BILL REQ. #:  S-1171.1 

Read first time 01/26/2007.   Referred to Committee on Health & Long-Term Care.

     AN ACT Relating to establishing a health care reinsurance program for small businesses; amending RCW 48.21.045, 48.44.023, and 48.46.066; adding new sections to chapter 48.43 RCW; adding a new section to chapter 82.24 RCW; creating new sections; and making an appropriation.

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

NEW SECTION.  Sec. 1   The legislature finds that:
     (1) The people of Washington have expressed strong concerns about health care costs and access to needed health services. Even if currently insured, they are not confident that they will continue to have health insurance coverage in the future and feel that they are spending more, but getting less.
     (2) Many employers, especially 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.
     (3) Six hundred thousand Washingtonians are uninsured. Three-quarters work or have a working family member; two-thirds are low income; and one-half are young adults. Many are low-wage workers who are not offered, or eligible for, employer-sponsored coverage. Others struggle with the burden of paying their share of the costs of employer-sponsored health insurance, while still others turn down their employer's offer of coverage due to its costs. Families that work hard, pay taxes, and play by the rules deserve access to decent, affordable health care.
     (4) While other industrialized nations have developed their own systems of health care, Washingtonians deserve their own solution to the health care crisis. We should use American ingenuity to develop a fair, common sense plan to make sure that all have access to quality, affordable health care.
     (5) We need to make smart investments in our families' future. By expanding access to affordable care, we can start investing in a healthy future for our country and ensure healthier families and a healthy next generation.

NEW SECTION.  Sec. 2   The legislature intends to reduce premiums for small employers by providing reinsurance services. Reinsurance will reduce the uncertainty that raises premiums across the small group market to: (1) Help make health insurance coverage more affordable for small businesses and their employees; (2) stabilize the private health insurance market for small businesses; and (3) increase the numbers of people with access to affordable health insurance coverage and improve health outcomes in Washington state.

NEW SECTION.  Sec. 3   A new section is added to chapter 48.43 RCW to read as follows:
     (1) A reinsurance program is hereby established in the office of the insurance commissioner for the purpose of making health insurance coverage more affordable for small employers.
     (2) The reinsurance program shall reimburse claims for all carriers, defined in RCW 48.43.005, offering health plans to eligible small employers as defined in this section, for eligible employees covered under a health benefit plan.
     (3) "Eligible small employers" means those employers with at least thirty percent of their eligible employees receiving annual wages from the employer at a level equal to or less than thirty thousand dollars, adjusted annually for inflation. The commissioner may certify employer eligibility with the department of employment security or other means defined by the commissioner. The commissioner may contract out for these services.

NEW SECTION.  Sec. 4   A new section is added to chapter 48.43 RCW to read as follows:
     Beginning January 1, 2009, the reinsurance program shall reimburse carriers for ninety percent of covered health plan benefits from ten thousand dollars up to a maximum of ninety thousand dollars in a calendar year for eligible small employer groups.
     (1) Claims shall be reported and funds shall be distributed from the reinsurance account on a calendar year basis. Claims are eligible for reimbursement only for the calendar year in which the claims are paid. Once claims paid on behalf of an enrollee reach or exceed ninety thousand dollars in a given calendar year, no further claims paid on behalf of such person in that calendar year are eligible for reimbursement from the reinsurance account.
     (2) Each carrier shall submit a request for reimbursement from the reinsurance in a manner prescribed by the insurance commissioner. Each of the requests for reimbursement shall be submitted no later than April 1st following the end of the calendar year for which the reimbursement requests are being made. The commissioner may require carriers to submit such claims data in connection with the reimbursement requests as he or she deems necessary to enable distribution of funds and oversee the operation of the reinsurance account.
     (3) The commissioner shall calculate the total claims reimbursement amount for all carriers for the calendar year for which claims are being reported. The commissioner may contract out all administrative functions related to the reinsurance program.
     (a) In the event that the total amount requested for reimbursement for a calendar year exceeds funds available for distribution for claims paid during that same calendar year, the commissioner shall provide for the pro rata distribution of the available funds. Each carrier is eligible to receive only such proportionate amount of the available funds as the individual carrier's total eligible claims paid bears to the total eligible claims paid by all carriers.
     (b) In the event that funds available for distribution for claims paid by all carriers during a calendar year exceeds the total amount requested for reimbursement by all carriers during that same calendar year, any excess funds shall be carried forward and made available for distribution in the next calendar year. Such excess funds shall be in addition to the funds appropriated for the reinsurance account in the next calendar year.

Sec. 5   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 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) 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) 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; and
     (v) Reinsurance premium discounts.
     (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).
     (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. This subsection does not restrict or enhance the portability of benefits as provided in RCW 48.43.015.
     (i) 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 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. A variation that is not denied within sixty days shall be deemed approved. The commissioner must provide to the carrier a detailed actuarial justification for any denial within thirty days of the denial.
     (4) Nothing in this section shall restrict the right of employees to collectively bargain for insurance providing benefits in excess of those provided herein.
     (5)(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) 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) 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. 6   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 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) 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) 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; and
     (v) Reinsurance premium discounts.
     (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).
     (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. This subsection does not restrict or enhance the portability of benefits as provided in RCW 48.43.015.
     (i) 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 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. A variation that is not denied within sixty days shall be deemed approved. The commissioner must provide to the carrier a detailed actuarial justification for any denial within thirty days of the denial.
     (4) Nothing in this section shall restrict the right of employees to collectively bargain for insurance providing benefits in excess of those provided herein.
     (5)(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) 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. 7   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 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) 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) 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; and
     (v) Reinsurance premium discounts.
     (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).
     (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. This subsection does not restrict or enhance the portability of benefits as provided in RCW 48.43.015.
     (i) 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 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. A variation that is not denied within sixty days shall be deemed approved. The commissioner must provide to the carrier a detailed actuarial justification for any denial within thirty days of the denial.
     (4) Nothing in this section shall restrict the right of employees to collectively bargain for insurance providing benefits in excess of those provided herein.
     (5)(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) 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. 8   A new section is added to chapter 82.24 RCW to read as follows:
     (1) In addition to the tax imposed upon the sale, use, consumption, handling, possession, or distribution of cigarettes under other sections of this chapter, there is imposed a tax in an amount equal to the rate of twelve and one-half mills per cigarette.
     (2) The revenue collected under this section shall be deposited as follows:
     (a) 21.7 percent shall be deposited into the health services account.
     (b) 2.8 percent shall be deposited into the general fund.
     (c) 2.3 percent shall be deposited into the violence reduction and drug enforcement account under RCW 69.50.520.
     (d) 1.7 percent shall be deposited into the water quality account under RCW 70.146.030.
     (e) The remainder shall be deposited into the reinsurance account under section 9 of this act.

NEW SECTION.  Sec. 9   The reinsurance account is created in the state treasury. The account shall consist of revenues deposited into the account under section 8 of this act. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used for the purposes of this act, including the reimbursement paid to carriers and the associated administrative expenses of operating the reinsurance program.

NEW SECTION.  Sec. 10   A new section is added to chapter 48.43 RCW to read as follows:
     The insurance commissioner or the administrator of the account, on behalf of and with the prior approval of the commissioner, may purchase reinsurance from an insurance company licensed to write such type of insurance in this state. Such reinsurance may be purchased with funds appropriated to the reinsurance account established in section 9 of this act.

NEW SECTION.  Sec. 11   A new section is added to chapter 48.43 RCW to read as follows:
     Upon the request of the insurance commissioner, each carrier shall furnish such data as the commissioner deems necessary to oversee the operation of the reinsurance account. The commissioner shall adopt rules that set forth procedures for the operation of the reinsurance account and distribution of funds therefrom.

NEW SECTION.  Sec. 12   The sum of five million dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 2009, from the health savings account, previously identified with small employer insurance assistance, to the reinsurance account established in section 9 of this act for the purposes of this act.