HOUSE BILL REPORT

ESHB 2230

BYHouse Committee on Appropriations (originally sponsored by Representative Locke)

Establishing standards for benefit plans for school district employees.

House Committe on Appropriations

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (16)

      Signed by Representatives Locke, Chair; Silver, Ranking Republican Member; Appelwick, Belcher, Brekke, Dorn, Ebersole, Hine, Peery, Rust, Sayan, Spanel, Sprenkle, Valle, Wang and Wineberry.

Minority Report:  Do not pass.  (7)

      Signed by Representatives Youngsman, Assistant Ranking Republican Member; Bowman, Doty, Inslee, McLean, Nealey and Padden.

House Staff:Janet Peterson (786-7143)

AS PASSED HOUSE MARCH 31, 1990

BACKGROUND:

The 1988 Health Care Reform Act directed the Washington state Health Care Authority to conduct a study of school employees' health benefits.  The study, submitted to the Legislature in December, 1989, made several recommendations concerning pooling of state benefit allocations among employees, limiting funding to basic benefits, and requiring school districts to report demographic data on employees and dependents covered by school district benefit plans.

In school districts that do not pool benefit allocations, all individual employees can choose benefit options that exhaust their full state-funded benefit amount; currently $240 per month per employee.  This allows many single employees or employees with other coverage to choose special benefit options or to set money aside in a Voluntary Employee Beneficiary Association account (VEBA).  Employees who need health insurance for dependents, however, generally have payroll deductions to cover additional costs of family coverage.  These payroll deductions for employees with families have risen quickly in recent years, due to rapid inflation in health care costs.

SUMMARY:

After October 1, 1990, school districts may provide fringe benefit contributions only for basic benefits, unless the district is obligated to continue payments under a current contract with a benefit provider.

"Basic benefits" are limited to medical, dental, vision, group term life, and group long-term disability insurance, and are determined through local bargaining.

However, school districts may provide employer contributions for optional benefit plans, in addition to basic benefits, for employees included in a pooling arrangement that covers at least one bargaining unit and/or all nonbargaining group employees, under specific conditions.  Contributions to the optional benefit plan are authorized only if all full-time employees included in the pooling arrangement are offered basic benefits, including coverage for dependents, without a payroll deduction for premium charges.  Any money remaining after basic benefits are funded must be divided equally among employees.  Part-time employees may be included under the same eligibility criteria and/or proration of benefit contributions that apply for basic benefits.

School districts may not provide employer contributions for employee beneficiary accounts that can be liquidated by the employee on termination of employment.

School districts' contracts for employee fringe benefits may not exceed one year.

School districts shall annually submit summary plan descriptions and data on plan subscribers to the Washington State Health Care Authority.  The data shall include the total number of employees and, for each employee, types of coverage or benefits received, numbers of covered dependents, the number of eligible dependents, the amount of the district's contribution, additional premium costs paid by the employee through payroll deductions, and the age and sex of the employee and each dependent.  Benefits providers shall make available to school districts the benefit plan descriptions and, where available, the demographic data.

The Health Care Authority, in consultation with the State Insurance Commissioner and a three-member advisory committee, shall develop and submit recommendations on school employee benefit plans, to be considered by the Legislature for implementation in the 1991-93 biennium.  The advisory committee shall include a representative of health maintenance organizations, a representative of health care service providers, and a representative of commercial carriers.  Preliminary recommendations, including a proposed set of guidelines for school employee benefit plans, shall be submitted by December 15, 1990.  A final report, including analysis of demographic data on plan subscribers, is due February 15, 1991.  The recommendations and guidelines shall address pooling of benefit allocations, priority for basic benefits, cost-containment provisions, benefit allocations for part-time employees, financial practices of benefit providers, and coverage of retired school employees.

Fiscal Note:      Not Requested.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Susan O'Loughlin, Washington State Health Care Authority; and David Arbaugh, Public School Employees (qualified support).

House Committee - Testified Against:      Karen Davis, Washington Education Association; Kris Van Gorkom, Washington Association of School Administrators; Mark Wilkerson, VEBA consultants; Dr. Cliff Campbell, VEBA trustees; and Neal Nogler, Washington State Retired Teachers Association.

House Committee - Testimony For:    The bill is consistent with the recommendations of the Health Care Authority report on K-12 employee benefits.  The timelines established in the bill can be met.  The language on VEBA's in the bill will provide an incentive for districts to bargain for lower-cost benefit packages.  The bill is a move toward good public policy in directing how public dollars for benefits are used.  Data collection is important for establishing future policy directions.

House Committee - Testimony Against:      The bill gives the Health Care Authority too much power to dictate benefit design. The Health Care Authority has a conflict of interest since it will also be offering coverage for school district employees beginning in 1990-91.  Health Care Authority standards will be too prescriptive.  The bill inhibits local control, and will reduce VEBA options that are very popular with some employee groups.  The scope of the standards is too broad, and there needs to be more time for their development.  Data collection will be costly for school districts.