PROPOSED RULES
Original Notice.
Preproposal statement of inquiry was filed as WSR 99-11-025.
Title of Rule: Washington state health insurance pool.
Purpose: The commissioner is considering amending rules governing the pool to require pool coverage in counties where no comprehensive individual health plans are commercially available.
Other Identifying Information: Insurance Commissioner Matter No. R 99-4.
Statutory Authority for Adoption: RCW 48.02.060, 48.41.040, 48.41.170.
Statute Being Implemented: RCW 48.41.040, 48.41.100.
Summary: The rules proposal would require pool coverage in Washington counties where no comprehensive individual health plans are commercially available.
Reasons Supporting Proposal: Many state residents are unable to purchase a comprehensive, commercial, individual plan from a health carrier. This proposal would ensure that Washington residents have access to comprehensive individual health insurance coverage.
Name of Agency Personnel Responsible for Drafting: John S. Conniff, P.O. Box 40255, Olympia, WA, (360) 664-3786; Implementation and Enforcement: Bethany Weidner, P.O. Box 40255, Olympia, WA, (360) 664-8137.
Name of Proponent: Deborah Senn, Insurance Commissioner, governmental.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: These rules would require pool coverage in Washington counties where no comprehensive individual health plans are commercially available. The commissioner has requested that the Health Insurance Pool Board submit an amendment to its plan of operation to assure the availability of comprehensive health insurance to state residents. The commissioner may adopt rules governing pool operations consistent with this request to assure the fair, reasonable, and equitable administration of the pool.
Many state residents are unable to purchase a comprehensive, commercial, individual plan from a health carrier. The Washington State Health Insurance Pool was created in 1987 "to provide a mechanism to insure the availability of comprehensive health insurance to persons unable to obtain such insurance coverage on either an individual or group basis directly under any health plan." (RCW 48.41.020) This statutory statement of purpose precisely describes the circumstances of state residents in many Washington counties. The commissioner intends to consider all rules necessary to assist the pool board in accomplishing this statutory purpose to assure that Washington residents have access to comprehensive individual health insurance coverage.
Proposal does not change existing rules. A new WAC section, WAC 284-91-060, is proposed.
A small business economic impact statement has been prepared under chapter 19.85 RCW.
The pool is financed by a combination of premium income from enrollees and assessments upon members of the pool. By statute, maximum premium rates for enrollees are 150% for the indemnity health plan and 125% for managed care plans of the rates established as applicable for group standard risks in groups comprised of up to fifty persons. Members of the pool are defined as all commercial insurers providing disability insurance, all health care service contractors, and all health maintenance organizations licensed under Title 48 RCW, with certain exceptions. The amount that each member contributes to the operation of the pool is proportional to its size: Each carrier is assessed according to the number of resident insured persons covered in the preceding calendar year.
The pool is administered by a third-party contractor. Individual health carriers do not undertake administration of the pool, other than to provide information as required by statute.
Is the rule required by federal law or federal regulation? This rule is not required by federal law or regulation.
What industry is affected by the proposed rule? The industry code that would be affected by the proposed rule includes hospital and medical service plans, industry code # 6324. In Washington, such plans are called health care service contractors (HCSCs) and health maintenance organizations (HMOs). It will also apply to group and blanket disability carriers, which fall under the classification of Accident and Health Insurance Companies, industry code # 6321.
List the specific parts of the proposed rule, based on the underlying statutory authority (RCW section), which may impose a cost to business: The following provisions may impose a cost to businesses:
Proposed WAC 284-91-060(1) states that evidence of rejection under RCW 48.41.100 shall be waived by the pool for any person who resides in a county of this state where no member offers to the public an individual health plan.
Proposed WAC 284-91-060(2) requires that every member shall provide a notice and application for pool coverage to every person who applies for and is denied for any reason, an individual health plan. Provision of this information and material is a requirement of RCW 48.41.180.
What will be the compliance costs for the industries affected? The costs of this rule, if any, will depend upon a number of factors that are unpredictable at this point in time. Chief among the factors will be the number of persons who choose to apply for coverage under the Washington State Health Insurance Pool, and the claims experience of any new people who join. Further information concerning compliance costs of the rule will be developed as the rule-making process continues.
However, for the current purpose of analyzing the impact of this proposed rule on small businesses, the salient fact is that any compliance costs to the industry are borne by the members of the pool on a strictly proportional basis, according to the size of the members. Thus, any costs resulting from this rule making will not be disproportionately borne by small businesses.
What percentage of the industries in the four-digit standard industrial classification will be affected by the rule? The proposed rule would affect all commercial insurers providing disability insurance, all health care service contractors, and all health maintenance organizations licensed under Title 48 RCW. However, exceptions include any insurer, health care service contractor or health maintenance organization whose products are exclusively dental products or those products excluded from coverage under RCW 48.41.030(9). Of the thirty-nine HCSCs and HMOs licensed in this state, nine (21%) fall under this exception.
Will the rule impose a disproportionately higher economic burden on small businesses within the four-digit classification? No. Due to the strictly proportional method of assessing pool members, the proposed rule will not impose a disproportionately higher economic burden on smaller carriers.
Can mitigation be used to reduce the economic impact of the rule on small businesses and still meet the stated objective of the statutes that are the basis of the proposed rule? The arrangements for financial participation of industry members in the Washington Health Insurance Pool is defined in RCW 48.41.090. As previously described, the statute mandates that a strictly proportional method be used for assessing the members; mitigation from the effects of the basic formula is not an option. However, it should be noted that RCW 48.41.090(3) allows the board of the pool to abate or defer the assessment of a member if payment of the assessment would endanger the ability of the member to fulfill its contractual obligations. In the unlikely event that a small carrier is unduly burdened by the effects of this rule, the statute provides a remedy through the action of the pool board.
Since the insurance companies are not responsible for administering the pool, it is not relevant to discuss mitigation of administrative costs.
The rule drafter will continue to work with all parties, including carriers of all sizes, throughout the rule-making period. If mitigation techniques are proposed that do not transgress the statute, they will be considered.
What steps will the commissioner take to reduce the costs of the rule on small businesses? See above.
Which mitigation techniques have been considered and incorporated into the proposed rule? See above.
Which mitigation techniques were considered for incorporation into the proposed rule but were rejected, and why? No mitigation techniques were proposed that achieved the goals of this rule making. The rule drafter will continue to work with all parties, including carriers of all sizes. If mitigation techniques are proposed that do not undermine the goals of the rule, they will be considered.
Briefly describe the reporting, recordkeeping, and other compliance requirements of the proposed rule: There are no new reporting or record-keeping requirements.
List the kinds of professional services that a small business is likely to need in order to comply with the reporting, recordkeeping, and other compliance requirements of the proposed rule: There are no new reporting or record-keeping requirements in this proposed rule. It is not expected that any new professional services will be needed by smaller carriers.
Cost of equipment: There is no anticipated additional cost of equipment.
Cost of supplies: There is no anticipated additional cost of supplies.
Cost of labor: There should be no additional labor costs associated with the requirements of the rule.
Cost of increased administration: As noted before, the pool is administered by a third-party contractor.
Compare the cost of compliance for small business with the cost of compliance for the largest business in the same four-digit classification: As previously mentioned, the cost of compliance will be proportional for small businesses because of the proportional method used to assess members for the costs of the pool. There should be no proportional differences in costs of equipment, supplies, labor, or administration.
Have businesses that will be affected been asked what the economic impact will be? Since any compliance cost associated with this rule is proportional to the size of the carrier, businesses have not been asked about the economic impact for purposes of this Small Business Economic Impact Statement.
The commissioner filed a CR-101 "preproposal statement of inquiry" for this proposed rule in May of this year, and the issue also received attention in the news media. No comments regarding the economic impact of changes to the pool have been received from businesses.
How did the commissioner involve small business in the development of the proposed rule? See above.
How and when were affected small businesses advised of the proposed rule? The CR-101 was filed on May 13, 1999. The proposal was published in the Washington State Register and was posted on the Insurance Commissioner's website. The CR-101 gave agency contact numbers for parties interested in participating in the rule-making process.
A copy of the statement may be obtained by writing to Kacy Brandeberry, P.O. Box 40255, Olympia, WA 98504-0255, Internet e-mail KacyB@oic.wa.gov, phone (360) 664-3784, fax (360) 664-2782.
RCW 34.05.328 applies to this rule adoption.
Hearing Location: 14th and Water, Cherberg Building, Senate Hearing Room 4, Olympia, Washington, on Tuesday, August 10, 1999, at 10:00.
Assistance for Persons with Disabilities: Contact Lorie Villaflores by August 9, 1999, TDD (360) 407-0409.
Submit Written Comments to: Kacy Brandeberry, P.O. Box 40255, Olympia, WA 98504-0255, Internet e-mail KacyB@oic.wa.gov, fax (360) 664-2782, by August 9, 1999.
Date of Intended Adoption: August 25, 1999.
July 7, 1999
Bethany Weidner
Deputy Insurance Commissioner
OTS-3211.1
NEW SECTION
WAC 284-91-060
Eligibility in counties without commercially available coverage
equivalent to pool coverage.
(1) Evidence of rejection under RCW 48.41.100 shall be waived by the pool for any person who resides in a county of this state where no member offers to the public an individual health plan.
(2) In accordance with RCW 48.41.180, every member shall provide a notice and application for pool coverage to every person who applies for and is denied for any reason, an individual health plan. This includes the reason that the member has decided to reject all new applicants for individual health plan coverage state-wide or within any county.
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