Establishes the state employee health program and a state employee health demonstration project.

     Declares that the state employee health program shall: (1) Provide technical assistance and other services as needed to wellness staff in all state agencies and institutions of higher education;

(2) Develop effective communication tools and ongoing training for wellness staff;

(3) Contract with outside vendors for evaluation of program goals;

(4) Strongly encourage the widespread completion of online health assessment tools for all state employees, dependents, and retirees. The health assessment tool must be voluntary and confidential. Health assessment data and claims data shall be used to: (a) engage state agencies and institutions of higher education in providing evidence-based programs targeted at reducing identified health risks; (b) guide contracting with third-party vendors to implement behavior change tools for targeted high-risk populations; and (c) guide the benefit structure for state employees, dependents, and retirees to include covered services and medications known to manage and reduce health risks.

Requires the health care authority shall report to the legislature in December 2008, 2009, and 2010 on outcome goals for the employee health program.

Directs the health care authority through the state employee health program to create a state employee health demonstration project in four state agencies: The department of health, department of personnel, department of natural resources, and department of labor and industries. Demonstration project agencies shall operate employee health programs for their employees in collaboration with the state employee health program.

Requires the state employee health program to evaluate each of the four programs separately and compare outcomes for each of them with the entire state employee population to assess effectiveness of the programs. Specifically, the program shall measure at least the following outcomes in the demonstration population: The reduction in the percent of the population that is overweight or obese, the reduction in risk factors related to diabetes, the reduction in risk factors related to absenteeism, the reduction in tobacco consumption, and the increase in appropriate use of preventive health services. The state employee health program shall report to the legislature in December 2008, 2009, and 2010 on the demonstration project.

Appropriates the sum of one million three hundred thousand dollars, or as much thereof as may be necessary, for the biennium ending June 30, 2009, from the general fund to the health care authority for the purposes of this act.