AN ACT Relating to self-insurance; and amending RCW 51.14.010, 51.14.020, 51.14.070, 51.14.150, 51.14.160, 51.32.055, and 51.44.150.

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

Sec. 1. Section 26, chapter 289, Laws of 1971 ex. sess. and RCW 51.14.010 are each amended to read as follows:

Every employer under this title shall secure the payment of compensation under this title by:

(1) Insuring and keeping insured the payment of such benefits with the state fund; or

(2) Qualifying as a self-insurer under this title: PROVIDED, That compensation paid by a self-insurer under this title shall be of a value at least equal to that paid or furnished out of the state fund in similar cases.

Sec. 2. Section 27, chapter 289, Laws of 1971 ex. sess. as last amended by section 9, chapter 323, Laws of 1977 ex. sess. and RCW 51.14.020 are each amended to read as follows:

(1) An employer may qualify as a self-insurer by establishing to the director's satisfaction that he or she has sufficient financial ability to make certain the prompt payment of all compensation under this title and all assessments which may become due from such employer. Each application for certification as a self-insurer submitted by an employer shall be accompanied by payment of a fee of one hundred fifty dollars or such larger sum as the director shall find necessary for the administrative costs of evaluation of the applicant's qualifications. Any employer who has formerly been certified as a self-insurer and thereafter ceases to be so certified may not apply for certification within three years of ceasing to have been so certified.

(2) A self-insurer ((~~may~~)) shall be required by the director to supplement existing financial ability by depositing in an escrow account in a depository designated by the director, money and/or corporate or governmental securities approved by the director, or a surety bond written by any company admitted to transact surety business in this state filed with the department. The money, securities, or bond shall be in an amount reasonably sufficient in the director's discretion to insure payment of reasonably foreseeable compensation and assessments but not less than the employer's normal expected annual claim liabilities and in no event less than one hundred thousand dollars. ((~~In arriving at~~)) The director shall base the amount of money, securities, or bond required under this subsection((~~, the director shall take into consideration the financial ability of the employer to pay compensation and assessments and his or her probable continuity of operation~~)) on the self-insurer's prospective liabilities under this title as determined under accepted actuarial standards. In determining the amount of money, securities, or bond required, the director shall take into consideration any aggregate reinsurance purchased by the self-insurer under subsection (5) of this section. The money, securities, or bond so deposited shall be held by the director to secure the payment of compensation by the self-insurer and to secure payment of his or her assessments. The amount of security shall be reviewed annually and may be increased or decreased ((~~from time to time~~)) by the director as necessary to comply with this section. The income from any securities deposited may be distributed currently to the self-insurer.

(3) Securities or money deposited by an employer pursuant to subsection (2) of this section shall be returned to him or her upon his or her written request provided the employer files the bond required by such subsection.

(4) If the employer seeking to qualify as a self-insurer has previously insured with the state fund, the director shall require the employer to make up his or her proper share of any deficit or insufficiency in the state fund as a condition to certification as a self-insurer.

(5) A self-insurer may reinsure a portion of his or her liability under this title with any reinsurer authorized to transact such reinsurance in this state: PROVIDED, That the reinsurer may not participate in the administration of the responsibilities of the self-insurer under this title. ((~~Such reinsurance may not exceed eighty percent of the liabilities under this title.~~))

Sec. 3. Section 36, chapter 289, Laws of 1971 ex. sess. and RCW 51.14.070 are each amended to read as follows:

(1) Whenever compensation due under this title is not paid because of an uncorrected default of a self-insurer, such compensation shall be paid from the medical aid and accidents funds only after the moneys available from the bonds or other security provided under RCW 51.14.020 have been exhausted and the self-insurers' guaranty fund established under RCW 51.44.150 has been exhausted.

(2) Such defaulting self-insurer or surety, if any, shall be liable for payment into the appropriate fund of the amounts paid therefrom by the director, and for the purpose of enforcing this liability the director, for the benefit of the appropriate fund, shall be subrogated to all of the rights of the person receiving such compensation.

Sec. 4. Section 7, chapter 191, Laws of 1982 as amended by section 2, chapter 174, Laws of 1983 and RCW 51.14.150 are each amended to read as follows:

(1) Any two or more employers ((which are school districts or educational service districts, (2) any two or more employers which are hospitals, as defined in RCW 70.39.020(3), and are owned or operated by a state agency or municipal corporation of this state, or (3) any two or more employers which are hospitals, as defined in RCW 70.39.020(3), no one of which is owned or operated by a state agency or municipal corporation of this state or subject to RCW 70.39.150(3),)) who are in a common industry or who are members of a bona fide trade or professional association may enter into agreements to form self-insurance groups for the purposes of this chapter: PROVIDED, That no more than one group may be formed ((~~under subsection (2) of this section~~)), the employers in which are hospitals, as defined in RCW 70.39.020(3), that are owned or operated by a state agency or municipal corporation of this state, and no more than one group may be formed ((~~under subsection (3) of this section~~)), the employers in which are hospitals, as defined in RCW 70.39.020(3), no one of which is owned or operated by a state agency or municipal corporation of this state or subject to RCW 70.39.150(3).

(2) The self-insurance groups shall be organized and operated under rules promulgated by the director under RCW 51.14.160. A self-insurance group shall be required to self-administer its industrial insurance claims. Such a self-insurance group shall be deemed an employer for the purposes of this chapter, and may qualify as a self-insurer if it meets all the other requirements of this chapter.

(3) For the purposes of this section:

(a) "Common industry" means employers engaging in the same or substantially similar trades, businesses, occupations, professions, or functions within the state;

(b) "Bona fide trade association" means a corporation or unincorporated association engaged in substantial activity for the benefit of its members, which was formed for a purpose other than that of obtaining industrial insurance coverage and has been in existence at least five years, and which is comprised of employers who are engaged in trades, businesses, occupations, professions, or functions within this state whether or not such trades or businesses are the same.

Sec. 5. Section 8, chapter 191, Laws of 1982 as amended by section 3, chapter 174, Laws of 1983 and RCW 51.14.160 are each amended to read as follows:

The director shall promulgate rules to carry out the purposes of RCW 51.14.150:

(1) Governing the formation of self-insurance groups for the purposes of this chapter, including the standards for determining bona fide members of trade or professional associations and bona fide members of a common industry;

(2) Governing the organization and operation of the groups to assure their compliance with the requirements of this chapter;

(3) Requiring adequate monetary reserves, determined under accepted actuarial practices, to be maintained by each group to assure financial solvency of the group; and

(4) Requiring each group to carry adequate reinsurance.

Sec. 6. Section 46, chapter 289, Laws of 1971 ex. sess. as last amended by section 1, chapter 326, Laws of 1981 and RCW 51.32.055 are each amended to read as follows:

(1) One purpose of this title is to restore the injured worker as near as possible to the condition of self-support as an able-bodied worker. Benefits for permanent disability shall be determined under the director's supervision only after the injured worker's condition becomes fixed.

(2) All determinations of permanent disabilities shall be made by the department. Either the worker, employer, or self-insurer may make a request or such inquiry may be initiated by the director on his or her own motion. Such determinations shall be required in every instance where permanent disability is likely to be present. All medical reports and other pertinent information in the possession of or under the control of the employer or self-insurer shall be forwarded to the director with such requests.

(3) A request for determination of permanent disability shall be examined by the department and an order shall issue in accordance with RCW 51.52.050.

(4) The department may require that the worker present himself or herself for a special medical examination by a physician, or physicians, selected by the department, and the department may require that the worker present himself or herself for a personal interview. In such event the costs of such examination or interview, including payment of any reasonable travel expenses, shall be paid by the department or self-insurer as the case may be.

(5) The director may establish a medical bureau within the department to perform medical examinations under this section. Physicians hired or retained for this purpose shall be grounded in industrial medicine and in the assessment of industrial physical impairment. Self-insurers shall bear a proportionate share of the cost of such medical bureau in a manner to be determined by the department.

(6) Where dispute arises from the handling of any claims prior to the condition of the injured worker becoming fixed, the worker, employer, or self-insurer may request the department to resolve the dispute or the director may initiate an inquiry on his or her own motion. In such cases the department shall proceed as provided in this section and an order shall issue in accordance with RCW 51.52.050.

(7) ((~~In the case of~~)) Claims accepted by a self-insurer((~~s which involve only medical treatment and which do not involve payment of temporary disability compensation under RCW 51.32.090 and which~~)) may be closed by the self-insurer only if at the time medical treatment is concluded ((do)): (a) The claim does not involve permanent disability((~~, such claims may be closed by the self-insurers subject to reporting of claims~~)); (b) the worker has returned to his or her preinjury employment with the self-insurer; and (c) the department has not intervened with regard to the claim under subsection (6) of this section. All claims closed pursuant to this subsection shall be reported to the department in a manner prescribed by department rules promulgated pursuant to chapter 34.04 RCW. Upon ((~~such~~)) closure the self-insurer((s)) shall enter a written order, communicated to the worker, which contains the following statement clearly set forth in bold-face type: "This order constitutes notification that your claim is being closed with ((~~medical benefits only, as provided~~)) the following benefits as listed below: (list of benefits). If for any reason you disagree with this closure, you may protest in writing to the Department of Labor and Industries, Olympia, within 60 days of the date you received this order. The department will then review your claim and enter a further determinative order." ((~~In the event~~)) If the department receives such a protest ((it)) the self-insurer's order shall be withdrawn. The department shall review the claim and enter a ((~~further~~)) determinative order as provided for in RCW 51.52.050.

Any claim closed pursuant to this section which within two years of closure is discovered by the department to have been closed in violation of this title may be set aside by the department. The department shall review the claim and enter a determinative order in accordance with RCW 51.52.050 within sixty days of discovery of the unlawful closure.

Sec. 7. Section 59, chapter 289, Laws of 1971 ex. sess. and RCW 51.44.150 are each amended to read as follows:

The director shall impose and collect assessments each fiscal year upon all self-insurers in the amount of the estimated costs of administering their portion of this title during such fiscal year. The director shall also impose and collect, as circumstances require, an assessment in pro rata shares from all self-insurers in an amount necessary to pay compensation due, which as a result of uncorrected defaults by self-insurers, has not been paid. These assessments shall be placed in a separate self-insurers' guaranty fund. The time and manner of imposing and collecting assessments due the department shall be set forth in regulations promulgated by the director in accordance with chapter 34.04 RCW.