AN ACT Relating to state employees' insurance; amending RCW 41.05.025, 41.05.040, and 43.84.090; and declaring an emergency.

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

Sec. 1. Section 2, chapter 136, Laws of 1977 ex. sess. as last amended by section 68, chapter 287, Laws of 1984 and RCW 41.05.025 are each amended to read as follows:

(1) There is hereby created a state employees' insurance board to be composed of the members of the present board holding office on the day prior to July 1, 1977, which such members shall serve until the expiration of the period of time of the term for which they were appointed and until their successors are appointed and qualified. Thereafter the board shall be composed as follows: The governor or the governor's designee; one administrative officer representing all of higher education to be appointed by the governor; two higher education faculty members to be appointed by the governor; the director of the department of personnel who shall act as trustee; one representative of an employee association certified as an exclusive representative of at least one bargaining unit of classified employees and one representative of an employee union certified as exclusive representative of at least one bargaining unit of classified employees, both to be appointed by the governor; one person who is retired and is covered by a program under the jurisdiction of the board, to be appointed by the governor; one member of the senate who shall be appointed by the president of the senate; and one member of the house of representatives who shall be appointed by the speaker of the house. The terms of office of the administrative officer representing higher education, the two higher education faculty members, the representative of an employee association, the retired person, and the representative of an employee union shall be for four years: PROVIDED, That the first term of one faculty member and one employee association or union representative member shall be for three years. Meetings of the board shall be at the call of the director of personnel. The board shall prescribe rules for the conduct of its business and shall elect a chairman and vice chairman annually. Members of the board shall be compensated in accordance with RCW 43.03.240 and shall be paid for their travel expenses while on official business in accordance with RCW 43.03.050 and 43.03.060, and legislative members shall receive allowances provided for in RCW 44.04.120.

(2) The board shall study all matters connected with the providing of adequate health care coverage, life insurance, liability insurance, accidental death and dismemberment insurance, and disability income insurance or any one of, or a combination of, the enumerated types of insurance and health care plans 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. The board shall design benefits, devise specifications, analyze carrier responses to advertisements for bids, determine the terms and conditions of employee participation and coverage, and decide on the award of contracts which shall be signed by the trustee on behalf of the board: PROVIDED, That all contracts for insurance, health care plans, including panel medicine plans, or protection applying to employees covered by RCW 28B.10.660 and chapters 41.04 and 41.05 RCW shall provide that the beneficiaries of such insurance, health care plans, or protection may utilize 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: PROVIDED FURTHER, That the boards of trustees and boards of regents of the several institutions of higher education shall retain sole authority to provide liability insurance as provided in RCW 28B.10.660. The board shall from time to time review and amend such plans. Contracts for all plans shall be rebid and awarded at least every five years.

(3) The board shall develop and provide as a part of the employee insurance benefit program an employee health care benefit plan which may be provided through a contract or contracts with regularly constituted insurance carriers or health care service contractors as defined in chapter 48.44 RCW, and a plan to be provided by a panel medicine plan in its service area only when approved by the board. The board may but shall not be required to pay more for health benefits under a panel medicine plan than it would otherwise be required to pay for health benefits by a contract with a regularly constituted insurance carrier or health care service contractor in effect at the time the panel medicine plan is included in the employee health care benefit plan. Except for panel medicine plans, the board may but is not required to contract with more than one insurance carrier or health care service contractor to provide similar benefits: PROVIDED, That employees may choose participation in only one of the health care benefit plans sponsored by the board. Active employees, as defined in RCW 41.05.010(2), eligible for medicare benefits shall have the option of continuing participation in health care programs on the same basis as all other employees or participation in medicare supplemental programs as may be developed by the board. These health care benefit plans shall provide coverage for all officials and employees and their dependents without premium or subscription cost to the individual employees and officials, unless the board approves a panel medicine plan at a subscription rate in excess of the premium of the regularly constituted insurance carrier or health care service contractor, in which circumstances an employee contribution may be authorized at an amount equal to such excess. Rates for self pay segments of state employee groups will be developed from the experience of the entire group. Such self pay rates will be established based on a separate rate for the employee, the spouse, and children.

(4) The board shall review plans proposed by insurance carriers who 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.

(5) (a) The state employees' insurance board may self-fund or self-insure programs under its jurisdiction, except property and casualty insurance authorized under subsection (4) of this section. The board may contract for payment of claims or other administrative services including the purchase of excess loss liability insurance for programs under its jurisdiction. If programs under the jurisdiction of the board do not require the prepayment of reserves the board shall establish that such reserves be maintained for the payment of claims as are normally required for that method of providing that type of insurance. Reserves established by the board shall be held in respective separate trust accounts of the state employees' insurance fund as established by RCW 41.05.040 by the state treasurer.

(b) Group disability coverage provided as a self-insured program of the state employees' insurance board shall provide conversion rights in accordance with RCW 48.21.260.

(c) Group disability coverage provided as a self-insured program of the state employees' insurance board shall provide coverage as required by RCW 48.21.130, 48.21.140, 48.21.141, 48.21.142, 48.21.144, 48.21.146, 48.21.150, 48.21.155 and 48.21.180.

(d) Group disability coverage provided as a self-insured program of the state employees' insurance board shall conform with the requirements of RCW 48.21.200 (1) and (2).

(e) The state employees' insurance board shall keep or cause to be kept full and adequate accounts and records of the assets, obligations, transactions and affairs of any program created under this subsection (5).

(f) Members of the board shall be deemed to stand in a fiduciary relationship to the employees covered by any insurance program created under this subsection (5) and shall discharge the duties of their respective positions in good faith and with that diligence, care and skill which ordinary prudent persons would exercise under similar circumstances in like positions.

(6) The state employees' insurance board shall file an annual report of the financial condition, transactions and affairs of any program under the board's jurisdiction. The report shall also contain actuarial information regarding the adequacy of the reserves established for the type of insurance being offered. A copy of the annual report shall be filed with the speaker of the house of representatives, the president of the senate, and the office of the state auditor. The statement shall be signed by a member of the American Academy of Actuaries certifying that the actuarial amounts are computed in accordance with commonly accepted actuarial standards; and include all actuarial reserves and related statement items required for the sound operation of any employee benefits program.

Sec. 2. Section 4, chapter 39, Laws of 1970 ex. sess. as amended by section 3, chapter 136, Laws of 1977 ex. sess. and RCW 41.05.040 are each amended to read as follows:

(1) There is hereby created a fund within the state treasury, designated as the "state employees' insurance fund", to be used by the trustee as a revolving fund for the deposit of contributions, dividends, reserves, and refunds, ((~~and~~)) for payment of premiums for employee insurance benefit contracts entered into in accordance with instructions of the board, and for payments authorized by RCW 41.05.025(5) and 41.05.030(2). Moneys from the state employees' insurance fund shall be disbursed by the state treasurer by warrants on vouchers duly authorized by the trustee.

(2) The state treasurer and the state investment board may invest moneys in the state employees' insurance fund. All such investments shall be in accordance with RCW 43.84.080 or 43.84.150, whichever is applicable. The state employees' insurance board shall determine whether the state treasurer or the state investment board or both shall invest moneys in the state employees' insurance fund. Except as provided for in RCW 43.33A.160, one hundred percent of all earnings from these investments shall accrue directly to the state employees' insurance fund and the separate accounts which may be created under RCW 41.05.025.

Sec. 3. Section 43.84.090, chapter 8, Laws of 1965 as last amended by section 2, chapter 242, Laws of 1981 and RCW 43.84.090 are each amended to read as follows:

Except as provided in RCW 41.05.040, twenty percent of all income received from such investments shall be deposited in the state general fund.

NEW SECTION. Sec. 4. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.