S-1497.2  _______________________________________________

                         SENATE BILL 6029

          _______________________________________________

State of Washington      55th Legislature     1997 Regular Session

By Senators Strannigan, Oke, McDonald and West

Read first time 02/28/97.  Referred to Committee on Health & Long‑Term Care.

Providing for catastrophic insurance/health care savings accounts.

    AN ACT Relating to catastrophic insurance/health care savings accounts; amending RCW 41.05.006, 41.05.011, 41.05.021, 41.05.065, 41.05.140, 41.05.170, and 41.05.180; reenacting and amending RCW 41.05.075; and creating a new section.

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

    Sec. 1.  RCW 41.05.006 and 1988 c 107 s 2 are each amended to read as follows:

    (1) The legislature recognizes that (a) the state is a major purchaser of health care services, (b) the increasing costs of such health care services are posing and will continue to pose a great financial burden on the state, (c) it is the state's policy, consistent with the best interests of the state, to provide comprehensive health care as an employer, to state employees and officials and their dependents and to those who are dependent on the state for necessary medical care, (d) in the alternative, it is the state's policy to provide a catastrophic insurance/health care savings account option, and (((d))) (e) it is imperative that the state begin to develop effective and efficient health care delivery systems and strategies for procuring health care services in order for the state to continue to purchase the most comprehensive health care or the most cost-effective catastrophic insurance/health care savings account possible.

    (2) It is therefore the purpose of this chapter to establish the Washington state health care authority whose purpose shall be to (a) develop health care benefit programs, funded to the fullest extent possible by the employer, that provide comprehensive health care or a catastrophic insurance/health care savings account option for eligible state employees, officials, and their dependents, and (b) study all state-purchased health care, alternative health care delivery systems, and strategies for the procurement of health care services and make recommendations aimed at minimizing the financial burden which health care poses on the state, its employees, and its charges, while at the same time allowing the state to provide the most comprehensive health care or the most cost-effective catastrophic insurance/health care savings account possible.

    Sec. 2.  RCW 41.05.011 and 1996 c 39 s 21 are each amended to read as follows:

    Unless the context clearly requires otherwise, the definitions in this section shall apply throughout this chapter.

    (1) "Administrator" means the administrator of the authority.

    (2) "Catastrophic insurance/health care savings account" means a medical benefit plan with a high annual deductible and out-of-pocket maximum and an account funded through employer contributions, as well as investment earning, for financing health services.  Health care expenses are paid by available funds from the health care savings account, up to the catastrophic insurance deductible, after which covered claims are to be paid by the medical benefit plan.  Account balances net incurred expenses accrue to the benefit of the employee, either at year-end or at some other defined time.

(3) "State purchased health care" or "health care" means medical and health care, pharmaceuticals, and medical equipment purchased with state and federal funds by the department of social and health services, the department of health, the basic health plan, the state health care authority, the department of labor and industries, the department of corrections, the department of veterans affairs, and local school districts.

    (((3))) (4) "Authority" means the Washington state health care authority.

    (((4))) (5) "Insuring entity" means an insurer as defined in chapter 48.01 RCW, a health care service contractor as defined in chapter 48.44 RCW, or a health maintenance organization as defined in chapter 48.46 RCW.

    (((5))) (6) "Flexible benefit plan" means a benefit plan that allows employees to choose the level of health care coverage provided and the amount of employee contributions from among a range of choices offered by the authority.

    (((6))) (7) "Employee" includes all full-time and career seasonal employees of the state, whether or not covered by civil service; elected and appointed officials of the executive branch of government, including full-time members of boards, commissions, or committees; and includes any or all part-time and temporary employees under the terms and conditions established under this chapter by the authority; justices of the supreme court and judges of the court of appeals and the superior courts; and members of the state legislature or of the legislative authority of any county, city, or town who are elected to office after February 20, 1970.  "Employee" also includes:  (a) Employees of a county, municipality, or other political subdivision of the state if the legislative authority of the county, municipality, or other political subdivision of the state seeks and receives the approval of the authority to provide any of its insurance programs by contract with the authority, as provided in RCW 41.04.205; (b) employees of employee organizations representing state civil service employees, at the option of each such employee organization, and, effective October 1, 1995, employees of employee organizations currently pooled with employees of school districts for the purpose of purchasing insurance benefits, at the option of each such employee organization; and (c) employees of a school district if the authority agrees to provide any of the school districts' insurance programs by contract with the authority as provided in RCW 28A.400.350.

    (((7))) (8) "Board" means the public employees' benefits board established under RCW 41.05.055.

    (((8))) (9) "Retired or disabled school employee" means:

    (a) Persons who separated from employment with a school district or educational service district and are receiving a retirement allowance under chapter 41.32 or 41.40 RCW as of September 30, 1993;

    (b) Persons who separate from employment with a school district or educational service district on or after October 1, 1993, and immediately upon separation receive a retirement allowance under chapter 41.32 or 41.40 RCW;

    (c) Persons who separate from employment with a school district or educational service district due to a total and permanent disability, and are eligible to receive a deferred retirement allowance under chapter 41.32 or 41.40 RCW.

    (((9))) (10) "Benefits contribution plan" means a premium only contribution plan, a medical flexible spending arrangement, or a cafeteria plan whereby state and public employees may agree to a contribution to benefit costs which will allow the employee to participate in benefits offered pursuant to 26 U.S.C. Sec. 125 or other sections of the internal revenue code.

    (((10))) (11) "Salary" means a state employee's monthly salary or wages.

    (((11))) (12) "Participant" means an individual who fulfills the eligibility and enrollment requirements under the benefits contribution plan.

    (((12))) (13) "Plan year" means the time period established by the authority.

    (((13))) (14) "Separated employees" means persons who separate from employment with an employer as defined in RCW 41.32.010(11) on or after July 1, 1996, and who are at least age fifty-five and have at least ten years of service under the teachers' retirement system plan III as defined in RCW 41.32.010(40).

    Sec. 3.  RCW 41.05.021 and 1995 1st sp.s. c 6 s 7 are each amended to read as follows:

    (1) The Washington state health care authority is created within the executive branch.  The authority shall have an administrator appointed by the governor, with the consent of the senate.  The administrator shall serve at the pleasure of the governor.  The administrator may employ up to seven staff members, who shall be exempt from chapter 41.06 RCW, and any additional staff members as are necessary to administer this chapter.  The administrator may delegate any power or duty vested in him or her by this chapter, including authority to make final decisions and enter final orders in hearings conducted under chapter 34.05 RCW.  The primary duties of the authority shall be to:  Administer state employees' insurance benefits and retired or disabled school employees' insurance benefits; administer the basic health plan pursuant to chapter 70.47 RCW; study state-purchased health care programs in order to maximize cost containment in these programs while ensuring access to quality health care; and implement state initiatives, joint purchasing strategies, and techniques for efficient administration that have potential application to all state-purchased health services.  The authority's duties include, but are not limited to, the following:

    (a) To administer health care benefit programs for employees and retired or disabled school employees as specifically authorized in RCW 41.05.065 and in accordance with the methods described in RCW 41.05.075, 41.05.140, and other provisions of this chapter;

    (b) To analyze state-purchased health care programs and to explore options for cost containment and delivery alternatives for those programs that are consistent with the purposes of those programs, including, but not limited to:

    (i) Creation of economic incentives for the persons for whom the state purchases health care to appropriately utilize and purchase health care services, including the development of flexible benefit plans ((to offset increases in individual financial responsibility)) and catastrophic insurance/health care services accounts;

    (ii) Utilization of provider arrangements that encourage cost containment, including but not limited to prepaid delivery systems, utilization review, and prospective payment methods, and that ensure access to quality care, including assuring reasonable access to local providers, especially for employees residing in rural areas;

    (iii) Coordination of state agency efforts to purchase drugs effectively as provided in RCW 70.14.050;

    (iv) Development of recommendations and methods for purchasing medical equipment and supporting services on a volume discount basis; and

    (v) Development of data systems to obtain utilization data from state-purchased health care programs in order to identify cost centers, utilization patterns, provider and hospital practice patterns, and procedure costs, utilizing the information obtained pursuant to RCW 41.05.031;

    (c) To analyze areas of public and private health care interaction;

    (d) To provide information and technical and administrative assistance to the board;

    (e) To review and approve or deny applications from counties, municipalities, and other political subdivisions of the state to provide state-sponsored insurance or self-insurance programs to their employees in accordance with the provisions of RCW 41.04.205, setting the premium contribution for approved groups as outlined in RCW 41.05.050;

    (f) To appoint a health care policy technical advisory committee as required by RCW 41.05.150;

    (g) To establish billing procedures and collect funds from school districts and educational service districts under RCW 28A.400.400 in a way that minimizes the administrative burden on districts; and

    (h) To promulgate and adopt rules consistent with this chapter as described in RCW 41.05.160.

    (2) On and after January 1, 1996, the public employees' benefits board may implement strategies to promote managed competition among employee health benefit plans.  Strategies may include but are not limited to:

    (a) Standardizing the benefit package;

    (b) Soliciting competitive bids for the benefit package;

    (c) Limiting the state's contribution to a percent of the lowest priced qualified plan within a geographical area;

    (d) Monitoring the impact of the approach under this subsection with regards to:  Efficiencies in health service delivery, cost shifts to subscribers, access to and choice of managed care plans state-wide, and quality of health services.  The health care authority shall also advise on the value of administering a benchmark employer-managed plan to promote competition among managed care plans.  The health care authority shall report its findings and recommendations to the legislature by January 1, 1997.

    (3) The health care authority shall, no later than July 1, 1996, submit to the appropriate committees of the legislature, proposed methods whereby, through the use of a voucher-type process, state employees may enroll with any health carrier to receive employee benefits.  Such methods shall include the employee option of participating in a health care savings account, as set forth in Title 48 RCW.

    (4) The Washington health care policy board shall study the necessity and desirability of the health care authority continuing as a self-insuring entity and make recommendations to the appropriate committees of the legislature by December 1, 1996.

    Sec. 4.  RCW 41.05.065 and 1996 c 140 s 1 are each amended to read as follows:

    (1) The board shall study all matters connected with the provision of health care coverage, life insurance, liability insurance, accidental death and dismemberment insurance, and disability income insurance or any of, or a combination of, the enumerated types of insurance for employees and their dependents on the best basis possible with relation both to the welfare of the employees and to the state.  However, liability insurance shall not be made available to dependents.

    (2) Except as provided in subsection (3) of this section, the board shall develop employee benefit plans that include comprehensive health care benefits for all employees.  In developing these plans, the board shall consider the following elements:

    (a) Methods of maximizing cost containment while ensuring access to quality health care;

    (b) Development of provider arrangements that encourage cost containment and ensure access to quality care, including but not limited to prepaid delivery systems and prospective payment methods;

    (c) Wellness incentives that focus on proven strategies, such as smoking cessation, injury and accident prevention, reduction of alcohol misuse, appropriate weight reduction, exercise, automobile and motorcycle safety, blood cholesterol reduction, and nutrition education;

    (d) Utilization review procedures including, but not limited to a cost-efficient method for prior authorization of services, hospital inpatient length of stay review, requirements for use of outpatient surgeries and second opinions for surgeries, review of invoices or claims submitted by service providers, and performance audit of providers;

    (e) Effective coordination of benefits;

    (f) Minimum standards for insuring entities; and

    (g) Minimum scope and content of public employee benefit plans to be offered to enrollees participating in the employee health benefit plans.  To maintain the comprehensive nature of employee health care benefits, employee eligibility criteria related to the number of hours worked and the benefits provided to employees shall be substantially equivalent to the state employees' health benefits plan and eligibility criteria in effect on January 1, 1993.  Nothing in this subsection (2)(g) shall prohibit changes or increases in employee point-of-service payments or employee premium payments for benefits.

    (3) By January 1, 1999, the board shall offer a catastrophic insurance/health care savings account as an employee benefit option for all employees.  In developing this option, the board shall include the following elements:

(a) Methods of maximizing cost containment while ensuring employees maximum choice of providers and access to quality health care;

(b) Effective coordination of benefits;

(c) Minimum standards for insuring entities;

(d) Methods for maximizing financial responsibility in the purchase of health services by employees;

(e) The establishment by the public employees' benefit board and the health care authority of a technical advisory committee to provide advice in the development of the benefit design and the establishment of the catastrophic insurance/health care services account.  The technical advisory committee shall be comprised of, at a minimum, representatives of insuring entities, employees, retired employees, retired school employees, persons with substantial experience in establishing catastrophic insurance/health care savings accounts, and the persons determined to be appropriate by the board.

By December 2002, the health care authority, in consultation with the public employees' benefits board, shall submit a report to the appropriate committees of the legislature, including an analysis of catastrophic insurance/health care services accounts as a continued health insurance option for all employees.

(4) The board shall design benefits and determine the terms and conditions of employee participation and coverage, including establishment of eligibility criteria.

    (((4))) (5) The board may authorize premium contributions for an employee and the employee's dependents in a manner that encourages the use of cost-efficient managed health care systems.

    (((5))) (6) Employees shall choose participation in one of the health care benefit plans or catastrophic insurance/health care services accounts developed by the board and may be permitted to waive coverage under terms and conditions established by the board.

    (((6))) (7) The board shall review plans proposed by insuring entities that desire to offer property insurance and/or accident and casualty insurance to state employees through payroll deduction.  The board may approve any such plan for payroll deduction by insuring entities holding a valid certificate of authority in the state of Washington and which the board determines to be in the best interests of employees and the state.  The board shall promulgate rules setting forth criteria by which it shall evaluate the plans.

    (((7))) (8) Before January 1, 1998, the public employees' benefits board shall make available one or more fully insured long-term care insurance plans that comply with the requirements of chapter 48.84 RCW.  Such programs shall be made available to eligible employees, retired employees, and retired school employees as well as eligible dependents which, for the purpose of this section, includes the parents of the employee or retiree and the parents of the spouse of the employee or retiree.  Employees of local governments and employees of political subdivisions not otherwise enrolled in the public employees' benefits board sponsored medical programs may enroll under terms and conditions established by the administrator, if it does not jeopardize the financial viability of the public employees' benefits board's long-term care offering.

    (a) Participation of eligible employees or retired employees and retired school employees in any long-term care insurance plan made available by the public employees' benefits board is voluntary and shall not be subject to binding arbitration under chapter 41.56 RCW.  Participation is subject to reasonable underwriting guidelines and eligibility rules established by the public employees' benefits board and the health care authority.

    (b) The employee, retired employee, and retired school employee are solely responsible for the payment of the premium rates developed by the health care authority.  The health care authority is authorized to charge a reasonable administrative fee in addition to the premium charged by the long-term care insurer, which shall include the health care authority's cost of administration, marketing, and consumer education materials prepared by the health care authority and the office of the insurance commissioner.

    (c) To the extent administratively possible, the state shall establish an automatic payroll or pension deduction system for the payment of the long-term care insurance premiums.

    (d) The public employees' benefits board and the health care authority shall establish a technical advisory committee to provide advice in the development of the benefit design and establishment of underwriting guidelines and eligibility rules.  The committee shall also advise the board and authority on effective and cost-effective ways to market and distribute the long-term care product.  The technical advisory committee shall be comprised, at a minimum, of representatives of the office of the insurance commissioner, providers of long-term care services, licensed insurance agents with expertise in long-term care insurance, employees, retired employees, retired school employees, and other interested parties determined to be appropriate by the board.

    (e) The health care authority shall offer employees, retired employees, and retired school employees the option of purchasing long-term care insurance through licensed agents or brokers appointed by the long-term care insurer.  The authority, in consultation with the public employees' benefits board, shall establish marketing procedures and may consider all premium components as a part of the contract negotiations with the long-term care insurer.

    (f) In developing the long-term care insurance benefit designs, the public employees' benefits board shall include an alternative plan of care benefit, including adult day services, as approved by the office of the insurance commissioner.

    (g) The health care authority, with the cooperation of the office of the insurance commissioner, shall develop a consumer education program for the eligible employees, retired employees, and retired school employees designed to provide education on the potential need for long-term care, methods of financing long-term care, and the availability of long-term care insurance products including the products offered by the board.

    (h) By December 1998, the health care authority, in consultation with the public employees' benefits board, shall submit a report to the appropriate committees of the legislature, including an analysis of the marketing and distribution of the long-term care insurance provided under this section.

    Sec. 5.  RCW 41.05.075 and 1994 sp.s. c 9 s 724, 1994 c 309 s 3, and 1994 c 153 s 6 are each reenacted and amended to read as follows:

    (1) The administrator shall provide benefit plans or catastrophic insurance/health services accounts designed by the board through a contract or contracts with insuring entities, through self-funding, self-insurance, or other methods of providing insurance coverage authorized by RCW 41.05.140.

    (2) The administrator shall establish a contract bidding process that:

    (a) Encourages competition among insuring entities;

    (b) Maintains an equitable relationship between premiums charged for similar benefits and between risk pools including premiums charged for retired state and school district employees under the separate risk pools established by RCW 41.05.022 and 41.05.080 such that insuring entities may not avoid risk when establishing the premium rates for retirees eligible for medicare;

    (c) Is timely to the state budgetary process; and

    (d) Sets conditions for awarding contracts to any insuring entity.

    (3) The administrator shall establish a requirement for review of utilization and financial data from participating insuring entities on a quarterly basis.

    (4) The administrator shall centralize the enrollment files for all employee and retired or disabled school employee health plans offered under chapter 41.05 RCW and develop enrollment demographics on a plan-specific basis.

    (5) All claims data shall be the property of the state.  The administrator may require of any insuring entity that submits a bid to contract for coverage all information deemed necessary including subscriber or member demographic and claims data necessary for risk assessment and adjustment calculations in order to fulfill the administrator's duties as set forth in this chapter.

    (6) All contracts with insuring entities for the provision of comprehensive health care benefits shall provide that the beneficiaries of such benefit plans may use on an equal participation basis the services of practitioners licensed pursuant to chapters 18.22, 18.25, 18.32, 18.53, 18.57, 18.71, 18.74, 18.83, and 18.79 RCW, as it applies to registered nurses and advanced registered nurse practitioners.  However, nothing in this subsection may preclude the administrator from establishing appropriate utilization controls approved pursuant to RCW 41.05.065(2) (a), (b), and (d).  Furthermore, nothing in this subsection applies these requirements to catastrophic insurance/health care savings accounts offered as an option to all state employees.

    (7) Beginning in January 1990, and each January thereafter until January 1996, the administrator shall publish and distribute to each school district a description of health care benefit plans available through the authority and the estimated cost if school district employees were enrolled.

    Sec. 6.  RCW 41.05.140 and 1994 c 153 s 10 are each amended to read as follows:

    (1) The authority may self-fund, self-insure, or enter into other methods of providing insurance coverage for insurance programs, including catastrophic insurance/health care savings accounts, under its jurisdiction except property and casualty insurance.  The authority shall contract for payment of claims or other administrative services for programs under its jurisdiction.  If a program does not require the prepayment of reserves, the authority shall establish such reserves within a reasonable period of time for the payment of claims as are normally required for that type of insurance under an insured program.

    (2) Reserves established by the authority for employee and retiree benefit programs shall be held in a separate trust fund by the state treasurer and shall be known as the public employees' and retirees' insurance reserve fund.  The state investment board shall act as the investor for the funds and, except as provided in RCW 43.33A.160, one hundred percent of all earnings from these investments shall accrue directly to the public employees' and retirees' insurance reserve fund.

    (3) Any savings realized as a result of a program created for employees and retirees under this section shall not be used to increase benefits unless such use is authorized by statute.

    (4) Any program created under this section shall be subject to the examination requirements of chapter 48.03 RCW as if the program were a domestic insurer.  In conducting an examination, the commissioner shall determine the adequacy of the reserves established for the program.

    (5) The authority shall keep full and adequate accounts and records of the assets, obligations, transactions, and affairs of any program created under this section.

    (6) The authority shall file a quarterly statement of the financial condition, transactions, and affairs of any program created under this section in a form and manner prescribed by the insurance commissioner.  The statement shall contain information as required by the commissioner for the type of insurance being offered under the program.  A copy of the annual statement shall be filed with the speaker of the house of representatives and the president of the senate.

    Sec. 7.  RCW 41.05.170 and 1989 c 345 s 4 are each amended to read as follows:

    (1) Each health plan offered to public employees and their covered dependents under this chapter which is not subject to the provisions of Title 48 RCW and is established or renewed on or after twelve months after July 23, 1989, shall include coverage for neurodevelopmental therapies for covered individuals age six and under.

    (2) Benefits provided under this section shall cover the services of those authorized to deliver occupational therapy, speech therapy, and physical therapy.  Benefits shall be payable only where the services have been delivered pursuant to the referral and periodic review of a holder of a license issued pursuant to chapter 18.71 or 18.57 RCW or where covered services have been rendered by such licensee.  Nothing in this section shall preclude a self-funded plan authorized under this chapter from negotiating rates with qualified providers.

    (3) Benefits provided under this section shall be for medically necessary services as determined by the self-funded plan authorized under this chapter.  Benefits shall be payable for services for the maintenance of a covered individual in cases where significant deterioration in the patient's condition would result without the service.  Benefits shall be payable to restore and improve function.

    (4) It is the intent of this section that the state, as an employer providing comprehensive health coverage including the benefits required by this section, retains the authority to design and employ utilization and cost controls.  Therefore, benefits delivered under this section may be subject to contractual provisions regarding deductible amounts and/or copayments established by the self-funded plan authorized under this chapter.  Benefits provided under this section may be subject to standard waiting periods for preexisting conditions, and may be subject to the submission of written treatment plans.

    (5) In recognition of the intent expressed in subsection (4) of this section, benefits provided under this section may be subject to contractual provisions establishing annual and/or lifetime benefit limits.  Such limits may define the total dollar benefits available, or may limit the number of services delivered as established by the self-funded plan authorized under this chapter.

(6) Catastrophic insurance/health services accounts developed under RCW 41.05.065(3) are not required to comply with this section.

    Sec. 8.  RCW 41.05.180 and 1994 sp.s. c 9 s 725 are each amended to read as follows:

    Each health plan offered to public employees and their covered dependents under this chapter that is not subject to the provisions of Title 48 RCW and is established or renewed after January 1, 1990, and that provides benefits for hospital or medical care shall provide benefits for screening or diagnostic mammography services, provided that such services are delivered upon the recommendation of the patient's physician or advanced registered nurse practitioner as authorized by the nursing care quality assurance commission pursuant to chapter 18.79 RCW or physician assistant pursuant to chapter 18.71A RCW.

    This section shall not be construed to prevent the application of standard health plan provisions applicable to other benefits such as deductible or copayment provisions.  This section does not limit the authority of the state health care authority to negotiate rates and contract with specific providers for the delivery of mammography services.  This section shall not apply to medicare supplement policies or supplemental contracts covering a specified disease or other limited benefits.  This section does not apply to catastrophic insurance/health services accounts developed under RCW 41.05.065(3).

NEW SECTION. Sec. 9.  If Senate Bill No. 5178 becomes law, catastrophic insurance/health services accounts developed under RCW 41.05.065(3) are not required to comply with the provisions of Senate Bill No. 5178.

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