H-3750

AN ACT Relating to small employer health insurance coverage; amending RCW 48.21.260, 48.44.370, 48.46.450, and 48.21.030; and adding a new chapter to Title 48 RCW.

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

NEW SECTION. Sec. 1. The legislature finds that small business employers are unable to buy affordable health care coverage for their employees that is comparable in cost and benefits or service to that available to larger businesses. It further finds that this inability directly affects Washington citizens' access to health care. It is, therefore, the intent of the legislature to make certain that all citizens have equal access to health care coverage through their employers. Thus, it is the further intent of the legislature to insure this access regardless of the size of the employer's business enterprise.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Issuer" means group disability insurers as defined in chapter 48.21 RCW, health service contractors as defined in chapter 48.44 RCW, and health maintenance organizations as defined in chapter 48.46 RCW.

(2) "Small employer" and "employer" mean a business which, during the most recent calendar year, employed at least three and not more than fifty employees who are eligible for coverage under a health care benefit plan on at least fifty percent of that business' working days.

(3) "Health care benefit plan" and "plan" mean any group policy, contract, or agreement, which provides medical, surgical, or hospital care or benefits to employees of a small employer and their dependents.

(4) "Premium" means consideration for issuance and administration of a policy, contract, or agreement.

NEW SECTION. Sec. 3. (1)(a) An issuer providing a health care benefit plan to a small employer may refuse to renew the plan, without penalties, for any of the following reasons:

(i) Nonpayment of required premium;

(ii) Fraud or misrepresentation on the part of the employer; or

(iii) Noncompliance with provisions of the plan regarding minimum numbers of or percentages of insured employees;

(b) The refusal to renew a group health care benefit plan requires ninety days written notice to the group.

(2) If an issuer refuses to renew a health care benefit plan for any reason not under subsection (1)(a) of this section the issuer may not accept any new small employer business for a period of two years after it provides notice of such refusal.

(3) Nothing in this section is intended to prevent any issuer from rescinding or refusing to renew the coverage of any individual employee or dependent of that employee for fraud or material misrepresentation.

NEW SECTION. Sec. 4. (1) An issuer shall establish the premium rate in accordance with the issuer's table, contractor's table, or organization's table of premium rates applicable to the age and class of risk of each person to be covered under the policy. However, no issuer shall charge any single group a rate greater than two times that of the lowest rate the issuer charges to any small business employer in the state.

(2) No issuer may increase the annual premium, subject to the limitations under subsection (1) of this section, by more than:

(a) The percentage change in the new business premium rate for employers with similar characteristics as measured between the first day of the calendar year in which the new rates take effect and the first day of the prior calendar year for groups with similar characteristics; plus

(b) Fifteen percent annually based on group experience; plus

(c) An adjustment because of changes in the coverage provided or changes in the work force characteristics of the employer.

NEW SECTION. Sec. 5. No issuer may refuse to offer coverage under a health care benefit plan to employees of a small employer based solely on the nature of the employer's business. An issuer may charge additional premiums based on the nature of the employer's business that do not exceed one hundred fifty percent of the total premium that would be charged to that employer under section 3 of this act regardless of the nature of the employer's business.

Sec. 6. RCW 48.21.260 and 1984 c 190 s 3 are each amended to read as follows:

(1) Except as otherwise provided by this section, any group disability insurance policy issued, renewed, or amended on or after January 1, 1985, that provides benefits for hospital or medical expenses shall contain a provision granting a person covered by the group policy the right to obtain a conversion policy from the insurer upon termination of the person's eligibility for coverage under the group policy.

(2) An insurer need not offer a conversion policy to:

(a) A person whose coverage under the group policy ended when the person's employment or membership was terminated for misconduct: PROVIDED, That when a person's employment or membership is terminated for misconduct, a conversion policy shall be offered to the spouse and/or dependents of the terminated employee or member. The policy shall include in the conversion provisions the same conversion rights and conditions which are available to employees or members and their spouses and/or dependents who are terminated for reasons other than misconduct; or

(b) A person who is ((~~eligible for federal Medicare coverage; or~~

~~(c) A person who is~~)) covered under another group plan, policy, contract, or agreement providing benefits for hospital or medical care.

(3) To obtain the conversion policy, a person must submit a written application and the first premium payment for the conversion policy not later than thirty-one days after the date the person's group coverage terminates. The conversion policy shall become effective, without lapse of coverage, immediately following termination of coverage under the group policy.

(4) If an insurer or group policyholder does not renew, cancels, or otherwise terminates the group policy, the insurer shall offer a conversion policy to any person who was covered under the terminated policy unless the person is eligible to obtain group hospital or medical expense coverage within thirty-one days after such nonrenewal, cancellation, or termination of the group policy.

(5) The insurer shall determine the premium for the conversion policy in accordance with the insurer's table of premium rates applicable to the age and class of risk of each person to be covered under the policy and the type and amount of benefits provided. The benefits offered shall not be less than those in the group policy and the individual premium shall not exceed one hundred thirty-five percent of the rate that would have been offered under the same plan in the same time period. The insurer may apply any benefits already paid under the plan against the benefit limits of the conversion policy providing that it shall also credit the insured with any waiting period, deductible, or coinsurance previously credited under the plan.

(6) If the insured is eligible for medicare the insurer shall offer a medigap policy providing supplemental benefits to medicare. The total benefits when combined with medicare shall not be less than those in the group policy. The individual premium shall not exceed seventy-five percent of the rate that is offered under the group plan. The insurer may apply any benefits already paid under the plan against the benefit limits of the conversion policy providing that it shall also credit the insured with any waiting period, deductible, or coinsurance previously credited under the plan.

Sec. 7. RCW 48.44.370 and 1984 c 190 s 6 are each amended to read as follows:

(1) Except as otherwise provided by this section, any group health care service contract entered into or renewed on or after January 1, 1985, that provides benefits for hospital or medical expenses shall contain a provision granting a person covered by the group contract the right to obtain a conversion contract from the contractor upon termination of the person's eligibility for coverage under the group contract.

(2) A contractor need not offer a conversion contract to:

(a) A person whose coverage under the group contract ended when the person's employment or membership was terminated for misconduct: PROVIDED, That when a person's employment or membership is terminated for misconduct, a conversion policy shall be offered to the spouse and/or dependents of the terminated employee or member. The policy shall include in the conversion provisions the same conversion rights and conditions which are available to employees or members and their spouses and/or dependents who are terminated for reasons other than misconduct; or

(b) A person who is ((~~eligible for federal Medicare coverage; or~~

~~(c) A person who is~~)) covered under another group plan, policy, contract, or agreement providing benefits for hospital or medical care.

(3) To obtain the conversion contract, a person must submit a written application and the first premium payment for the conversion contract not later than thirty-one days after the date the person's eligibility for group coverage terminates. The conversion contract shall become effective, without lapse of coverage, immediately following termination of coverage under the group contract.

(4) If a health care service contractor or group contract holder does not renew, cancels, or otherwise terminates the group contract, the health care service contractor shall offer a conversion contract to any person who was covered under the terminated contract unless the person is eligible to obtain group hospital or medical expense coverage within thirty-one days after such nonrenewal, cancellation, or termination of the group contract.

(5) The health care service contractor shall determine the premium for the conversion contract in accordance with the contractor's table of premium rates applicable to the age and class of risk of each person to be covered under the contract and the type and amount of benefits provided. The benefits offered shall not be less than those in the group contract and the individual premium shall not exceed one hundred thirty-five percent of the rate that would have been offered under the same plan in the same time period. The insurer may apply any benefits already paid under the plan against the benefit limits of the conversion policy providing that it shall also credit the insured with any waiting period, deductible, or coinsurance previously credited under the plan.

(6) If the person covered under the group contract is eligible for medicare the contractor shall offer medigap coverage providing supplemental benefits to medicare. The total benefits when combined with medicare shall not be less than those in the group plan. The individual premium shall not exceed seventy-five percent of the rate that is offered under the group plan. The insurer may apply any benefits already paid under the plan against the benefit limits of the conversion policy providing that it shall also credit the insured with any waiting period, deductible, or coinsurance previously credited under the plan.

Sec. 8. RCW 48.46.450 and 1984 c 190 s 9 are each amended to read as follows:

(1) Except as otherwise provided by this section, any group health maintenance agreement entered into or renewed on or after January 1, 1985, that provides benefits for hospital or medical care shall contain a provision granting a person covered by the group agreement the right to obtain a conversion agreement from the health maintenance organization upon termination of the person's eligibility for coverage under the group agreement.

(2) A health maintenance organization need not offer a conversion agreement to:

(a) A person whose coverage under the group agreement ended when the person's employment or membership was terminated for misconduct: PROVIDED, That when a person's employment or membership is terminated for misconduct, a conversion policy shall be offered to the spouse and/or dependents of the terminated employee or member. The policy shall include in the conversion provisions the same conversion rights and conditions which are available to employees or members and their spouses and/or dependents who are terminated for reasons other than misconduct; or

(b) A person who is ((~~eligible for federal Medicare coverage; or~~

~~(c) A person who is~~)) covered under another group plan, policy, contract, or agreement providing benefits for hospital or medical care.

(3) To obtain the conversion agreement, a person must submit a written application and the first premium payment for the conversion agreement not later than thirty-one days after the date the person's eligibility for group coverage terminates. The conversion agreement shall become effective without lapse of coverage, immediately following termination of coverage under the group agreement.

(4) If a health maintenance organization or group agreement holder does not renew, cancels, or otherwise terminates the group agreement, the health maintenance organization shall offer a conversion agreement to any person who was covered under the terminated agreement unless the person is eligible to obtain group benefits for hospital or medical care within thirty-one days after such nonrenewal, cancellation, or termination of the group agreement.

(5) The health maintenance organization shall determine the premium for the conversion agreement in accordance with the organization's table of premium rates applicable to the age and class of risk of each person to be covered under the agreement and the type and amount of benefits provided. The benefits offered shall not be less than those in the group agreement and the individual premium shall not exceed one hundred thirty-five percent of the rate that would have been offered under the same plan in the same time period. The insurer may apply any benefits already paid under the plan against the benefit limits of the conversion policy providing that it shall also credit the insured with any waiting period, deductible, or coinsurance previously credited under the plan.

(6) If the person covered under the group agreement is eligible for medicare the contractor shall offer medigap coverage providing supplemental benefits to medicare. The total benefits when combined with medicare shall not be less than those in the group plan. The individual premium shall not exceed seventy-five percent of the rate that is offered under the group plan. The insurer may apply any benefits already paid under the plan against the benefit limits of the conversion policy providing that it shall also credit the insured with any waiting period, deductible, or coinsurance previously credited under the plan.

NEW SECTION. Sec. 9. No issuer offering a health care benefit plan may refuse to accept for coverage under the plan, any person employed after the effective date of the policy, who on the date of application for the coverage is eligible, if that person has, as of that date, been continuously covered under a health care benefit plan or other employer provided health care coverage for a period of one year. However, the issuer may refuse to insure the employee for health underwriting considerations, sufficient to qualify the person as a high risk eligible for the Washington health insurance pool, or because the employee was previously insured by a policy issued by any state high risk pool. If a new employee is refused coverage, the employer shall facilitate coverage through the Washington state health insurance pool, under chapter 48.41 RCW, and pay the same premium amount to the pool as he or she is paying for the group coverage for the other employees. If the pool premium is a greater amount, the employee and employer shall negotiate the difference as part of the employment contract. An issuer does not need to provide benefits greater than those provided to a person insured as a standard risk under the health care benefit plan or greater than those that would have been provided under prior coverage had it remained in force if they were greater than the standard risk. For purposes of this section, a person is deemed to be continuously covered for a period of one year if the person is insured at the beginning and end of that period and has not had any breaks in coverage during that period totaling more than thirty-one days.

Sec. 10. RCW 48.21.030 and 1947 c 79 s .21.03 are each amended to read as follows:

(1) A policy of group disability insurance may be issued to a corporation, as policyholder, existing primarily for the purpose of assisting individuals who are its subscribers in securing medical, hospital, dental, and other health care services for themselves and their dependents, covering all and not less than five hundred such subscribers and dependents, with respect only to medical, hospital, dental, and other health care services.

(2) This section does not apply to sections 1 through 4 and 8 of this act.

NEW SECTION. Sec. 11. Sections 1 through 5 and 9 of this act shall constitute a new chapter in Title 48 RCW.