6384 AMH FII H4963

6384 AMH FII H4963.1

SB 6384 - H COMM AMD

By Committee on Financial Institutions & Insurance

Strike everything after the enacting clause and insert the following:

"NEW SECTION. Sec. 1. SHORT TITLE. This chapter shall be known and may be cited as the small employer health care coverage availability act."

"NEW SECTION. Sec. 2. PURPOSE. The purpose and intent of this chapter and RCW 48.14.040 is to promote the availability of health care coverage to small employers regardless of the health status or claims experience of their employees and their employees' dependents, to prevent abusive rating practices, to require disclosure of rating practices to purchasers, to establish rules regarding renewability of coverage, to establish limitation on the use of preexisting condition exclusions, to provide for development of basic and standard health benefit plans to be offered to all small employers, and to improve the overall fairness and efficiency of the small employer health care coverage market.

This chapter is not intended to provide a solution to the problem of affordability of health care or health insurance."

"NEW SECTION. Sec. 3. DEFINITIONS. As used in this chapter:

(1) "Actuarial certification" means a written statement by a member of the American academy of actuaries, or other individual acceptable to the commissioner, that a small employer carrier is in compliance with the provisions of section 5 of this act, based upon the person's examination, including a review of the appropriate records and of the actuarial assumptions and methods used by the small employer carrier in establishing premium rates for applicable health benefit plans.

(2) "Affiliate" or "affiliated" means any entity or person who directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, a specified entity or person.

(3) "Association" means an organization organized and maintained in good faith for purposes other than that of obtaining health care coverage. Associations shall have constitutions and bylaws or other analogous governing documents and shall have been in active existence for at least five years, unless they are based on participation in a certain industry, in which case they must have been in active existence for at least two years.

(4) "Base premium rate" means, as to a rating period, the lowest premium rate for either employees or enrollees, based on rates or formulas filed by the small employer carrier with the commissioner, that could be charged under the rating system by the small employer carrier to small employers with similar case characteristics for health benefit plans with the same or similar coverage.

(5) "Basic health benefit plan" means a health benefit plan developed under section 9 of this act that meets the requirements of RCW 48.21.045, 48.44.023, or 48.46.066.

(6) "Board" means the board of directors of the Washington state health insurance pool, as established by chapter 48.41 RCW and amended by chapter ..., Laws of 1992 (this act).

(7) "Carrier" means any entity that provides health benefits coverage in Washington state. For the purposes of this chapter, carrier includes an insurance company, health care service contractor, health maintenance organization, or any person or entity that lawfully writes, issues, or administers health benefit plans in Washington state and is subject to the jurisdiction of the state of Washington.

(8) "Case characteristics" means demographic or other objective characteristics of a small employer that are considered by the small employer carrier in the determination of premium rates for the small employer, provided that claim experience, health status, and duration of coverage shall not be case characteristics for the purposes of this chapter.

(9) "Commissioner" means the insurance commissioner as defined in RCW 48.02.010.

(10) "Committee" means the health benefit plan committee created under section 9 of this act.

(11) "Dependent" means the eligible employee's lawful spouse, unmarried natural child, adopted child or child legally placed for adoption, stepchild, or legally designated minor ward; unmarried child who is a full-time student under the age of twenty-three years who is financially dependent upon an eligible employee; or unmarried child of any age who is medically certified and disabled and claimed as an exemption on the federal income tax form of the eligible employee.

(12) "Eligible employee" means an active employee, proprietor, partner, or corporate officer of the small employer's group who is paid on a regular, periodic basis through the group's payroll system and who regularly works on a full-time basis and has a normal work week of thirty or more hours, and who is expected to continue doing so. An eligible employee must have met any applicable requirement of the employer as to the period of employment before the employee is eligible for health benefits coverage. The term does not include an employee, proprietor, partner, or corporate officer who works on a part-time, temporary, or substitute basis.

(13) "Established geographic service area" means a geographical area, if any, as approved by the commissioner and based on the carrier's certificate of authority to transact business in Washington state, within which the carrier is authorized to provide coverage.

(14) "Financially impaired" means a carrier that, after the effective date of this section, is not insolvent and is:

(a) Deemed by the commissioner to be potentially unable to fulfill its contractual obligations; or

(b) Placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

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

(16) "Index rate" means, as to a rating period for small employers with similar case characteristics for the same or similar coverage, the arithmetic average of the applicable base premium rate and corresponding highest premium rate for either employees or enrollees based on rates or formulas filed by the small employer carrier with the commissioner.

(17) "Late enrollee" means an eligible employee or dependent who requests enrollment in a health benefit plan of a small employer following the initial enrollment period in which the person was initially eligible to enroll under the terms of the health benefit plan, provided that such initial enrollment period is a period of at least thirty days. However, an eligible employee or dependent shall not be considered a late enrollee if:

(a) The individual meets each of the following:

(i) The individual was covered under qualifying previous coverage at the time the individual was eligible to enroll;

(ii) The individual certified at the time of the initial enrollment that coverage under another health benefit plan was the reason for declining enrollment;

(iii) The individual lost coverage under qualifying previous coverage as a result of termination of employment or eligibility, the involuntary termination of the qualifying previous coverage, death of a spouse, or divorce;

(iv) The individual requests enrollment within thirty days after termination of the qualifying previous coverage;

(b) The individual is employed by an employer that offers multiple health benefit plans and the individual elects a different plan during an open enrollment period; or

(c) A court has ordered coverage be provided for a dependent under a covered employee's health benefit plan and request for enrollment is made within thirty days after issuance of the court order.

(18) "New business premium rate" means, as to a rating period, the lowest premium rate for either employees or enrollees based on rates or formulas filed by the small employer carrier with the commissioner and which could have been charged by the small employer carrier to small employers with similar case characteristics for newly issued health benefit plans with the same or similar coverage.

(19) "Plan of operation" means the plan of operation of the program established under section 8 of this act.

(20) "Premium" means all moneys paid by a small employer and eligible employees as a condition of receiving coverage from a small employer carrier, including any fees or other contributions associated with the health benefit plan.

(21) "Producer" means an agent, broker, or solicitor as defined in chapter 48.17 RCW.

(22) "Program" means the Washington small employer program established under section 8 of this act.

(23) "Qualifying previous coverage" and "qualifying existing coverage" means benefits or coverage provided under:

(a) Medicare, medicaid, or the basic health plan;

(b) An employer-based health insurance or health benefit arrangement that provides benefits similar to or exceeding benefits provided under a basic or standard health benefit plan that is subject to regulations of Washington state provided that such coverage has been in effect for the individual in question for a period of at least six months; or

(c) An individual health insurance policy issued by a carrier that provides benefits similar to or exceeding benefits provided under a standard health benefit plan, provided that such policy has been in effect for a period of at least six months.

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

(25) "Restricted network provision" means any provision of a health benefit plan that conditions the payment of benefits, in whole or in part, on the use of health care providers that have entered into an arrangement with the carrier pursuant to chapter 48.44 or 48.46 RCW to provide health care services to covered individuals.

(26) "Similar coverage" means two or more health benefit plans whose differences in plan or benefit structure cause no major differences in the rate schedules associated with the benefit plans. Carriers may define two or more coverage plans as being dissimilar and separate coverage if the structure of the benefits, payment methods, or other aspect of the coverage plans results in actuarial rate differences of more than fifteen percent, as filed by the carrier with the commissioner. A fully insured association plan in existence on July 1, 1992, and meeting the requirements of this chapter as of July 1, 1993, may be considered dissimilar and separate coverage.

(27) "Small employer" means any 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 at least three eligible employees unrelated by blood or marriage but no more than forty-nine eligible employees, the majority of whom were employed within Washington state. In determining the number of eligible employees, companies that are affiliated companies, or that are eligible to file a combined tax return for purposes of state taxation, shall be considered one employer. Small employers who are members of multiple employer groups or associations are subject to this chapter. Multiple employer group members or association members that do not meet the definition of a small employer are not subject to this chapter.

(28) "Small employer carrier" means any carrier that offers health benefit plans covering eligible employees of one or more small employers in Washington state.

(29) "Standard benefit plan" means a health benefit plan developed under section 9 of this act."

"NEW SECTION. Sec. 4. APPLICABILITY AND SCOPE. (1) This chapter shall apply to any health benefit plan that provides coverage to the employees of a small employer in Washington state if any of the following conditions are met:

(a) Any portion of the premium or benefits is paid by or on behalf of the small employer and the employer meets the minimum participation and employer contribution requirements set forth by the carrier;

(b) An eligible employee or dependent is reimbursed, whether through wage adjustments or otherwise, by or on behalf of the small employer for any portion of the premium; or

(c) The health benefit plan is treated by the employer or any of the eligible employees or dependents as part of a plan or program for the purposes of section 162, 125, or 106 of the United States Internal Revenue Code.

(2) Each carrier holding a certificate of authority or a certificate of registration shall be treated as a separate carrier for the purposes of this chapter."

"NEW SECTION. Sec. 5. RESTRICTIONS RELATING TO PREMIUM RATES. (1) Premium rates for health benefit plans subject to this chapter shall be subject to the following provisions:

(a) The premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage, or the rates that could be charged to such employers under the rating system as filed with the commissioner, shall not vary from the index rate by more than twenty-five percent of the index rate.

(b) Subject to the limits established in (a) of this subsection, the percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of the following:

(i) The percentage change applied to all small employers covered by the small employer carrier from the first day of the prior rating period to the first day of the new rating period to account for the cost experience of the prior rating period and the anticipated cost experience for the new rating period;

(ii) Any adjustment, not to exceed fifteen percent annually and adjusted pro rata for rating periods of less than one year, due to the claim experience, health status, and duration of coverage of the employees or dependents of the small employer as determined from the small employer carrier's rate manual; and

(iii) Any adjustment due to change in coverage or change in the case characteristics of the small employer, as determined from the small employer carrier's rate manual.

(c) Adjustments in rates for claim experience, health status, and duration of coverage shall not be charged to individual employees or dependents. Any such adjustment shall be applied uniformly to the rates charged for all employees and dependents of the small employer.

(d) A small employer carrier may utilize industry as a case characteristic in establishing premium rates, provided that the highest rate factor associated with any industry classification shall not exceed the lowest rate factor associated with any industry classification by more than fifteen percent.

(e) Except for fully insured assocation plans in existence on July 1, 1993, for health benefit plans issued prior to the effective date of this section, a premium rate for a rating period may exceed the ranges set forth in (a) of this subsection for a period of three years following the effective date of this section. In such cases, the percentage increase in the premium rate charged to a small employer for a new rating period shall not exceed the sum of the following:

(i) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a health benefit plan into which the small employer carrier is no longer enrolling new small employers, the small employer carrier shall use the percentage change in the base premium rate, provided that such change does not exceed, on a percentage basis, the change in the new business premium rate for the most similar health benefit plan into which the small employer carrier is actively enrolling new small employers; and

(ii) Any adjustment due to change in coverage or change in the case characteristics of the small employer, as determined from the small employer carrier's rate manual.

(f)(i) Small employer carriers shall apply rating factors, including case characteristics, consistently with respect to all small employers. Rating factors shall produce premiums for identical small employers that differ only by amounts attributable to plan design and do not reflect differences due to the nature of the groups assumed to select particular health benefit plans. All small employer health benefit plans offered by a carrier shall be rated subject to the requirements of (a) of this subsection.

(ii) A small employer carrier shall treat all health benefit plans issued or renewed in the same calendar month as having the same rating period.

(g) For the purposes of this subsection, a health benefit plan that utilizes a restricted provider network shall not be considered similar coverage to a health benefit plan that does not utilize such a network, provided that utilization of the restricted provider network results in substantial differences in claims costs.

(h) A small employer carrier shall not use case characteristics other than age, gender, industry and geographic area, without prior approval of the commissioner, based on the board's recommendation.

(i) The commissioner may establish rules, giving due consideration to the recommendations of the board, to implement the provisions of this section and to assure that rating practices used by small employer carriers are consistent with the purposes of this chapter, including:

(i) Assuring that differences in rates charged for health benefit plans by small employer carriers are reasonable and reflect actuarially acceptable differences in plan design, not including differences due to the nature of the groups assumed to select particular health benefit plans; and

(ii) Prescribing the manner in which case characteristics may be used by small employer carriers.

(j) Nothing in this section shall be construed as a prohibition against using family size and composition in setting rates.

(2) A small employer carrier shall not transfer a small employer involuntarily into a health benefit plan or out of a health benefit plan unless that benefit plan is discontinued by the carrier for all small employers. A small employer carrier shall not offer to transfer a small employer into or out of a health benefit plan unless such offer is made to transfer all small employers with the same health benefit plan without regard to case characteristics, claim experience, health status, or duration of coverage.

(3) In connection with the offering for sale of any health benefit plan to a small employer, a small employer carrier shall make a reasonable disclosure, at least once in writing to the small employer or as part of its solicitation and sales materials, of all of the following:

(a) The extent to which premium rates for a specified small employer are established or adjusted based upon the actual or expected variation in claims costs or actual or expected variation in health status of the employees of the small employer and their dependents;

(b) The provisions of the health benefit plan concerning the small employer carrier's right to change premium rates and factors, other than claim experience, that affect changes in premium rates;

(d) The provisions relating to any preexisting condition.

(4)(a) Each small employer carrier shall maintain at its principal place of business a complete and detailed description of its rating practices and renewal underwriting practices, including information and documentation that demonstrate that its rating methods and practices are based upon commonly accepted actuarial assumptions and are in accordance with sound actuarial principles.

(b) Each small employer carrier shall file with the commissioner annually on or before March 15 an actuarial certification certifying that the carrier is in compliance with this chapter and that the rating methods of the small employer carrier are actuarially sound. Such certification shall be in a form and manner, and shall contain such information, as specified by the commissioner. A copy of the certification shall be retained by the small employer carrier at its principal place of business.

(c) A small employer carrier shall make the information and documentation described in (a) of this subsection available to the commissioner upon request. The information shall be considered proprietary and trade secret information and shall not be subject to disclosure by the commissioner to any persons outside of the office except as agreed to by the small employer carrier or as ordered by a court of competent jurisdiction."

"NEW SECTION. Sec. 6. RENEWABILITY OF COVERAGE. (1) A health benefit plan subject to this chapter shall be renewable with respect to all eligible employees and dependents, at the option of the small employer, except in any of the following cases:

(a) Nonpayment of the required premiums or cost-sharing requirements of the health benefit plan;

(b) Fraud or misrepresentation by the small employer or, with respect to coverage of individual insureds, the insureds or their representatives;

(d) Noncompliance with the carrier's employer contribution requirements;

(e) Repeated misuse of a provider network provision;

(f) The small employer carrier elects to not renew all of its health benefit plans issued to small employers in Washington state. In such a case the carrier shall:

(i) Provide advance notice of its decision under this subsection (1)(f)(i) to the board and to the commissioner; and

(ii) Provide notice of the decision not to renew coverage to all affected small employers and to the commissioner in each state in which an affected covered individual is known to reside at least one hundred eighty days prior to the nonrenewal of any health benefit plan by the carrier. Notice to the commissioner under this subsection (1)(f)(ii) shall be provided at least three working days prior to the notice to the affected small employers;

(g) The commissioner finds that the continuation of coverage for small employers would:

(i) Not be in the best interests of the policyholders or certificate holders; or

(ii) Impair the carrier's ability to meet its contractual obligations.

In such instance the commissioner shall assist affected small employers in finding replacement coverage.

(2) Nothing in this section will preclude a carrier from modifying its health benefit plans other than its basic or standard health benefit plans, unless changed by the board, so long as the modifications are offered to all of the small employers covered by the modified plans.

(3) A small employer carrier that elects not to renew a standard health benefit plan under subsection (1)(f) of this section shall be prohibited from writing new business in the small employer market in Washington state for a period of five years from the date of notice to the commissioner.

(4) In the case of a small employer carrier that ceases doing business in one established geographic service area of the state, the rules set forth in this section shall apply only to the carrier's operations in such service area."

"NEW SECTION. Sec. 7. GENERAL SMALL EMPLOYER CARRIER REQUIREMENTS. (1) Small employer carriers may offer a variety of benefit plans to small employers; however each small employer carrier must offer a standard health benefit plan developed by the health benefit plan committee pursuant to section 9 of this act to any eligible small employer. A small employer carrier may offer a basic health benefit plan developed by the health benefit plan committee pursuant to sections 9 and 15 of this act to any eligible small employer with fewer than twenty-five employees. All health benefit plans covering small employers shall include at least a standard health benefit coverage established pursuant to this chapter and shall also comply with the following provisions:

(a) A small employer carrier shall file with the commissioner, in a form and manner prescribed by the commissioner, the basic, standard, and other small employer health benefit plans to be used by the carrier. Any health benefit plan filed pursuant to this subsection (1)(a) may be used by a small employer carrier immediately after it is filed.

(b) A health benefit plan shall not deny, exclude, or limit benefits for a covered individual for losses incurred more than six months following the effective date of the individual's coverage due to a preexisting condition. A small employer health benefit plan shall not define a preexisting condition more restrictively than:

(i) A condition that would have caused an ordinarily prudent person to seek medical advice, diagnosis, care, or treatment during the six months immediately preceding the effective date of coverage;

(ii) 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

(iii) A pregnancy existing on the effective date of coverage.

(c) A health benefit plan shall waive any time period applicable to a preexisting condition exclusion or limitation period with respect to particular services for the period of time an individual was covered by qualifying previous coverage that provided benefits with respect to such services, provided that the qualifying previous coverage did not terminate more than thirty days prior to the effective date of the new coverage. This subsection (1)(c) does not preclude application of any eligibility waiting period imposed by the small employer subject to the federal Employee's Retirement Income Security Act (ERISA) and applicable to all new employees and dependents under the health benefit plan. The eligibility waiting period imposed by the small employer shall not be counted as part of the time period used to determine qualifying previous coverage.

(d) A health benefit plan may exclude coverage for late enrollees for the greater of twelve months or for a twelve-month preexisting condition exclusion, provided that if both a period of exclusion from coverage and a preexisting condition exclusion are applicable to a late enrollee, the combined period shall not exceed twelve months from the date the individual enrolls for coverage under the health benefit plan.

(e)(i) Except as provided in (iv) of this subsection (1)(e), requirements used by a small employer carrier in determining whether to provide coverage to a small employer, including requirements for minimum participation of eligible employees and minimum employer contributions, shall be applied uniformly among all small employers with the same number of eligible employees applying for coverage or receiving coverage from the small employer carrier.

(ii) A small employer carrier may vary application of minimum participation requirements and minimum employer contribution requirements only by the size of the small employer group.

(iii)(A) Except as provided in (iii)(B) of this subsection (1)(e), in applying minimum participation requirements with respect to a small employer, a small employer carrier shall not consider employees or dependents who have qualifying existing coverage in determining whether the applicable percentage of participation is met.

(B) With respect to a small employer with ten or fewer eligible employees, a small employer carrier may consider employees or dependents who have coverage under another health benefit plan sponsored by an employer in applying minimum participation requirements.

(iv) A small employer carrier shall not increase any requirement for minimum employee participation or any requirement for minimum employer contribution applicable to a small employer at any time after the small employer has been accepted for coverage.

(f)(i) If a small employer carrier offers coverage to a small employer, the small employer carrier shall offer coverage to all of the eligible employees of the small employer and their dependents. A small employer carrier shall not offer coverage to only certain individuals in a small employer group or to only part of the group, except in the case of late enrollees as provided in (e) of this subsection.

(ii) A small employer carrier shall not modify the basic or standard health benefit plan with respect to a small employer or any eligible employee or dependent through riders, endorsements, or otherwise, to restrict or exclude coverage for certain diseases or medical conditions otherwise covered by the basic or standard health benefit plan.

(2)(a) Every small employer carrier shall, as a condition of transacting business in Washington state with small employers, actively offer to small employers at least a standard health benefit plan.

(b) A small employer carrier shall issue a basic or standard health benefit plan to any eligible small employer that applies for such a plan and agrees to make the required premium payments and to satisfy the other reasonable provisions of the health benefit plan not inconsistent with this chapter.

(c) A small employer carrier shall issue at least the standard health benefit plan to any eligible small employer that applies to such a plan and agrees to make the required premium payments and to satisfy the other reasonable provisions of the health benefit plan not inconsistent with this chapter, until the carrier's target of high-risk individuals has been met under section 8 of this act.

(d) Coverage provided to a small employer through an association shall be subject to all of the requirements of this chapter, except the requirement to make health benefit plans available to small employers that do not belong to the association. For the purpose of providing coverage to the association, a carrier shall not be required to issue a health benefit plan to any small employer that is not a member of any such association through the association policy or contract.

(e)(i) No small employer carrier utilizing a restricted network provision shall be required to offer coverage or accept applications pursuant to (b) of this subsection in the case of the following:

(A) To a small employer, where the small employer is not physically located in the carrier's established geographic service area;

(B) To an employee, when the employee does not reside within the carrier's established geographic service area; or

(C) Within an established geographic service area where the carrier reasonably anticipates, and demonstrates to the satisfaction of the commissioner that it will not have the capacity within that area in its network of providers to deliver service adequately to the members of such groups because of its obligations to existing group contract holders and enrollees.

(ii) A carrier that cannot offer coverage pursuant to (e)(i)(C) of this subsection may not offer coverage in the applicable service area to any new employer groups until the later of ninety days following each such refusal or the date on which the carrier notifies the commissioner that it has regained capacity to deliver services to small employer groups in that service area.

(f) A small employer carrier shall not be required to offer coverage or accept applications pursuant to (b) of this subsection where the commissioner finds that the acceptance of an application or applications would place the small employer carrier in a financially impaired condition; provided, however, that a small employer carrier that has not offered coverage or accepted applications pursuant to this subsection (2)(f) may not offer health benefit plans to any group except pursuant to a marketing plan approved by the commissioner.

(g) For purposes of establishing continued small employer eligibility under this chapter, a small employer carrier may reassess the size of the covered employer on the anniversary date of the employer's policy. Coverage under this chapter may be discontinued if the small employer no longer meets the size requirements provided for in this chapter. However, if a small employer falls below the minimum size, coverage must be continued for a period of at least one year before the small employer carrier can discontinue coverage under this chapter, provided that the small employer continues to fall below the minimum group size requirements of this chapter.

(h) The provisions of this subsection shall be effective one hundred eighty days after the commissioner's approval of the basic and standard health benefit plans developed under section 9 of this act, provided that if the small employer program created under section 8 of this act is not yet in operation on such date, the provisions of this subsection shall be effective on the date that such program begins operation."

"NEW SECTION. Sec. 8. SMALL EMPLOYER HEALTH BENEFITS COVERAGE PROGRAM. (1) All small employer carriers issuing health benefit plans in this state on and after July 1, 1993, shall be required to meet the requirements of this section as a condition of authority to transact business in Washington state. However, nothing in this chapter shall be construed to prohibit a small employer carrier from continuing to offer coverage to small employer groups after meeting its target of high-risk individuals as defined by the board.

(2) There is created a nonprofit entity to be known as the Washington small employer health benefits coverage program. All small employer carriers issuing health benefit plans in Washington state on and after July 1, 1993, shall be participants in the program.

(3) The program shall operate subject to the supervision and control of the board of the Washington health insurance pool, as established by chapter 48.41 RCW and amended by chapter --, Laws of 1992 (this act).

(4) Within sixty days of the effective date of this section each small employer carrier shall make a filing with the commissioner containing the carrier's enrollment in health benefit plans issued to small employers in this state as of the effective date of this section.

(5) Within one hundred eighty days after the effective date of this section, the board shall submit to the commissioner a plan of operation and thereafter any amendments thereto necessary or suitable, to assure the fair, reasonable, and equitable administration of the program. The commissioner may, after notice and hearing, disapprove the plan of operation if the commissioner determines that it does not meet the requirements of chapter --, Laws of 1992 (this act). The plan of operation shall become effective unless disapproved in writing by the commissioner within thirty days of the date it was submitted by the board.

(6) If the board fails to submit a plan of operation within one hundred eighty days after the effective date of this section, the commissioner shall, after notice and hearing, adopt a temporary plan of operation, which shall be rescinded at the time a plan of operation is submitted by the board.

(7) The plan of operation shall:

(a) Establish procedures for handling and accounting of program assets and moneys and for an annual fiscal reporting to the commissioner;

(b) Establish procedures for retaining independent consultants to assist the board in establishing and enforcing reasonable target amounts and risk distribution practices for small employer carriers;

(c) Establish procedures at least annually for assigning targets of high-risk individuals among small employer carriers in accordance with the provisions of this chapter;

(d) Establish targets of sufficient size and variability to assure that a substantial proportion of available carrier capacity remains open for new enrollment in a geographic area;

(e) Establish procedures so that carriers who have fulfilled their target of high-risk individuals from small employers in a geographic area may remain open selectively for new enrollment to small employers;

(f) Establish procedures for collecting assessments from all small employer carriers to provide for administrative expenses incurred or estimated to be incurred for the period for which the assessment is made; and

(g) Provide for any additional matters necessary for the implementation and administration of the program.

(8) The program board shall have the specific authority to:

(a) Establish rules, conditions, and procedures pertaining to its functions under this chapter, including the board's authority to review and approve a carrier's accounting for high-risk individuals from newly enrolled small employers;

(b) Enter into contracts as are necessary or proper to carry out the provisions and purposes of this section, including the authority, with the approval of the commissioner, to enter into contracts with similar programs of other states for the joint performance of common functions or with persons or other organizations for the performance of administrative functions;

(c) Sue or be sued, including taking any legal actions necessary or proper for recovering any assessments and penalties for, on behalf of, or against the program or any allocating carriers;

(d) Assess small employer carriers in accordance with the provisions of subsection (12) of this section, and to make interim assessments as may be reasonable and necessary for organizational and interim operating expenses. Any interim assessments shall be credited as offsets against any regular assessments due following the close of the fiscal year;

(e) Appoint appropriate legal, actuarial, audit, and other committees as necessary to provide technical assistance in the operation of the program, policy, and other contract design, and any other function within the authority of the program;

(f) Perform other functions necessary and proper to carry out its responsibilities under this chapter.

(9) The board shall establish procedures, as part of the plan of operation, for determining targets by geographic area of high-risk individuals in small employers with no more than twenty-five eligible employees among all small employer carriers. Such procedures shall be designed to assure a fair distribution of risks among small employer carriers. The procedures shall include the following:

(a) A method by which the board shall estimate each year the total number of expected new high-risk individuals across all small employer groups that will be identified and used for determining carrier targets under this subsection during the year. The board shall develop a uniform definition of a high-risk individual based on standardized criteria that are generally accepted, actuarially justified and similar to those that would be administered by carriers in determining on a prospective basis an individual's likely risk category, for purposes of this section. The board shall not consider those high-risk individuals already in each small employer carrier's existing book of business subject to these targets, except as provided by (b) of this subsection.

(b) A method by which the board shall assign to each small employer carrier a target number of high-risk individuals. The target number for a small employer carrier shall bear the same proportional relationship to the total number of high-risk individuals estimated under (a) of this subsection as the small employer carrier's average annual enrollment of small employers bears to the average annual enrollment of all small employer carriers for coverage of small employers. However, for small employer carriers whose enrollees from small groups are at least sixty percent of their total covered enrollees from all sources in the geographic service area and which have fewer than ten thousand enrollees, no more than forty percent of their small group enrollees shall be deemed small group enrollees for purposes of establishing the carrier's target. In the case of an established small employer carrier with an established geographic services area, the board shall allow an initial adjustment to the target otherwise applicable to the small employer carrier where the carrier applies to the board for such an adjustment and demonstrates to the satisfaction of the board that such an adjustment is appropriate. The adjustment shall account for such factors as the carrier's increased or decreased exposure resulting from the demographics of the carrier's geographic service area, the existing mix of small groups, the existing risk base of the carrier, and other factors that the board deems appropriate and applies consistently.

(c) A procedure by which the board shall determine the number of high-risk eligible employees and dependents of each small employer that constitutes the carrier's target of high-risk individuals, not including those high-risk individuals already in a small employer carrier's existing book of business subject to this chapter, except as provided in (b) of this subsection. A small employer carrier may not count an individual towards filling its target unless it receives the approval of the board. The board shall not approve an individual to be counted toward a small employer carrier's target unless the carrier submitted that individual to the board within sixty days following the commencement of coverage with the carrier. If a small employer carrier fails to submit an individual to the board within sixty days following the commencement of coverage, the carrier is permanently prohibited from submitting that individual to the board in the future for the purpose of meeting the carrier's target.

(d) A procedure by which a small employer carrier which has met its established target for new enrollment of high-risk individuals in small employer groups may cease enrolling small employers with high-risk individuals in the carrier's geographic service area.

(e) A procedure by which the board shall establish a target for a small employer carrier that wishes to enter a new geographic service area.

(f) Procedures for achieving an equitable, prospective distribution among small employer carriers of high-risk individuals; efficient administration of the program; and providing incentive for small employer carriers to manage the care of high-risk individuals enrolled under the program.

(10) The board shall periodically evaluate the program to assure equity in the distribution of high-risk individuals under small employers, including consideration of the comparative lengths of time that carriers have provided coverage to meet their target of high-risk individuals and of the utilization and cost data for small groups and high-risk individuals enrolled with the carrier after the effective date of this section. The board, subject to the approval of the commissioner, shall have the authority to make adjustments to the procedures established pursuant to this subsection to further the goal of equitable distribution of high-risk individuals under small employers.

(11) Following the close of each fiscal year, the board shall determine the program expenses of the administration. The net expense for the year shall be recouped by assessment on the participating carriers.

(12) Small employer carriers shall accept application from all small employers until their targets for high-risk individuals are met, as determined by the board pursuant to subsection (9) of this section. A small employer carrier may also offer to small employers coverage that is more comprehensive than that required by this chapter.

(13) Each small employer carrier shall file with the commissioner, in a form and manner to be prescribed by the commissioner, an annual report. The report shall state the small employer carrier's enrollment of new small employer coverage written in the previous twelve-month period. The report also shall state the number and size of small employers with high-risk individuals and the number of high-risk individuals that meets the standard criteria for high-risk individuals, the names and number of the small employers that canceled or terminated coverage with it during the preceding calendar year, and the reasons for such cancellations or terminations, if known. The report shall be filed on or before March 1 for the preceding calendar year. A copy of the report shall be provided to the board.

(14) Neither the participation by members, the establishment of rates, forms, or procedures for coverages issued by the program, nor any other joint or collective action required by this chapter or the state of Washington shall be the basis of any legal action, criminal or civil liability or penalty against the program or any small employer carrier either jointly or separately.

(15) The program board and operations are exempt from any and all taxes. This exemption shall not be construed to include carriers."

"NEW SECTION. Sec. 9. HEALTH BENEFIT PLAN COMMITTEE. (1) The commissioner shall appoint a health benefit plan committee. The committee shall be composed of balanced representation from small employer carriers, including insurance companies, health care service contractors, health maintenance organizations, and other carriers, and from small employers, employees, and health care providers.

(2) The committee shall recommend the form and level of coverage to be made available by small employer carriers under sections 7 and 8 of this act.

(3)(a) The committee shall recommend benefit levels, cost sharing levels, exclusions, and limitations for the basic and standard health benefit plans. The committee shall also design at least two basic and two standard health benefit plans that contain benefit and cost sharing levels consistent with the basic method of operation and benefits of health maintenance organizations, at least one of which shall be consistent with restrictions and requirements imposed on health maintenance organizations by federal law, including the federal HMO act (42 U.S.C. Sec. 300e et seq.). The committee may also develop recommended underwriting standards for use voluntarily by carriers that employ such practices.

(b) With the approval of the board, the committee shall submit the health benefit plans described in (a) of this subsection to the commissioner for approval within one hundred eighty days after the appointment of the committee.

(c)(i) A small employer carrier shall file with the commissioner, in a format and manner prescribed by the commissioner, the health benefit plans to be used by the carrier. Any health benefit plan filed pursuant to this subsection (3)(c)(i) may be used by a small employer carrier immediately after it is filed.

(ii) The commissioner at any time may, after providing written notice and an opportunity for a hearing to the small employer carrier, disapprove the continued use by a small employer carrier of a basic or standard health benefit plan on the grounds that the plan does not meet the requirements of this subsection."

"NEW SECTION. Sec. 10. PERIODIC MARKET EVALUATION. (1) The board, in consultation with members of the committee, shall study and report at least every three years to the commissioner on the effectiveness of this chapter. The report shall analyze the effectiveness of this chapter in promoting rate stability, product availability, and percent of eligible employers providing coverage. The report may contain recommendations for actions to improve the overall effectiveness, efficiency, and fairness of the small employer health care coverage market place. The report shall address whether carriers and producers are fairly and actively marketing and issuing health benefit plans to small employers in fulfillment of the purposes of this chapter. The report may contain recommendations for market conduct or other regulatory standards or actions.

(2) The board shall commission an actuarial study, by an independent actuary approved by the commissioner, within the first three years of the operation of the program to evaluate and measure the relative risks being assumed by differing types of small employer carriers as a result of this chapter."

"NEW SECTION. Sec. 11. WAIVER OF CERTAIN STATE LAWS. Nothing in this chapter shall be construed to require the basic health benefit plan of a small employer carrier to satisfy the applicable requirements of:

(1) RCW 48.21.130, 48.21.140, 48.21.141, 48.21.142, 48.21.144, 48.21.146, 48.21.160 through 48.21.197, 48.21.200, 48.21.220, 48.21.225, 48.21.230, 48.21.235, 48.21.240, 48.21.244, 48.21.250, 48.21.300, 48.21.310, or 48.21.320;

(2) RCW 48.44.225, 48.44.240, 48.44.245, 48.44.290, 48.44.300, 48.44.310, 48.44.320, 48.44.325, 48.44.330, 48.44.335, 48.44.340, 48.44.344, 48.44.360, 48.44.400, 48.44.440, 48.44.450, and 48.44.460;

(3) RCW 48.46.275, 48.46.280, 48.46.285, 48.46.290, 48.46.350, 48.46.355, 48.46.375, 48.46.440, 48.46.480, 48.46.510, 48.46.520, and 48.46.530."

"NEW SECTION. Sec. 12. ADMINISTRATIVE PROCEDURES. The commissioner may issue rules in accordance with this chapter, to be implemented on July 1, 1993, upon due consideration of recommendations of the board."

"NEW SECTION. Sec. 13. STANDARDS TO ASSURE FAIR MARKETING. (1) If a small employer carrier chooses to offer only a basic or standard health benefit plan to a small employer, the carrier shall notify the small employer of the reason or reasons for this decision in a form and manner prescribed by the commissioner. If a small employer carrier that has met its target of high-risk individuals under section 8 of this act chooses not to offer a basic or standard health benefit plan to a small employer, the carrier shall notify the small employer in a form and manner prescribed by the commissioner of the availability of coverage through other small employer carriers in the geographic area.

(2) A small employer carrier may provide reasonable compensation, as provided under the plan of operation of the program, provided, no incentives or remuneration of any kind may be paid to or accepted by the producer to place or refer small groups with any carrier based on health status or claims history of potential enrollees.

(3) No small employer carrier shall terminate, fail to renew, or limit its contract or agreement of representation with a producer because the producer has placed small employers with the small employer carrier.

(4) No small employer carrier or producer shall induce or otherwise encourage a small employer to separate or otherwise exclude an employee from health coverage or benefits provided in connection with the employee's employment.

(5) If a small employer carrier declines to offer a health benefit plan to a small employer for a reason permitted under section 7 or 8 of this act, the small employer carrier shall notify the small employer of such decision in writing and shall state the reason or reasons for the decision.

(6) Upon due consideration of the recommendation of the board, the commissioner may adopt by rule additional standards to provide for the availability of health benefit plans to small employers through the program.

(7)(a) A violation of this section by a small employer insurer or producer shall be an unfair trade practice under chapter 48.30 RCW. A violation by a health care service contractor or a health maintenance organization is a prohibited practice under the applicable provisions of chapter 48.44 or 48.46 RCW.

(b) If a small employer carrier enters into a contract, agreement, or other arrangement with a third-party administrator to provide administrative, marketing, or the other services related to the offering of health benefit plans to small employers in Washington state, the third-party administrator shall be subject to this section as if it were a small employer carrier."

"Sec. 14. RCW 48.41.040 and 1989 c 121 s 2 are each amended to read as follows:

(1) There is hereby created a nonprofit entity to be known as the Washington state health insurance pool. All members in this state on or after May 18, 1987, shall be members of the pool. When authorized by federal law, all self-insured employers shall also be members of the pool.

(2) Pursuant to chapter 34.05 RCW the commissioner shall, within ninety days after ((May 18, 1987)) the effective date of this section, give notice to all members of the time and place for the ((initial)) organizational meetings of the pool as restructured pursuant to chapter --, Laws of 1992 (this act). A board of directors shall be established, which shall be comprised of ((nine)) thirteen members. The commissioner shall select (a) three members of the board who shall represent (((a))) (i) the general public, (((b))) (ii) health care providers, and (((c))) (iii) health insurance agents and (b) two members of the board who shall represent small employers as defined by section 3 of this act. The remaining members of the board shall be selected by election from among the members of the pool. The elected members shall, to the extent possible, include at least ((one)) three representatives of health care service contractors, ((one)) three representatives of health maintenance organizations, and ((one)) two representatives of commercial insurers which provides disability insurance. When self-insured organizations become eligible for participation in the pool, the membership of the board shall be increased to ((eleven)) fifteen and at least one member of the board shall represent the self-insurers. In electing and appointing members of the board, due regard shall be given to the need for geographic balance among members and for representation from diverse carrier perspectives. Members of the board representing small business shall not vote on matters involving the administration of the Washington state health insurance coverage access act established by this chapter. Members of the board representing providers and agents shall not vote on matters involving sections 1 through 13, 15, 16, 19, and 20 of this act.

(3) The ((original)) additional members of the board of directors as provided by sections 1 through 13, 15, 16, 19, and 20 of this act shall be appointed for intervals of one to three years. Thereafter, all board members shall serve a term of three years. Board members shall receive no compensation, but shall be reimbursed for all travel expenses as provided in RCW 43.03.050 and 43.03.060.

(4) The board shall submit to the commissioner a plan of operation for the pool and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the pool. The commissioner shall, after notice and hearing pursuant to chapter 34.05 RCW, approve the plan of operation if it is determined to assure the fair, reasonable, and equitable administration of the pool and provides for the sharing of pool losses on an equitable, proportionate basis among the members of the pool. The plan of operation shall become effective upon approval in writing by the commissioner consistent with the date on which the coverage under this chapter must be made available. If the board fails to submit a plan of operation within one hundred eighty days after the appointment of the board or any time thereafter fails to submit acceptable amendments to the plan, the commissioner shall, within ninety days after notice and hearing pursuant to chapters 34.05 and 48.04 RCW, adopt such rules as are necessary or advisable to effectuate this chapter. The rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the board and approved by the commissioner."

"NEW SECTION. Sec. 15. APPLICATION OF CHAPTER TO CHAPTERS 48.21, 48.44, AND 48.46 RCW. This chapter applies to carriers regulated under chapters 48.21, 48.44, and 48.46 RCW. After the effective date of this section, basic group disability insurance policies issued pursuant to RCW 48.21.045, basic health care service contracts issued pursuant to RCW 48.44.023, and basic health maintenance agreements issued pursuant to RCW 48.46.066 shall become subject to this chapter when they are renewed or reissued."

"NEW SECTION. Sec. 16. CAPTIONS. Captions as used in this chapter constitute no part of the law."

"NEW SECTION. Sec. 17. A new section is added to chapter 82.02 RCW to read as follows:

The provisions of this title shall not apply to the Washington small employer benefits coverage program board and operations established under section 8 of this act. This exemption shall not be construed to include carriers."

"NEW SECTION. Sec. 18. A new section is added to chapter 84.36 RCW to read as follows:

The real and personal property of the Washington small employer benefits coverage program board and operations is exempt from taxation."

"NEW SECTION. Sec. 19. SEVERABILITY. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected."

"NEW SECTION. Sec. 20. EFFECTIVE DATE. This act shall take effect July 1, 1993, except for sections 8, 9, 11, 12, 14, 17 and 18 of this act. Sections 8, 9, 11, 12, 14, 17 and 18 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. 21. Sections 1 through 13, 15, 16, 19, and 20 of this act shall constitute a new chapter in Title 48 RCW."

SB 6384 - H COMM AMD

By Committee on Financial Institutions & Insurance

On page 1, line 2 of the title, after "reform;" strike the remainder of the title and insert "amending RCW 48.41.040; adding a new section to chapter 82.02 RCW; adding a new section to chapter 84.36 RCW; adding a new chapter to Title 48 RCW; prescribing penalties; providing an effective date; and declaring an emergency."