cooperative, 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 48.20 or 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) "Cooperative board" means the Washington health care purchasing cooperative board as established under chapter 48.-- RCW (sections 101 through 113 and 609 of this act).

Sec. 308. 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 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:

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

(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, consistent with premium contribution limits set forth by the cooperative board 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 promulgate and adopt rules consistent with this chapter as described in RCW 41.05.160.

Sec. 309. RCW 41.05.050 and 1988 c 107 s 18 are each amended to read as follows:

(1) Every department, division, or separate agency of state government, and such county, municipal, or other political subdivisions as are covered by this chapter, shall provide contributions to insurance and health care plans for its employees and their dependents, the content of such plans to be determined by the authority. Contributions, paid by the county, the municipality, or other political subdivision for their employees, shall include an amount determined by the authority to pay such administrative expenses of the authority as are necessary to administer the plans for employees of those groups. All such contributions will be paid into the state employees' health insurance account.

(2) The contributions of any department, division, or separate agency of the state government, and such county, municipal, or other political subdivisions as are covered by this chapter, shall be set by the authority, subject to the approval of the governor for availability of funds as specifically appropriated by the legislature for that purpose. However, insurance and health care contributions for ferry employees shall be governed by RCW 47.64.270.

(((3) The administrator with the assistance of the state employees' benefits board shall survey private industry and public employers in the state of Washington to determine the average employer contribution for group insurance programs under the jurisdiction of the authority. Such survey shall be conducted during each even-numbered year but may be conducted more frequently. The survey shall be reported to the authority for its use in setting the amount of the recommended employer contribution to the employee insurance benefit program covered by this chapter. The authority shall transmit a recommendation for the amount of the employer contribution to the governor and the director of financial management for inclusion in the proposed budgets submitted to the legislature.))

Sec. 310. 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 nonhealth insurance benefit plans for state employees and to approve the cooperative board adopted certified health plans for state 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. 311. RCW 41.05.065 and 1988 c 107 s 8 are each amended to read as follows:

(2) With the exception of health benefit plans, 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;~~

~~(e) Effective coordination of benefits~~)). The board shall adopt employee health benefit plans that are certified by the cooperative board to provide the uniform benefit package under chapter 48.-- RCW (sections 101 through 113 and 609 of this act).

(3) The board shall design benefits and determine the terms and conditions of employee participation and coverage, including establishment of eligibility criteria, which, when appropriate are consistent with terms of participation developed by the cooperative board under chapter 48.-- RCW (sections 101 through 113 and 609 of this act).

(4) The board ((~~may~~)) shall authorize premium contributions for an employee and the employee's dependents consistent with those adopted by the cooperative board under chapter 48.-- RCW (sections 101 through 113 and 609 of this act). ((~~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~~)) certified health plans adopted 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~~)) adopt rules setting forth criteria by which it shall evaluate the plans.

Sec. 312. 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 and health benefit plans adopted 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 purchase employee health benefit plans through the Washington health insurance purchasing cooperative in accordance with terms set forth by the cooperative board and under chapter 48.-- RCW (sections 101 through 113 and 609 of this act).

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

((~~(4)~~)) (5) The administrator shall centralize the enrollment files for all employee health plans and develop enrollment demographics on a plan-specific basis.

((~~(5)~~)) (6) 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)~~)) (7) 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. 313. 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. After January 1, 1996, the authorization to self-insure for health benefit plans shall result in coverage to no more than twenty-five percent of enrollees under jurisdiction of the authority. The health benefits offered under this authorization must meet requirements as a certified plan under chapter 48.-- RCW (sections 101 through 113 and 609 of this act). 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. Reserves established by the authority 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) Any savings realized as a result of a program created under this section shall not be used to increase benefits unless such use is authorized by statute.

(3) 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) 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) 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.

Sec. 314. RCW 28A.400.350 and 1990 1st ex.s. c 11 s 3 and 1990 c 74 s 1 are each reenacted and amended to read as follows:

(1) The board of directors of any of the state's school districts may make available liability, life, health, health care, accident, disability and salary protection or insurance or any one of, or a combination of the enumerated types of insurance, or any other type of insurance or protection, for the members of the boards of directors, the students, and employees of the school district, and their dependents. Except for health care benefits, such coverage may be provided by contracts with private carriers((~~, with the state health care authority after July 1, 1990, pursuant to the approval of the authority administrator,~~)) or through self-insurance or self-funding pursuant to chapter 48.62 RCW, or in any other manner authorized by law. Effective after July 1, 1996, all health benefit plans shall be obtained through the state health care authority.

(2) Whenever funds are available for these purposes the board of directors of the school district may contribute all or a part of the cost of such protection or insurance for the employees of their respective school districts and their dependents. The premiums on such liability insurance shall be borne by the school district.

After October 1, 1990, school districts may not contribute to any employee protection or insurance other than liability insurance unless the district's employee benefit plan conforms to RCW 28A.400.275 and 28A.400.280.

(3) For school board members and students, the premiums due on such protection or insurance shall be borne by the assenting school board member or student: PROVIDED, That the school district may contribute all or part of the costs, including the premiums, of life, health, health care, accident or disability insurance which shall be offered to all students participating in interschool activities on the behalf of or as representative of their school or school district. The school district board of directors may require any student participating in extracurricular interschool activities to, as a condition of participation, document evidence of insurance or purchase insurance that will provide adequate coverage, as determined by the school district board of directors, for medical expenses incurred as a result of injury sustained while participating in the extracurricular activity. In establishing such a requirement, the district shall adopt regulations for waiving or reducing the premiums of such coverage as may be offered through the school district to students participating in extracurricular activities, for those students whose families, by reason of their low income, would have difficulty paying the entire amount of such insurance premiums. The district board shall adopt regulations for waiving or reducing the insurance coverage requirements for low-income students in order to assure such students are not prohibited from participating in extracurricular interschool activities.

(4) All contracts for insurance or protection written to take advantage of the provisions of this section shall provide that the beneficiaries of such contracts may utilize on an equal participation basis the services of those practitioners licensed pursuant to chapters 18.22, 18.25, 18.53, 18.57, and 18.71 RCW.

NEW SECTION. Sec. 315. EFFECTIVE DATE. Sections 306 through 314 of this act shall take effect January 1, 1996.

PART IV - HEALTH DATA

Sec. 401. RCW 70.170.010 and 1989 1st ex.s. c 9 s 501 are each amended to read as follows:

(1) The legislature finds and declares that there is a need for health care information that helps the general public understand health care issues and how they can be better consumers and that is useful to purchasers, payers, and providers in making health care choices ((~~and negotiating payments~~)). The legislature further finds that there is a need for a comprehensive health data system that will permit purchasers, payers, consumers, and government to assess and monitor the quality of health care services, monitor the costs of health care and aid in making health care purchasing decisions. It is the purpose and intent of this chapter to establish a ((~~hospital~~)) health care data collection, storage, and retrieval system which supports these data needs and which also provides public officials and others engaged in the development of state health policy the information necessary for the analysis of health care issues.

(2) The legislature finds that rising health care costs and access to health care services are of vital concern to the people of this state. It is, therefore, essential that strategies be explored that moderate health care costs and promote access to health care services.

(3) The legislature further finds that access to health care is among the state's goals and the provision of such care should be among the purposes of health care providers and facilities. Therefore, the legislature intends that charity care requirements and related enforcement provisions for hospitals be explicitly established.

(4) The lack of reliable statistical information about the delivery of charity care is a particular concern that should be addressed. It is ((~~the~~)) a purpose and intent of this chapter to require hospitals to provide, and report to the state, charity care to persons with acute care needs, and to have a state agency both monitor and report on the relative commitment of hospitals to the delivery of charity care services, as well as the relative commitment of public and private purchasers or payers to charity care funding.

Sec. 402. RCW 70.170.020 and 1989 1st ex.s. c 9 s 502 are each amended to read as follows:

As used in this chapter:

(1) "Council" means the health care ((~~access~~)) data, quality assurance, and cost control council created by this chapter.

(2) "Department" means department of health.

(3) "Hospital" means any health care institution which is required to qualify for a license under RCW 70.41.020(2); or as a psychiatric hospital under chapter 71.12 RCW.

(4) "Secretary" means secretary of health.

(5) "Charity care" means necessary hospital health care rendered to indigent persons, to the extent that the persons are unable to pay for the care or to pay deductibles or co-insurance amounts required by a third-party payer, as determined by the department.

(6) "Sliding fee schedule" means a hospital-determined, publicly available schedule of discounts to charges for persons deemed eligible for charity care; such schedules shall be established after consideration of guidelines developed by the department.

(7) "Special studies" means studies which have not been funded through the department's biennial or other legislative appropriations.

(8) "Health care" means all care, goods, technologies, or services provided to persons by providers of care intended to ascertain, improve, restore, or maintain the health and well-being of such persons. It specifically includes but is not limited to, the care, goods, technologies, or services of health care practitioners, programs, facilities, or other health care entities regulated by Title 18 or 70 RCW.

(9) "Providers" means all health care practitioners, programs, facilities, or other health care entities regulated under Title 18 or 70 RCW.

(10) "Health care payers" includes all state health care payment programs; all disability insurers, health care service contractors, and health maintenance organizations subject to the jurisdiction of the insurance commissioner under Title 48 RCW; all providers, carriers, and others subject to the provisions of chapter 48.-- RCW (sections 101 through 113 and 609 of this act), and all employers who provide health care benefits to employees through self-insurance.

(11) "Reporters" means providers and health care payers.

Sec. 403. RCW 70.170.030 and 1989 1st ex.s. c 9 s 503 are each amended to read as follows:

(1) There is created the health care ((~~access~~)) data, quality assurance, and cost control council within the department of health consisting of the following: The director of the department of labor and industries; the administrator of the health care authority; the secretary of social and health services; the insurance commissioner; the administrator of the ((~~basic health plan~~)) Washington health insurance purchasing cooperative; a person representing the governor on matters of health policy; the secretary of health; and ((one member from the public-at-large to be selected by the governor who shall represent individual consumers of health care. The public member shall not have any fiduciary obligation to any health care facility or any financial interest in the provision of health care services)) six public members. Public members shall be appointed by the governor. In selecting public members, the governor shall assure that the council collectively has the technical expertise necessary to fulfill the purposes of this chapter and also reflects the perspectives of the users and reporters. Public members shall serve five-year terms. The governor shall designate three of the initial appointees to serve three-year terms in order to provide staggered terms. Thereafter all public members shall serve five-year terms. All persons appointed to fill vacancies shall be appointed in the same manner as the persons they are replacing. Members employed by the state shall serve without pay and participation in the council's work shall be deemed performance of their employment. The public member shall be compensated in accordance with RCW 43.03.240 and shall be reimbursed for related travel expenses in accordance with RCW 43.03.050 and 43.03.060.

(2) A member of the council designated by the governor shall serve as chairman. The council shall elect a vice-chairman from its members biennially. Meetings of the council shall be held as frequently as its duties require. The council shall keep minutes of its meetings and adopt procedures for the governing of its meetings, minutes, and transactions.

(3) ((~~Four~~)) Six members shall constitute a quorum((~~, but a vacancy on the council shall not impair its power to act~~)). No action of the council shall be effective unless four members concur therein.

Sec. 404. RCW 70.170.040 and 1989 1st ex.s. c 9 s 504 are each amended to read as follows:

(1) In order to advise the department and the board of health in preparing executive request legislation and the state health report according to RCW 43.20.050, and, in order to represent the public interest, the council shall monitor and evaluate hospital and related health care services consistent with RCW 70.170.010. In fulfilling its responsibilities, the council shall have complete access to all the department's data and information systems.

(2) The council shall advise the department on the ((~~hospital~~)) health care data collection system required by this chapter.

(3) The council, in addition to participation in the development of the state health report, shall, from time to time, report to the governor and the appropriate committees of the legislature with proposed changes in hospital and related health care services, consistent with the findings in RCW 70.170.010.

((~~(4) The department may undertake, with advice from the council and within available funds, the following studies:~~

~~(a) Recommendations regarding health care cost containment, and the assurance of access and maintenance of adequate standards of care;~~

~~(b) Analysis of the effects of various payment methods on health care access and costs;~~

~~(c) The utility of the certificate of need program and related health planning process;~~

~~(d) Methods of permitting the inclusion of advance medical technology on the health care system, while controlling inappropriate use;~~

~~(e) The appropriateness of allocation of health care services;~~

~~(f) Professional liabilities on health care access and costs, to include:~~

~~(i) Quantification of the financial effects of professional liability on health care reimbursement;~~

(ii) Determination of the effects, if any, of nonmonetary factors upon the availability of, and access to, appropriate and necessary basic health services such as, but not limited to, prenatal and obstetrical care; and

~~(iii) Recommendation of proposals that would mitigate cost and access impacts associated with professional liability.~~

~~The department shall report its findings and recommendations to the governor and the appropriate committees of the legislature not later than July 1, 1991.~~))

Sec. 405. RCW 70.170.050 and 1989 1st ex.s. c 9 s 505 are each amended to read as follows:

The department shall have the authority to respond to requests ((~~of others~~)) for data, special studies, or analysis. The department may require ((~~such sponsors to pay~~)) payment of any or all of the reasonable costs associated with such requests that might be approved, but in no event may costs directly associated with any such special study be charged against the funds generated by the assessment authorized under RCW 70.170.080.

Sec. 406. RCW 70.170.080 and 1991 sp.s. c 13 s 71 are each amended to read as follows:

The basic expenses for the ((~~hospital~~)) data collection and reporting activities of this chapter shall be financed by an assessment ((~~against hospitals~~)) upon reporters of no more than four one-hundredths of one percent of ((each hospital's gross operating costs, to be levied and collected from and after that date, upon which the similar assessment levied under chapter 70.39 RCW is terminated, for the provision of hospital services for its last fiscal year ending on or before June 30th of the preceding calendar year)) the gross billed amount for the service that is the subject matter of the data. Budgetary requirements in excess of that limit must be financed by a general fund appropriation by the legislature. All moneys collected under this section shall be deposited by the state treasurer in the ((~~hospital~~)) health data collection account which is hereby created in the state treasury. This account is the successor to the hospital data collection account, the balance of which shall be placed in the health care data collection account. The department may also charge, receive, and dispense funds or authorize any contractor or outside sponsor to charge for and reimburse the costs associated with special studies as specified in RCW 70.170.050.

Any amounts raised by the collection of assessments from hospitals provided for in this section which are not required to meet appropriations in the budget act for the current fiscal year shall be available to the department in succeeding years.

Sec. 407. RCW 70.170.100 and 1990 c 269 s 12 are each amended to read as follows:

(1) The department, in consultation with the council, is responsible for the development, implementation, and custody of a state-wide ((~~hospital~~)) health care data system. As part of the design stage for development of the system, the ((~~department~~)) council shall undertake a needs assessment of the types of, and format for, ((~~hospital~~)) health care data needed by consumers, purchasers, health care payers, ((~~hospitals~~)) providers, the Washington health insurance purchasing cooperative, and state government as consistent with the intent of this chapter and chapter 48.-- RCW (sections 101 through 113 and 609 of this act). The ((~~department~~)) council shall ((~~identify~~)) recommend to the department a set of ((~~hospital~~)) health care data elements and report specifications which satisfy these needs. The ((~~council shall review the design of the data system and may direct the department to~~)) department may contract with a private vendor ((~~for assistance in the design of the data system~~)) in the state of Washington for work to be performed under this section. The data elements, specifications, and other ((~~design~~)) distinguishing features of this data system shall be made available for public review and comment and shall be published, with comments, as the department's ((~~first~~)) data plan by January 1, ((~~1990~~)) 1994.

(2) ((Subsequent to the initial development of the data system as published as the department's first data plan, revisions to the data system shall be considered through the department's development of a biennial data plan, as proposed to, and funded by, the legislature through the biennial appropriations process. Costs of data activities outside of these data plans except for special studies shall be funded through legislative appropriations.

~~(3)~~)) In designing the state-wide ((~~hospital~~)) health care data system and any data plans, the council and the department shall identify ((~~hospital~~)) health care data elements relating to ((~~both hospital finances~~)) health care costs, public health services, the quality of health care services, data needs necessary to implement provisions of chapter 48.-- RCW (sections 101 through 113 and 609 of this act) and ((~~the~~)) use of health care services by ((~~patients~~)) consumers. Data elements ((~~relating to hospital finances~~)) shall be reported ((~~by hospitals~~)) as the department directs by reporters in conformance with a uniform ((~~system of~~)) reporting ((~~as specified by the department and shall~~)) system established by the department, which shall be adopted by all reporters. In the case of hospitals this includes data elements identifying each hospital's revenues, expenses, contractual allowances, charity care, bad debt, other income, total units of inpatient and outpatient services, and other financial, service utilization, and quality-related information reasonably necessary to fulfill the purposes of this chapter, for hospital activities as a whole and, as feasible and appropriate, for specified classes of hospital purchasers and payers. Data elements relating to use of hospital services by patients shall, at least initially, be the same as those currently compiled by hospitals through inpatient discharge abstracts ((~~and reported to the Washington state hospital commission~~)). The department shall permit reporting by electronic transmission or hard copy as is practical and economical to reporters.

((~~(4)~~)) (3) The state-wide ((~~hospital~~)) health care data system shall be uniform in its identification of reporting requirements for ((~~hospitals~~)) reporters across the state to the extent that such uniformity is ((~~necessary~~)) useful to fulfill the purposes of this chapter. Data reporting requirements may reflect differences ((~~in hospital size; urban or rural location; scope, type, and method of providing service; financial structure; or other pertinent distinguishing factors~~)) that involve pertinent distinguishing features as recommended by the council and approved by the department in rule. So far as ((~~possible~~)) is practical, the data system shall be coordinated with any requirements of the trauma care data registry as authorized in RCW 70.168.090, the federal department of health and human services in its administration of the medicare program, ((~~and~~)) the state in its role of gathering public health statistics, or any other payer program of consequence, so as to minimize any unduly burdensome reporting requirements imposed on ((~~hospitals~~)) reporters.

((~~(5)~~)) (4) In identifying financial reporting requirements under the state-wide ((~~hospital~~)) health care data system, the department may require both annual reports and condensed quarterly reports, from reporters so as to achieve both accuracy and timeliness in reporting, but shall craft such requirements with due regard of the data reporting burdens of reporters.

(((6) In designing the initial state-wide hospital data system as published in the department's first data plan, the department shall review all existing systems of hospital financial and utilization reporting used in this state to determine their usefulness for the purposes of this chapter, including their potential usefulness as revised or simplified.

(7) Until such time as the state-wide hospital data system and first data plan are developed and implemented and hospitals are able to comply with reporting requirements, the department shall require hospitals to continue to submit the hospital financial and patient discharge information previously required to be submitted to the Washington state hospital commission. Upon publication of the first data plan, hospitals shall have a reasonable period of time to comply with any new reporting requirements and, even in the event that new reporting requirements differ greatly from past requirements, shall comply within two years of July 1, 1989.

~~(8)~~)) (5) The ((~~hospital~~)) health care data collected ((~~and~~)), maintained, and studied by the department shall be available for retrieval, unless deemed confidential, in original or processed form to public and private requestors within a reasonable period of time after the date of request. The cost of retrieving data for state officials and agencies shall be funded through the state general appropriation. The cost of retrieving data for individuals and organizations engaged in research or private use of data shall be funded by a fee schedule developed by the department which reflects the direct cost of retrieving the data or study in the requested form.

(6) All persons subject to this chapter, including all state agencies, shall comply with requirements established by rule in the acquisition of data. The department shall each December 1 of even-numbered years report to the senate and house of representatives policy committees on health care on the status of the data system, the level of participation by payer and provider groups, and recommended statutory changes necessary to meet the objectives established in this chapter.

(7) The department shall establish in rule confidentiality standards to safeguard the information collected under this chapter from inappropriate use or release.

Sec. 408. RCW 70.170.110 and 1989 1st ex.s. c 9 s 511 are each amended to read as follows:

The department shall provide, or may contract with a private ((~~entity to provide, hospital analyses and reports~~)) vendor in the state of Washington to provide any studies or reports it chooses to conduct consistent with the purposes of this chapter. ((Prior to release, the department shall provide affected hospitals with an opportunity to review and comment on reports which identify individual hospital data with respect to accuracy and completeness, and otherwise shall focus on aggregate reports of hospital performance.)) The department may perform such studies or any other studies consistent with the purposes of this chapter. These reports ((~~shall~~)) may include:

(1) Consumer guides on purchasing ((~~hospital care services and~~)) or consuming health care and publications providing verifiable and useful comparative information to ((~~consumers on hospitals and hospital~~)) the public on health care services and the quality of health care providers;

(2) Reports for use by classes of purchasers, health care payers, and providers as specified for content and format in the state-wide data system and data plan; ((~~and~~))

(3) Reports on relevant ((~~hospital~~)) health care policy ((~~issues~~)) including the distribution of hospital charity care obligations among hospitals; absolute and relative rankings of Washington and other states, regions, and the nation with respect to expenses, net revenues, and other key indicators; ((~~hospital~~)) provider efficiencies; and the effect of medicare, medicaid, and other public health care programs on rates paid by other purchasers of ((~~hospital~~)) health care;

(4) Any other studies deemed useful to assist the public in understanding the prudent and cost-effective use of the health care delivery system;

(5) Study and report each December 1 to the health policy and fiscal committees of the legislature and the governor on the number of uninsured residents in the state. The report shall provide enough detail to permit the legislature and the governor to monitor the effectiveness of the state's efforts to increase the availability of health insurance to state residents and to identify significant populations or groups who remain uninsured; and

(6) Any other studies necessary to fulfill the legislative intent of this chapter and the provisions of chapter 48.-- RCW (sections 101 through 113 and 609 of this act).

NEW SECTION. Sec. 409. DEPARTMENT STUDY. By December 1, 1994, the department of health shall provide a baseline report on expenditures, utilization, and populations covered by publicly funded long-term care services for senior citizens and individuals with functional disabilities including developmental disabilities, physical disabilities, and mental illness. The report shall include cost benefit analysis of services designed to support persons in ways that prevent disease and injury and promote and restore health. The report should identify those services that support individuals and their families in ways that reflect consumer satisfaction and are more cost-effective and efficacious.

NEW SECTION. Sec. 410. EMERGENCY CLAUSE. Sections 401 through 409 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately.

PART V - PROVIDER CONFLICT OF FINANCIAL INTEREST

NEW SECTION. Sec. 501. LEGISLATIVE INTENT. The legislature finds that there is a growing practice of health care professionals having financial interest in laboratory and other services. The legislature further finds that such practices may result in overutilization of health care services and excessive costs to individuals, third-party payers, and the health care system.

NEW SECTION. Sec. 502. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Department" means the department of health.

(2) "Health care laboratory service" means a business, firm, corporation, or entity that provides testing or diagnosis of human disease or dysfunction and includes, but is not limited to, bioanalytical, laboratory, radiological, and diagnostic imagery services.

(3) "Practitioner" means a physician licensed under chapter 18.57 or 18.71 RCW or a chiropractor licensed under chapter 18.25 RCW.

NEW SECTION. Sec. 503. (1) Except when authorized under subsection (2) of this section, a practitioner shall not refer a patient to a health care laboratory service in which the practitioner has any financial interest.

(2) A practitioner may refer a patient to a health care laboratory service in which the practitioner has a financial interest if the department has determined by rule that:

(a) The service is located in a rural area, as defined by the department, and provides laboratory services primarily to patients living in the rural area;

(b) Alternative health care laboratory services are not available in the rural area;

(c) The service is part of a managed care system, as determined by the department, and the patient is an enrollee in the managed care system; or

(d) Prohibiting the referral of patients will jeopardize patient care because of delays in treatment.

NEW SECTION. Sec. 504. A violation of this chapter is a gross misdemeanor and is unprofessional conduct and subject to the provisions of chapter 18.130 RCW.

NEW SECTION. Sec. 505. CODIFICATION DIRECTIONS. Sections 501 through 504 of this act shall constitute a new chapter in Title 19 RCW.

NEW SECTION. Sec. 506. EMERGENCY CLAUSE. Sections 501 through 504 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately.

PART VI - UNIFORM ELECTRONIC CLAIMS PROCESSING

NEW SECTION. Sec. 601. A new section is added to chapter 48.20 RCW to read as follows:

APPLICATION TO DISABILITY INSURANCE POLICIES. (1) After July 1, 1994, all disability insurance policies that provide coverage for hospital or medical expenses shall use for all billing purposes in electronic format either the health care financing administration (HCFA) 1500 form, or its successor, or the uniform billing (UB) 82 form, or its successor. For billing purposes, this subsection does not apply to pharmacists, dentists, the provision of eyeglasses, transportation services, or vocational services.