HOUSE BILL REPORT
E2SHB 1569
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
As Passed House:
March 10, 2007
Title: An act relating to reforming the health care system in Washington state.
Brief Description: Reforming the health care system in Washington state.
Sponsors: By House Committee on Appropriations (originally sponsored by Representatives Cody, Campbell, Morrell, Linville, Moeller, Green, Seaquist, Conway, Dickerson, Appleton, McIntire, McCoy, Kagi, Pedersen, Kenney, Lantz, Santos, Wood and Ormsby).
Brief History:
Health Care & Wellness: 1/31/07, 2/8/07 [DPS];
Appropriations: 3/1/07, 3/3/07 [DP2S(w/o sub HCW)].
Floor Activity:
Passed House: 3/10/07, 53-44.
Brief Summary of Engrossed Second Substitute Bill |
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HOUSE COMMITTEE ON HEALTH CARE & WELLNESS
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 9 members: Representatives Cody, Chair; Morrell, Vice Chair; Barlow, Campbell, Green, Moeller, Pedersen, Schual-Berke and Seaquist.
Minority Report: Do not pass. Signed by 4 members: Representatives Hinkle, Ranking Minority Member; Alexander, Assistant Ranking Minority Member; Condotta and Curtis.
Staff: Dave Knutson (786-7146).
HOUSE COMMITTEE ON APPROPRIATIONS
Majority Report: The second substitute bill be substituted therefor and the second substitute bill do pass and do not pass the substitute bill by Committee on Health Care & Wellness. Signed by 26 members: Representatives Sommers, Chair; Dunshee, Vice Chair; Cody, Conway, Darneille, Ericks, Fromhold, Grant, Haigh, Hinkle, Hunt, Hunter, Kagi, Kenney, Kessler, Linville, McDermott, McDonald, McIntire, Morrell, Pettigrew, Priest, Schual-Berke, Seaquist, P. Sullivan and Walsh.
Minority Report: Do not pass. Signed by 8 members: Representatives Alexander, Ranking Minority Member; Bailey, Assistant Ranking Minority Member; Haler, Assistant Ranking Minority Member; Anderson, Buri, Chandler, Dunn and Kretz.
Staff: David Pringle (786-7310).
Background:
In 2004, Washington had approximately 600,000 uninsured persons under age 65. For adults
ages 19-64, 13.2 percent were uninsured. For children ages 0-16, 6 percent were uninsured.
Health coverage through an employer in Washington has declined from 71 percent in 1993 to
around 66 percent in 2004. Rising health care costs are a significant barrier to small
employers offering health coverage for their workers. Between 1999 and 2004, the annual
increase in health insurance premiums for small businesses in Washington was substantially
greater than the annual increase in wages or gross business income, some years by a factor of
more than five. It is estimated that poor quality health care costs the typical employer
between $1,900 and $2,250 per covered employee per year. Recent studies have shown that
only a little more than half of adult patients receive recommended care. The level of
performance is similar whether it is for chronic, acute, or preventive care and across all
spectrums of medical care, including screening, diagnosis, treatment and follow-up.
Summary of Engrossed Second Substitute Bill:
The Washington Health Insurance Partnership (WHP) is established to provide the
mechanism to purchase small group health benefit plans by small employers. Upon
implementation, the WHP will act as the administrator of participating small employer health
plans, and will collect and transmit employer contributions and premium assistance payments
to health carriers. Prior to implementation, the Health Care Authority (HCA) will study the
implementation of the WHP and report to the Legislature on January 1, 2008. A request for
proposals to operate the WHP will be issued April 1, 2008, unless legislative action rejects or
modifies the proposal during the 2008 legislative session.
The request for proposals shall include a description of the function of the WHP
encompassing offering a choice among any small group health plan approved by the Office of
the Insurance Commissioner, enrollment and participation procedures, a system of
maintaining administrator status under federal law, a system of collecting premiums from
participants and transmitting payments to health carriers, a system for determining eligibility
for premium assistance, a mechanism for payment of commissions to brokers for the
enrollment of small groups in the WHP, and a plan to offer health benefit plans through the
WHP by July 1, 2009.
The WHP Board is created, including 12 members appointed by the Governor, including a
member of the American Academy of Actuaries, two representatives of small businesses, two
employee plan benefits specialists, two representatives of health care consumers, a licensed
physician, a licensed health insurance broker, the Assistant Secretary of the Department of
Social and Health Services Health Recovery Services Administration, the Insurance
Commissioner and the Administrator of the Health Care Authority (Administrator). The
Governor appoints all members of the WHP Board for staggered terms not to exceed four
years, beginning on or before June 1, 2007.
A premium assistance program is established as part of the WHP program. Within
appropriated funding, participants below 200 percent of the federal poverty level shall be
offered assistance with the payment of premiums for certain health plans offered through the
WHP that are designated as premium assistance-eligible by the Administrator. The premium
assistance eligible health plans shall include innovative components that maximize quality of
care and health outcomes, range from catastrophic to comprehensive, and at least one shall
offer similar services and cost-sharing as the Basic Health Plan.
A non-appropriated Partnership Premium Assistance Account (Account) is established for
any Non-General Fund-State funds obtained for the program, as well as any other funds
appropriated for the premium assistance portion of the WHP program. Money in the Account
shall be used exclusively for the purposes of administering the Partnership Premium
Assistance Program. Only the Administrator or designee may authorize expenditures from
the Account.
The WHP shall annually report to the WHP Board, the Governor, and the Legislature on the
accounts and activities of the WHP. No later than two years after the WHP begins
operations, the HCA shall study the WHP and submit a written report to the Governor and
Legislature on the status and activities on the program. On or before December 1, 2009, the
WHP Board shall submit a report to the Governor and Legislature on the risks and benefits of
additional markets participating in the WHP, including association health plans, individual
health insurance plans, the Washington State Health Insurance Pool, the Basic Health Plan,
Public Employees' Benefits Board enrollees, and Public School Employees.
After January 1, 2009, all health coverage through the small group market will only be
available through the WHP. Association plans will continue to be sold outside the WHP.
Appropriation: None.
Fiscal Note: Available.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed, except Sections 302 through 310, relating to health plan methodology and application of the methodology as required by law, which takes effect January 1, 2009.
Staff Summary of Public Testimony: (Health Care & Wellness)
(In support) This Connector will make it easier for the employers and employees to afford
and keep health coverage. The sequencing of the elements of this bill are important to get
right. As the bill is written, most of the high risk will go into the pool first. Other groups
with known risk and lower risk, like state employees or K-12 employees, should go into the
Connector first. This proposal will increase competition and result in lower costs for
consumers. This is a good approach to sharing responsibility for the cost of health coverage
between individuals, employers, and government. The Connector should be required to use a
risk adjustment mechanism.
(Neutral) The model of a Connector aligns incentives in the health care system to get better
results at a better cost. It will provide continuity of coverage for workers who change
employers or might be self insured. It will lead to better continuity of care and better health
outcomes. It will result in the consumer choosing the health plan that best meets their needs
rather than having health plans attempting to choose their customers. If employees and
employers are able to contribute pre-tax dollars when purchasing health coverage through the
Connector the employee can realize a savings in the cost of their health coverage. In moving
to this model a state should start with a population the health carriers know well.
(With concerns) Combining the individual market, the high risk pool and the small group
market will result in higher costs for everyone receiving their health coverage through the
Connector. These reforms will not attract other health carriers into Washington from other
states. Providing a reinsurance program will reduce incentives for health carriers to manage
the care and costs of their enrollees. The Connector could result in an increased average risk
in the risk pool. An up-front risk adjustment is a better alternative than a reinsurance
program. There is no funding source for the premium subsidy or the reinsurance programs
created in the legislation. There must be a broad based consensus about any changes in the
health insurance statutes to ensure any reforms will not be overturned in a few years.
(Opposed) This bill does not address what small business is asking for. Business wants
affordable health coverage through the private market with more options. The mandatory
nature of the Connector is a problem. Association health plans are already providing
affordable health coverage. There might be a narrower application of the Connector concept
that could be tried. We should make improvements to the existing health care coverage
system and not throw out the entire system.
Staff Summary of Public Testimony: (Appropriations)
(In support) We supported the original version of this bill, and this version too. Waiting
longer also has fiscal implications as the market is failing right now. The costs are being
borne by the state taxpayers and other policy-payers. The bipartisan sponsorship of this
second substitute is heartening, but we are concerned about reducing the pool that will be
added to the connector even further. If we wait until 2009, consider funding the Small
Employer Health Insurance Program that was created last year in the meantime. My business
employs 20 people, and the long term impact to the state of passing this bill will be positive.
The current system leaves too many people behind.
(With concerns) We are concerned that this would change the group marketplace into an
individual marketplace instead. There has been commendable bipartisanship and energy in
creating this, and connectors are intended to reduce administrative costs, add choice and
portability. We support the goals and timeframe, but we support the study-first approach that
was in House Bill 2098 instead. The health carriers prefer that course because we don't have
enough information right now to understand the risks created by this bill.
(Opposed) We have just seen the new large proposed substitute bill, and have not had the
opportunity to analyze it yet. But our concerns remain. We believe that as a connector or as
a partnership this would be a massive overhaul of small employer coverage and we think that
there needs to be an opportunity to evaluate this idea as was suggested in the Governor's blue
ribbon commission bill. Sixty percent of our members oppose the connector approach as it
eliminates the existing small group market. It needs to be studied thoroughly first. How will
this affect our premiums? My business has five employees, and while we want affordable
coverage, we don't support this bill. We don't want another experiment like in the early
1990s that destabilized the market. We have computer models now that can produce
excellent studies of this behavior.
Persons Testifying: (Health Care & Wellness) (In support) Dr. Sarah Weinberg,
Washington Chapter of Health Care for All; Robby Stern, Washington State Labor Council;
Chuck Hawley, Providence Health and Services; Lonnie Johns-Brown, Washington Chapter
of National Organization for Women and Washington Clinical Society; Bill Daley,
Washington Community Action Network; Len McComb, Washington State Hospital
Association; and Mike Kreidler, Office of the Insurance Commissioner.
(Neutral) Ed Heisselmeier, Heritage Foundation; and Rick Curtis, Institute for Health Policy
Solutions.
(With concerns) Karen Merrikin, Group Health Cooperative; Audry Halvorson, Primera;
Nancy Ellison, Regence Blue Cross Blue Shield; Rebecca Kavoussi, Community Health Plan
of Washington; and Paul Chasco and Tammy Fellin, Association of Washington Cities.
(Opposed) Carolyn Logue, National Federation of Independent Business; Patrick Connor,
Washington Farm Bureau; Mellani McAleenan, Association of Washington Business; Gary
Smith, Independent Business Association; Mel Sorensen, Washington Assocation of Health
Underwriters; David Westberg, Stationary Engineers and American Federation of Labor and
Congress of Industrial Organizations; and Paul Guppy, Washington Policy Center.
Persons Testifying: (Appropriations) (In support) Kent Davis, Gene Otto, and Bill Daley,
Washington Community Action Network.
(With concerns) Ryan Spiller, Washington Fire Commissioners Association; Melanie
McAleenan, Association of Washington Business; and Nancee Wildermuth, Regence Blue
Shield, Pacific Care, and Aetna.
(Opposed) Carolyn Logue, National Federation of Independent Business; Mel Sorenson,
America's Health Insurance Plans; Gary Smith, Independent Business Association; and Susan
Pittman, Washington Association of Health Underwriters.