"NEW SECTION.  Sec. 1   FINDINGS AND INTENT. (1) The legislature finds that many small employers struggle with the cost of providing employer-sponsored health insurance coverage to their employees, while others are unable to offer employer-sponsored health insurance due to its high cost. Low-wage workers also struggle with the burden of paying their share of the costs of employer-sponsored health insurance, while others turn down their employer's offer of coverage due to its costs. A small employer health insurance program that provides subsidies for employers who want to purchase one type of insurance and allows other employers to choose more kinds of low-cost insurance products would help more small employers provide health insurance for their employees.
     (2) The legislature intends, through establishment of a small employer health insurance partnership program, to remove economic barriers to health insurance coverage for low-wage employees of small employers by building on the private sector health benefit plan system and encouraging employer and employee participation in employer-sponsored health benefit plan coverage.

NEW SECTION.  Sec. 2   DEFINITIONS. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Administrator" means the administrator of the Washington state health care authority, established under chapter 41.05 RCW.
     (2) "Eligible employee" means an individual who:
     (a) Is a resident of the state of Washington;
     (b) Has family income less than two hundred percent of the federal poverty level, as determined annually by the federal department of health and human services; and
     (c) Is employed by a small employer.
     (3) "Health benefit plan" has the same meaning as defined in RCW 48.43.005 or any plan provided by a self-funded multiple employer welfare arrangement as defined in RCW 48.125.010 or by a self-insured employer-sponsored health benefit arrangement under the federal employee retirement income security act of 1974, as amended.
     (4) "Program" means the small employer health insurance partnership program established in section 3 of this act.
     (5) "Small employer" has the same meaning as defined in RCW 48.43.005.
     (6) "Subsidy" means payment or reimbursement to an eligible employee toward the purchase of a health benefit plan, and may include a net billing arrangement with insurance carriers or a prospective or retrospective payment for health benefit plan premiums.

NEW SECTION.  Sec. 3   SMALL EMPLOYER HEALTH INSURANCE PARTNERSHIP PROGRAM ESTABLISHED. To the extent funding is appropriated in the operating budget for this purpose, the small employer health insurance partnership program is established. The administrator shall be responsible for the implementation and operation of the small employer health insurance partnership program, directly or by contract. The administrator shall offer premium subsidies to eligible employees under section 5 of this act, subsidies to fund a health savings account under section 4 of this act, or a business and occupation tax deduction under section 6 of this act.

NEW SECTION.  Sec. 4   HEALTH SAVINGS ACCOUNT SUBSIDIES TO ELIGIBLE EMPLOYEES. (1) Beginning July 1, 2007, the administrator shall accept applications from eligible employees, on behalf of themselves, their spouses, and their dependent children, to receive subsidies to fund a health savings account through the small employer health insurance partnership program.
     (2) Health savings account subsidy payments may be provided to eligible employees if:
     (a) The eligible employee is employed by a small employer; and
     (b) The eligible employee participates in an employer sponsored high deductible health plan and health savings account that conforms to section 223, Part VII of subchapter B of chapter 1 of the internal revenue code of 1986.
     (3) The amount of an eligible employee's health savings account subsidy shall be determined by the legislature in the biennial operating budget.
     (4) After an eligible individual has enrolled in the program, the program shall issue subsidies in an amount determined pursuant to subsection (3) of this section to either the eligible employee or to the carrier designated by the eligible employee.
     (5) An eligible employee must agree to provide verification of continued enrollment in his or her small employer's health benefit plan on a semiannual basis or to notify the administrator whenever his or her enrollment status changes, whichever is earlier. Verification or notification may be made directly by the employee, or through his or her employer or the carrier providing the small employer health benefit plan. When necessary, the administrator has the authority to perform retrospective audits on health savings account subsidy accounts. The administrator may suspend or terminate an employee's participation in the program and seek repayment of any subsidy amounts paid due to the omission or misrepresentation of an applicant or enrolled employee. The administrator shall adopt rules to define the appropriate application of these sanctions and the processes to implement the sanctions provided in this subsection, within available resources.

NEW SECTION.  Sec. 5   PREMIUM SUBSIDIES TO ELIGIBLE EMPLOYEES. (1) Beginning July 1, 2007, the administrator shall accept applications from eligible employees, on behalf of themselves, their spouses, and their dependent children, to receive premium subsidies through the small employer health insurance partnership program.
     (2) Premium subsidy payments may be provided to eligible employees if:
     (a) The eligible employee is employed by a small employer; and
     (b) The small employer will pay at least forty percent of the monthly premium cost for health benefit plan coverage of the eligible employee.
     (3) The amount of an eligible employee's premium subsidy shall be determined by applying the sliding scale subsidy schedule developed for subsidized basic health plan enrollees under RCW 70.47.060 to the employee's premium obligation for his or her employer's health benefit plan. However, in no case shall the amount of an eligible employee's monthly premium subsidy exceed the amount he or she would have received as a basic health plan enrollee.
     (4) After an eligible individual has enrolled in the program, the program shall issue subsidies in an amount determined pursuant to subsection (3) of this section to either the eligible employee or to the carrier designated by the eligible employee.
     (5) An eligible employee must agree to provide verification of continued enrollment in his or her small employer's health benefit plan on a semiannual basis or to notify the administrator whenever his or her enrollment status changes, whichever is earlier. Verification or notification may be made directly by the employee, or through his or her employer or the carrier providing the small employer health benefit plan. When necessary, the administrator has the authority to perform retrospective audits on premium subsidy accounts. The administrator may suspend or terminate an employee's participation in the program and seek repayment of any subsidy amounts paid due to the omission or misrepresentation of an applicant or enrolled employee. The administrator shall adopt rules to define the appropriate application of these sanctions and the processes to implement the sanctions provided in this subsection, within available resources.

NEW SECTION.  Sec. 6   A new section is added to chapter 82.04 RCW to read as follows:
     (1) In computing tax there may be deducted from the measure of tax the amount paid by small employers to provide health care services for its employees. Payments made by employees are not eligible for deduction under this subsection.
     (2) For the purposes of this section, the following definitions apply:
     (a) "Small employer" has the meaning provided in RCW 48.43.005;
     (b) "Health care services" means a health benefit plan as defined in RCW 48.43.005, contributions to health savings accounts as defined by the United States internal revenue service, or other health care services purchased by the small employer for its employees.

NEW SECTION.  Sec. 7   ENROLLMENT LIMITS TO REMAIN WITHIN APPROPRIATION. Enrollment in the small employer health insurance partnership program is not an entitlement and shall not result in expenditures that exceed the amount that has been appropriated for the program in the operating budget. If it appears that continued enrollment will result in expenditures exceeding the appropriated level for a particular fiscal year, the administrator may freeze new enrollment in the program and establish a waiting list of eligible employees who shall receive subsidies only when sufficient funds are available.

NEW SECTION.  Sec. 8   COLLABORATION WITH COMMUNITY ORGANIZATIONS. In implementing the small employer health insurance partnership program, the administrator shall work with organizations awarded grants through the community health care collaborative grant program established under Engrossed Second Substitute Senate Bill No. 6459, if enacted. The administrator may use funds appropriated for the small employer health insurance partnership program to enhance a grant otherwise awarded to a community-based organization. The grant enhancement shall be used by the organization specifically to provide a premium subsidy to eligible employees within the geographic region it serves.

NEW SECTION.  Sec. 9   RULES. The administrator shall adopt all rules necessary for the implementation and operation of the small employer health insurance partnership program. As part of the rule development process, the administrator shall consult with small employers, carriers, employee organizations, and the office of the insurance commissioner under Title 48 RCW to determine an effective and efficient method for the payment of subsidies under this chapter, including methods for electronic funds transfers of the subsidy. All rules shall be adopted in accordance with chapter 34.05 RCW.

NEW SECTION.  Sec. 10   REPORTS TO THE LEGISLATURE. The administrator shall report biennially to the relevant policy and fiscal committees of the legislature on the effectiveness and efficiency of the small employer health insurance partnership program, including the services and benefits covered under the purchased health benefit plans, consumer satisfaction, and other program operational issues.

NEW SECTION.  Sec. 11   STATE CHILDREN'S HEALTH INSURANCE PROGRAM--FEDERAL WAIVER REQUEST. The department of social and health services shall submit a request to the federal department of health and human services by October 1, 2006, for a state children's health insurance program section 1115 demonstration waiver. The waiver request shall seek authorization from the federal government to draw down Washington state's unspent state children's health insurance program allotment to finance basic health plan coverage, as provided in chapter 70.47 RCW, for parents of children enrolled in medical assistance or the state children's health insurance program. The waiver also shall seek authorization from the federal government to utilize the resulting state savings to finance expanded basic health plan enrollment, or subsidies provided to low-wage workers through the small employer health insurance partnership program established in this chapter.

NEW SECTION.  Sec. 12   The joint legislative audit and review committee shall conduct a program and fiscal review of the small employer health insurance partnership program and report their findings and recommendation to the appropriate committees of the legislature no later than November 2009. The review shall include an assessment of at least the following issues:
     (1) The extent to which eligible employees' employers were providing health insurance coverage prior to their entry into the program, and whether their employer modified their contribution to health plan premium costs or the scope of coverage provided prior to the employee's entry into the program;
     (2) The extent to which eligible employees are employed by an employer who began providing health insurance coverage to its employees due at least in part to the availability of the program;
     (3) The average percentage and dollar amount of employer contributions to premiums for eligible employees and dependents participating in the program;
     (4) The scope of covered benefits and the cost of employer-sponsored health plans being subsidized through the program; and
     (5) The amount of the state premium subsidy per participating employee and their dependents, in comparison to the cost that the state would have incurred if the eligible employees and their dependents were enrolled in the basic health plan.

Sec. 13   RCW 48.21.045 and 2004 c 244 s 1 are each amended to read as follows:
     (1)(((a))) An insurer offering any health benefit plan to a small employer, either directly or through an association or member-governed group formed specifically for the purpose of purchasing health care, may offer and actively market to the small employer ((a)) no more than one health benefit plan featuring a limited schedule of covered health care services. ((Nothing in this subsection shall preclude an insurer from offering, or a small employer from purchasing, other health benefit plans that may have more comprehensive benefits than those included in the product offered under this subsection. An insurer offering a health benefit plan under this subsection shall clearly disclose all covered benefits to the small employer in a brochure filed with the commissioner.
     (b) A health benefit plan offered under this subsection shall provide coverage for hospital expenses and services rendered by a physician licensed under chapter 18.57 or 18.71 RCW but is not subject to the requirements of 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))) (a) The plan offered under this subsection may be offered with a choice of cost-sharing arrangements, and may, but is not required to, comply with: RCW 48.21.130 through 48.21.240, 48.21.244 through 48.21.280, 48.21.300 through 48.21.320, 48.43.045(1) except as required in (b) of this subsection, 48.43.093, 48.43.115 through 48.43.185, 48.43.515(5), or 48.42.100.
     (b) In offering the plan under this subsection, the insurer must offer the small employer the option of permitting every category of health care provider to provide health services or care for conditions covered by the plan pursuant to RCW 48.43.045(1).
     (2) An insurer offering the plan under subsection (1) of this section must also offer and actively market to the small employer at least one additional health benefit plan.
     (3) Nothing in this section shall prohibit an insurer from offering, or a purchaser from seeking, health benefit plans with benefits in excess of the health benefit plan offered under subsection (1) of this section. All forms, policies, and contracts shall be submitted for approval to the commissioner, and the rates of any plan offered under this section shall be reasonable in relation to the benefits thereto.
     (((3))) (4) Premium rates for health benefit plans for small employers as defined in this section shall be subject to the following provisions:
     (a) The insurer shall develop its rates based on an adjusted community rate and may only vary the adjusted community rate for:
     (i) Geographic area;
     (ii) Family size;
     (iii) Age; and
     (iv) Wellness activities.
     (b) The adjustment for age in (a)(iii) of this subsection may not use age brackets smaller than five-year increments, which shall begin with age twenty and end with age sixty-five. Employees under the age of twenty shall be treated as those age twenty.
     (c) The insurer shall be permitted to develop separate rates for individuals age sixty-five or older for coverage for which medicare is the primary payer and coverage for which medicare is not the primary payer. Both rates shall be subject to the requirements of this subsection (((3))) (4).
     (d) The permitted rates for any age group shall be no more than four hundred twenty-five percent of the lowest rate for all age groups on January 1, 1996, four hundred percent on January 1, 1997, and three hundred seventy-five percent on January 1, 2000, and thereafter.
     (e) A discount for wellness activities shall be permitted to reflect actuarially justified differences in utilization or cost attributed to such programs.
     (f) The rate charged for a health benefit plan offered under this section may not be adjusted more frequently than annually except that the premium may be changed to reflect:
     (i) Changes to the enrollment of the small employer;
     (ii) Changes to the family composition of the employee;
     (iii) Changes to the health benefit plan requested by the small employer; or
     (iv) Changes in government requirements affecting the health benefit plan.
     (g) Rating factors shall produce premiums for identical groups that differ only by the amounts attributable to plan design, with the exception of discounts for health improvement programs.
     (h) For the purposes of this section, a health benefit plan that contains a restricted network provision shall not be considered similar coverage to a health benefit plan that does not contain such a provision, provided that the restrictions of benefits to network providers result in substantial differences in claims costs. A carrier may develop its rates based on claims costs ((due to network provider reimbursement schedules or type of network)) for a plan. This subsection does not restrict or enhance the portability of benefits as provided in RCW 48.43.015.
     (i) Except for small group health benefit plans that qualify as insurance coverage combined with a health savings account as defined by the United States internal revenue service, adjusted community rates established under this section shall pool the medical experience of all small groups purchasing coverage. However, annual rate adjustments for each small group health benefit plan may vary by up to plus or minus ((four)) eight percentage points from the overall adjustment of a carrier's entire small group pool((, such overall adjustment to be approved by the commissioner, upon a showing by the carrier, certified by a member of the American academy of actuaries that: (i) The variation is a result of deductible leverage, benefit design, or provider network characteristics; and (ii) for a rate renewal period, the projected weighted average of all small group benefit plans will have a revenue neutral effect on the carrier's small group pool. Variations of greater than four percentage points are subject to review by the commissioner, and must be approved or denied within sixty days of submittal)) if certified by a member of the American academy of actuaries, that: (i) The variation is a result of deductible leverage, benefit design, claims cost trend for the plan, or provider network characteristics; and (ii) for a rate renewal period, the projected weighted average of all small group benefit plans will have a revenue neutral effect on the carrier's small group pool. Variations of greater than eight percentage points are subject to review by the commissioner, and must be approved or denied within thirty days of submittal. A variation that is not denied within ((sixty)) thirty days shall be deemed approved. The commissioner must provide to the carrier a detailed actuarial justification for any denial ((within thirty days)) at the time of the denial.
     (((4))) (5) Nothing in this section shall restrict the right of employees to collectively bargain for insurance providing benefits in excess of those provided herein.
     (((5))) (6)(a) Except as provided in this subsection, requirements used by an insurer in determining whether to provide coverage to a small employer shall be applied uniformly among all small employers applying for coverage or receiving coverage from the carrier.
     (b) An insurer shall not require a minimum participation level greater than:
     (i) One hundred percent of eligible employees working for groups with three or less employees; and
     (ii) Seventy-five percent of eligible employees working for groups with more than three employees.
     (c) In applying minimum participation requirements with respect to a small employer, a small employer shall not consider employees or dependents who have similar existing coverage in determining whether the applicable percentage of participation is met.
     (d) An insurer may not increase any requirement for minimum employee participation or modify any requirement for minimum employer contribution applicable to a small employer at any time after the small employer has been accepted for coverage.
     (((6))) (7) An insurer must offer coverage to all eligible employees of a small employer and their dependents. An insurer may not offer coverage to only certain individuals or dependents in a small employer group or to only part of the group. An insurer may not modify a health plan with respect to a small employer or any eligible employee or dependent, through riders, endorsements or otherwise, to restrict or exclude coverage or benefits for specific diseases, medical conditions, or services otherwise covered by the plan.
     (((7))) (8) As used in this section, "health benefit plan," "small employer," "adjusted community rate," and "wellness activities" mean the same as defined in RCW 48.43.005.

Sec. 14   RCW 48.44.023 and 2004 c 244 s 7 are each amended to read as follows:
     (1)(((a))) A health care services contractor offering any health benefit plan to a small employer, either directly or through an association or member-governed group formed specifically for the purpose of purchasing health care, may offer and actively market to the small employer ((a)) no more than one health benefit plan featuring a limited schedule of covered health care services. ((Nothing in this subsection shall preclude a contractor from offering, or a small employer from purchasing, other health benefit plans that may have more comprehensive benefits than those included in the product offered under this subsection. A contractor offering a health benefit plan under this subsection shall clearly disclose all covered benefits to the small employer in a brochure filed with the commissioner.
     (b) A health benefit plan offered under this subsection shall provide coverage for hospital expenses and services rendered by a physician licensed under chapter 18.57 or 18.71 RCW but is not subject to the requirements of 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.
     (2))) (a) The plan offered under this subsection may be offered with a choice of cost-sharing arrangements, and may, but is not required to, comply with: RCW 48.44.210, 48.44.212, 48.44.225, 48.44.240 through 48.44.245, 48.44.290 through 48.44.340, 48.44.344, 48.44.360 through 48.44.380, 48.44.400, 48.44.420, 48.44.440 through 48.44.460, 48.44.500, 48.43.045(1) except as required in (b) of this subsection, 48.43.093, 48.43.115 through 48.43.185, 48.43.515(5), or 48.42.100.
     (b) In offering the plan under this subsection, the health care service contractor must offer the small employer the option of permitting every category of health care provider to provide health services or care for conditions covered by the plan pursuant to RCW 48.43.045(1).
     (2) A health care service contractor offering the plan under subsection (1) of this section must also offer and actively market to the small employer at least one additional health benefit plan.
     (3) Nothing in this section shall prohibit a health care service contractor from offering, or a purchaser from seeking, health benefit plans with benefits in excess of the health benefit plan offered under subsection (1) of this section. All forms, policies, and contracts shall be submitted for approval to the commissioner, and the rates of any plan offered under this section shall be reasonable in relation to the benefits thereto.
     (((3))) (4) Premium rates for health benefit plans for small employers as defined in this section shall be subject to the following provisions:
     (a) The contractor shall develop its rates based on an adjusted community rate and may only vary the adjusted community rate for:
     (i) Geographic area;
     (ii) Family size;
     (iii) Age; and
     (iv) Wellness activities.
     (b) The adjustment for age in (a)(iii) of this subsection may not use age brackets smaller than five-year increments, which shall begin with age twenty and end with age sixty-five. Employees under the age of twenty shall be treated as those age twenty.
     (c) The contractor shall be permitted to develop separate rates for individuals age sixty-five or older for coverage for which medicare is the primary payer and coverage for which medicare is not the primary payer. Both rates shall be subject to the requirements of this subsection (((3))) (4).
     (d) The permitted rates for any age group shall be no more than four hundred twenty-five percent of the lowest rate for all age groups on January 1, 1996, four hundred percent on January 1, 1997, and three hundred seventy-five percent on January 1, 2000, and thereafter.
     (e) A discount for wellness activities shall be permitted to reflect actuarially justified differences in utilization or cost attributed to such programs.
     (f) The rate charged for a health benefit plan offered under this section may not be adjusted more frequently than annually except that the premium may be changed to reflect:
     (i) Changes to the enrollment of the small employer;
     (ii) Changes to the family composition of the employee;
     (iii) Changes to the health benefit plan requested by the small employer; or
     (iv) Changes in government requirements affecting the health benefit plan.
     (g) Rating factors shall produce premiums for identical groups that differ only by the amounts attributable to plan design, with the exception of discounts for health improvement programs.
     (h) For the purposes of this section, a health benefit plan that contains a restricted network provision shall not be considered similar coverage to a health benefit plan that does not contain such a provision, provided that the restrictions of benefits to network providers result in substantial differences in claims costs. A carrier may develop its rates based on claims costs ((due to network provider reimbursement schedules or type of network)) for a plan. This subsection does not restrict or enhance the portability of benefits as provided in RCW 48.43.015.
     (i) Except for small group health benefit plans that qualify as insurance coverage combined with a health savings account as defined by the United States internal revenue service, adjusted community rates established under this section shall pool the medical experience of all groups purchasing coverage. However, annual rate adjustments for each small group health benefit plan may vary by up to plus or minus ((four)) eight percentage points from the overall adjustment of a carrier's entire small group pool((, such overall adjustment to be approved by the commissioner, upon a showing by the carrier, certified by a member of the American academy of actuaries that: (i) The variation is a result of deductible leverage, benefit design, or provider network characteristics; and (ii) for a rate renewal period, the projected weighted average of all small group benefit plans will have a revenue neutral effect on the carrier's small group pool. Variations of greater than four percentage points are subject to review by the commissioner, and must be approved or denied within sixty days of submittal)) if certified by a member of the American academy of actuaries, that: (i) The variation is a result of deductible leverage, benefit design, claims cost trend for the plan, or provider network characteristics; and (ii) for a rate renewal period, the projected weighted average of all small group benefit plans will have a revenue neutral effect on the carrier's small group pool. Variations of greater than eight percentage points are subject to review by the commissioner, and must be approved or denied within thirty days of submittal. A variation that is not denied within ((sixty)) thirty days shall be deemed approved. The commissioner must provide to the carrier a detailed actuarial justification for any denial ((within thirty days)) at the time of the denial.
     (((4))) (5) Nothing in this section shall restrict the right of employees to collectively bargain for insurance providing benefits in excess of those provided herein.
     (((5))) (6)(a) Except as provided in this subsection, requirements used by a contractor in determining whether to provide coverage to a small employer shall be applied uniformly among all small employers applying for coverage or receiving coverage from the carrier.
     (b) A contractor shall not require a minimum participation level greater than:
     (i) One hundred percent of eligible employees working for groups with three or less employees; and
     (ii) Seventy-five percent of eligible employees working for groups with more than three employees.
     (c) In applying minimum participation requirements with respect to a small employer, a small employer shall not consider employees or dependents who have similar existing coverage in determining whether the applicable percentage of participation is met.
     (d) A contractor may not increase any requirement for minimum employee participation or modify any requirement for minimum employer contribution applicable to a small employer at any time after the small employer has been accepted for coverage.
     (((6))) (7) A contractor must offer coverage to all eligible employees of a small employer and their dependents. A contractor may not offer coverage to only certain individuals or dependents in a small employer group or to only part of the group. A contractor may not modify a health plan with respect to a small employer or any eligible employee or dependent, through riders, endorsements or otherwise, to restrict or exclude coverage or benefits for specific diseases, medical conditions, or services otherwise covered by the plan.

Sec. 15   RCW 48.46.066 and 2004 c 244 s 9 are each amended to read as follows:
     (1)(((a))) A health maintenance organization offering any health benefit plan to a small employer, either directly or through an association or member-governed group formed specifically for the purpose of purchasing health care, may offer and actively market to the small employer ((a)) no more than one health benefit plan featuring a limited schedule of covered health care services. ((Nothing in this subsection shall preclude a health maintenance organization from offering, or a small employer from purchasing, other health benefit plans that may have more comprehensive benefits than those included in the product offered under this subsection. A health maintenance organization offering a health benefit plan under this subsection shall clearly disclose all the covered benefits to the small employer in a brochure filed with the commissioner.
     (b) A health benefit plan offered under this subsection shall provide coverage for hospital expenses and services rendered by a physician licensed under chapter 18.57 or 18.71 RCW but is not subject to the requirements of 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.
     (2))) (a) The plan offered under this subsection may be offered with a choice of cost-sharing arrangements, and may, but is not required to, comply with: RCW 48.46.250, 48.46.272 through 48.46.290, 48.46.320, 48.46.350, 48.46.375, 48.46.440 through 48.46.460, 48.46.480, 48.46.490, 48.46.510, 48.46.520, 48.46.530, 48.46.565, 48.46.570, 48.46.575, 48.43.045(1) except as required in (b) of this subsection, 48.43.093, 48.43.115 through 48.43.185, 48.43.515(5), or 48.42.100.
     (b) In offering the plan under this subsection, the health maintenance organization must offer the small employer the option of permitting every category of health care provider to provide health services or care for conditions covered by the plan pursuant to RCW 48.43.045(1).
     (2) A health maintenance organization offering the plan under subsection (1) of this section must also offer and actively market to the small employer at least one additional health benefit plan.
     (3) Nothing in this section shall prohibit a health maintenance organization from offering, or a purchaser from seeking, health benefit plans with benefits in excess of the health benefit plan offered under subsection (1) of this section. All forms, policies, and contracts shall be submitted for approval to the commissioner, and the rates of any plan offered under this section shall be reasonable in relation to the benefits thereto.
     (((3))) (4) Premium rates for health benefit plans for small employers as defined in this section shall be subject to the following provisions:
     (a) The health maintenance organization shall develop its rates based on an adjusted community rate and may only vary the adjusted community rate for:
     (i) Geographic area;
     (ii) Family size;
     (iii) Age; and
     (iv) Wellness activities.
     (b) The adjustment for age in (a)(iii) of this subsection may not use age brackets smaller than five-year increments, which shall begin with age twenty and end with age sixty-five. Employees under the age of twenty shall be treated as those age twenty.
     (c) The health maintenance organization shall be permitted to develop separate rates for individuals age sixty-five or older for coverage for which medicare is the primary payer and coverage for which medicare is not the primary payer. Both rates shall be subject to the requirements of this subsection (((3))) (4).
     (d) The permitted rates for any age group shall be no more than four hundred twenty-five percent of the lowest rate for all age groups on January 1, 1996, four hundred percent on January 1, 1997, and three hundred seventy-five percent on January 1, 2000, and thereafter.
     (e) A discount for wellness activities shall be permitted to reflect actuarially justified differences in utilization or cost attributed to such programs.
     (f) The rate charged for a health benefit plan offered under this section may not be adjusted more frequently than annually except that the premium may be changed to reflect:
     (i) Changes to the enrollment of the small employer;
     (ii) Changes to the family composition of the employee;
     (iii) Changes to the health benefit plan requested by the small employer; or
     (iv) Changes in government requirements affecting the health benefit plan.
     (g) Rating factors shall produce premiums for identical groups that differ only by the amounts attributable to plan design, with the exception of discounts for health improvement programs.
     (h) For the purposes of this section, a health benefit plan that contains a restricted network provision shall not be considered similar coverage to a health benefit plan that does not contain such a provision, provided that the restrictions of benefits to network providers result in substantial differences in claims costs. A carrier may develop its rates based on claims costs ((due to network provider reimbursement schedules or type of network)) for a plan. This subsection does not restrict or enhance the portability of benefits as provided in RCW 48.43.015.
     (i) Except for small group health benefit plans that qualify as insurance coverage combined with a health savings account as defined by the United States internal revenue service, adjusted community rates established under this section shall pool the medical experience of all groups purchasing coverage. However, annual rate adjustments for each small group health benefit plan may vary by up to plus or minus ((four)) eight percentage points from the overall adjustment of a carrier's entire small group pool((, such overall adjustment to be approved by the commissioner, upon a showing by the carrier, certified by a member of the American academy of actuaries that: (i) The variation is a result of deductible leverage, benefit design, or provider network characteristics; and (ii) for a rate renewal period, the projected weighted average of all small group benefit plans will have a revenue neutral effect on the carrier's small group pool. Variations of greater than four percentage points are subject to review by the commissioner, and must be approved or denied within sixty days of submittal)) if certified by a member of the American academy of actuaries, that: (i) The variation is a result of deductible leverage, benefit design, claims cost trend for the plan, or provider network characteristics; and (ii) for a rate renewal period, the projected weighted average of all small group benefit plans will have a revenue neutral effect on the health maintenance organization's small group pool. Variations of greater than eight percentage points are subject to review by the commissioner, and must be approved or denied within thirty days of submittal. A variation that is not denied within ((sixty)) thirty days shall be deemed approved. The commissioner must provide to the carrier a detailed actuarial justification for any denial ((within thirty days)) at the time of the denial.
     (((4))) (5) Nothing in this section shall restrict the right of employees to collectively bargain for insurance providing benefits in excess of those provided herein.
     (((5))) (6)(a) Except as provided in this subsection, requirements used by a health maintenance organization in determining whether to provide coverage to a small employer shall be applied uniformly among all small employers applying for coverage or receiving coverage from the carrier.
     (b) A health maintenance organization shall not require a minimum participation level greater than:
     (i) One hundred percent of eligible employees working for groups with three or less employees; and
     (ii) Seventy-five percent of eligible employees working for groups with more than three employees.
     (c) In applying minimum participation requirements with respect to a small employer, a small employer shall not consider employees or dependents who have similar existing coverage in determining whether the applicable percentage of participation is met.
     (d) A health maintenance organization may not increase any requirement for minimum employee participation or modify any requirement for minimum employer contribution applicable to a small employer at any time after the small employer has been accepted for coverage.
     (((6))) (7) A health maintenance organization must offer coverage to all eligible employees of a small employer and their dependents. A health maintenance organization may not offer coverage to only certain individuals or dependents in a small employer group or to only part of the group. A health maintenance organization may not modify a health plan with respect to a small employer or any eligible employee or dependent, through riders, endorsements or otherwise, to restrict or exclude coverage or benefits for specific diseases, medical conditions, or services otherwise covered by the plan.

NEW SECTION.  Sec. 16   Captions used in this act are not part of the law.

NEW SECTION.  Sec. 17   Sections 1 through 5, 7 through 11, and 16 of this act constitute a new chapter in Title 70 RCW.

NEW SECTION.  Sec. 18   Section 6 of this act takes effect July 1, 2006."