HOUSE   BILL  ANALYSIS

                 HB 1064

Brief Description: Changing the financial and reporting requirements of health care service contractors and health maintenance organizations.

       Prepared by: Charlie Gavigan, Counsel (786-7340)

      House Financial Institutions & Insurance Committee

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BACKGROUND:  There are three types of health carriers in Washington State: (1) disability insurers, which are traditional insurance companies that reimburse policy-holders for covered health care expenses; (2) health care service contractors (HCSCs), which are organizations that provide health care services through a provider network to enrollees who have contracted with the HCSCs; and (3) health maintenance organizations, which are organizations that provide health care services to enrollees on a pre-paid basis (generally monthly).   

Health care service contractors and health maintenance organizations are required to maintain a certain level of net worth.  Those amounts currently are $1.5 million for health care service contractors and $1 million for health maintenance organizations.

Limited health care service contractors are defined as a provider that offers one health care service such as vision care, dental care, mental health services, or pharmaceutical services.  Currently, limited health care service contractors are not required to maintain any particular net worth. 

 SUMMARY:   Limited health care service contractors must maintain a minimum net worth of $500,000.  Existing limited health care service contractors that have a net worth less than $500,000 are allowed to continue operating and meet this requirement in specified increments by December 31, 1999.

Health care service contractors (HCSCs) and health maintenance organizations (HMOs) must maintain a net worth equal to the greater of $3 million or 2 percent of annual premiums on the first $150 million of annual premiums and 1 percent on annual premiums in excess of that amount. Existing health care service contractors and health maintenance organizations that currently do not meet the new requirements may meet these requirements in specified increments by December 31, 1999.

Any HMO or HCSC that falls below the net worth requirements is required to cure the deficiency within 90 days after the deficiency notice from the Insurance Commissioner.  If the deficiency is not corrected, the contractor or HMO is declared insolvent and may not issue any further individual or group contracts or agreements.  HMOs and HCSCs must file their annual statements with the National Association of Insurance Commissioners.

     Fiscal Note:  Not requested.

Effective Date:  Ninety days after adjournment of session in which bill is passed.

Rulemaking:  No specific authority in bill.