Background:

The Office of the Insurance Commissioner was created by the Legislature in the 1889-90 session. It became a separately elected statewide office in 1907. Under the Insurance Code, the Insurance Commissioner (Commissioner) may adopt rules, hold hearings, and investigate and examine persons and entities regarding potential violations of the laws of Washington. The Commissioner can issue, deny, suspend, and revoke licenses, issue cease and desist orders, and levy fines of up to $1,000 per violation of the code.

Patient Protection and Affordable Care Act.

Health Benefit Exchanges.

The federal Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (ACA) requires every state to establish two Health Benefit Exchanges, one for small businesses and one for individuals. The exchanges may be administratively operated as one entity (Exchange). If a state elects not to establish an Exchange, the federal government will operate one either directly or through an agreement with a nonprofit entity. The Exchange's functions must include:

facilitating the purchase of qualified health plans by individuals and small groups;
certifying health plans as qualified health plans based on federal guidelines;
providing information to individuals about their eligibility for public programs like Medicaid and the Children's Health Insurance Program and enrolling eligible individuals in those programs;
operating a telephone hotline and website to assist consumers in the Exchange; and
establishing navigator programs to help inform consumers and facilitate their enrollment in qualified health plans in the Exchange.

The Exchange is to begin operations by January 1, 2014, consistent with federal law and statutory authorization. The Exchange is governed by a nine-member board (Board) appointed by the Governor from a list submitted by all four caucuses of the House of Representatives and the Senate. The Exchange is authorized to serve as a premium aggregator and to complete other duties necessary to begin open enrollment beginning October 2, 2013. The Board must establish rules or policies permitting entities to pay premiums on behalf of qualified individuals. The Exchange is required to be self-sustaining, which is defined as capable of operating without direct state tax subsidy. If at any time the Exchange is no longer self-sustaining, its operations must be suspended. The Board must develop funding mechanisms that fairly and equitably apportion among carriers the administrative costs and expenses of the Exchange and must develop a methodology to ensure that the Exchange is self-sustaining.

Market Rules.

The ACA specifies four categories of plans to be offered through the Exchange and in the individual and small group markets. The categories are based on the actuarial value of the plans; i.e., the percentage of the costs the plan is expected to pay:

Platinum: 90 percent actuarial value;
Gold: 80 percent actuarial value;
Silver: 70 percent actuarial value; and
Bronze: 60 percent actuarial value.

The following market rules apply to health plans:

for plan or policy years beginning January 1, 2014, if a carrier offers a Bronze plan outside the Exchange, it must also offer Gold and Silver plans outside the Exchange and
catastrophic plans (as defined in the ACA) may only be sold inside the Exchange.

All health plans outside of the Exchange, other than catastrophic plans, must offer plans that conform to the Platinum, Gold, Silver, and Bronze value tiers specified in the ACA.

Qualified Health Plans.

Only qualified health plans may sell insurance in the Exchange. In order to be a qualified health plan, a carrier must, at a minimum:

be certified as a qualified health plan based on federal guidelines;
provide coverage for the essential health benefits;
offer at least one Silver and one Gold plan in the Exchange; and
charge the same premium, both inside and outside the Exchange.

The Board must certify a health plan as a qualified health plan if the plan:

is determined by the Commissioner as meeting state insurance laws and regulations;
is determined by the Board to meet the requirements of the ACA; and
is determined by the Board to include tribal clinics and urban Indian clinics as essential community providers in the plan's provider network consistent with federal law. An integrated delivery system may be exempt from the essential community provider requirement if consistent with federal law.

A decision by the Board denying a request to certify or recertify a plan as a qualified health plan may be appealed according to procedures adopted by the Board.

Health Carrier Rate Filing.

A health carrier must submit certain rate information in connection with small group or individual health benefit rate filings to the Commissioner. The information is specified by the United States Department of Health and Human Services (HHS).

Grandfathered Plans.

Under the ACA and state law, certain group health plan or an individual health plan are "grandfathered" and do not have to meet all of the requirements of the ACA.

Dependent Coverage.

Any individual disability insurance contract that is not grandfathered and provides coverage for a participating member's dependent must offer each participating member the option of covering any dependent under the age of twenty-six.

Any group disability insurance contract or blanket disability insurance contract that provides coverage for a participating member's dependent must offer each participating member the option of covering any dependent under the age of twenty-six.

Health Maintenance Organizations (HMOs).

In order to provide health coverage in Washington, an HMO must have a certificate of registration with the Commissioner. The application requires the provision of certain information. The Commissioner must determine if it is reasonable to expect the HMO to meet its obligations to its enrolled policyholders. Until 2012, one of the factors the Commissioner had to consider was any agreements the HMO had with providers for the provision of health services. In 2012, Commissioner-requested legislation removed this factor from consideration.

State Reimbursement.

State employees may be reimbursed for subsistence, lodging, travel, and meals while engaged on official business away from their designated work stations.

Surplus Lines Insurance.

Generally, an insurance company may not engage in the business of insurance in the state unless the insurance company is authorized to do so by the Commissioner. Surplus lines insurance coverage is an exception. Surplus lines insurance is coverage that cannot be procured from authorized insurance companies. Often, surplus lines policies cover risks that do not fit normal underwriting patterns or fit standard insurance policies. Unlike insurance offered by an authorized insurer, surplus lines insurance is not subject to rate and policy form oversight. If coverage cannot be purchased from an authorized insurer, the coverage may be purchased from an unauthorized insurer through a licensed surplus lines broker if:

a diligent effort is made to find the coverage from authorized insurers; and
the purpose for using an unauthorized insurer is something other than securing a lower premium rate than would be accepted by any authorized insurer.

A surplus lines broker must pay a premium tax of 2 percent on surplus lines insurance transacted by the broker. The tax is credited to the State General Fund. For property and casualty insurance, if this state is the insured's home state, the tax is computed upon the entire premium without regard to whether the policy covers risks or exposures that are located in this state. For all other lines of insurance, the tax is computed upon the proportion of the premium that is properly allocable to the risks or exposures located in this state.

Medical Malpractice Closed Claim Reporting.

Self-insurers and insuring entities that write medical malpractice insurance are required to report medical malpractice closed claims that are closed after January 1, 2008, to the Commissioner. Closed claims reports must be filed annually by March 1, and must include data for closed claims for the preceding year. The reports must contain specified data relating to: the type of health care provider, specialty, and facility involved; the reason for the claim and the severity of the injury; the dates when the event occurred, the claim was reported to the insurer, and the suit was filed; the injured person's age and sex; and information about the settlement, judgment, or other disposition of the claim, including an itemization of damages and litigation expenses.

If a claim is not covered by an insuring entity or self-insurer, the provider or facility must report the claim to the Commissioner after a final disposition of the claim. The Commissioner may impose a fine of up to $250 per day against an insuring entity that fails to make the required report. The Department of Health may require a facility or provider to take corrective action to comply with the reporting requirements.

A claimant or the claimant's attorney in a medical malpractice action that results in a final judgment, settlement, or disposition, must report to the Commissioner certain data, including the date and location of the incident, the injured person's age and sex, and information about the amount of judgment or settlement, court costs, attorneys' fees, or expert witness costs incurred in the action.

The Commissioner must use the data to prepare aggregate statistical summaries of closed claims. The Commissioner must also prepare an annual report of closed claims. The annual report must include specified information.

Any information in a closed claim report that may result in the identification of a claimant, provider, health care facility, or self-insurer is exempt from public disclosure.

Summary of Bill:

Patient Protection and Affordable Care Act.

Market Rules.

For plan or policy years beginning January 1, 2014, a carrier that offers:

a bronze level health benefit plan in the individual market outside of the exchange must also offer silver and gold level plans in the individual market outside of the exchange; and
a bronze level health benefit plan in the small group market outside of the exchange must also offer silver and gold level plans in the small group market outside of the exchange.

The individual and small group health plans outside of the Exchange that must conform to the Platinum, Gold, Silver, and Bronze value tiers specified in the ACA are the plans that are not grandfathered.

Health Carrier Rate Filing.

The information a carrier is required to file with the Commissioner may be revised from time to time by HHS.

Dependent Coverage.

The provision that an individual disability insurance contract that provides coverage for a participating member's dependent must offer the option of covering any dependent under the age of twenty-six is limited to health benefit plans that are not grandfathered.

Any group disability insurance contract or blanket disability insurance contract that provides health benefit coverage for a participating member's dependent must offer each participating member the option of covering any dependent under the age of twenty-six.

Health Maintenance Organizations.

Agreements with providers for the provision of health services are one of the factors the Commissioner has to consider when determining if it is reasonable to expect an HMO that is applying for a certificate or registration is able to meet its obligations to its enrolled policyholders.

State Reimbursement.

The Commissioner may authorize reimbursement of:

authorized volunteer projects, training, and travel in the same manner as for state employees; and
other reasonable expenses related to volunteer recognition.

Surplus Lines.

When the surplus line policy covers risks or exposures located both inside and outside of the United States and its territories, the tax is computed without regard to the proportion of the premium properly allocable to the risks and exposures located outside of the United States and its territories

Medical Malpractice Closed Claim Reporting.

The requirement that the Commissioner must prepare aggregate statistical summaries of closed claims is repealed. Provisions related to the Commissioner's annual report of closed claims are modified and the due date of the report is changed from June 30th of each year to September 1 of each year.

A number of technical changes and grammatical changes are made.