SENATE BILL REPORT

SB 5357

BYSenators McDermott, Newhouse, DeJarnatt, Sellar, Talmadge, Zimmerman, Wojahn, Patterson, Williams, Deccio, Fleming, Bottiger, Vognild, Conner, Bauer, Hansen, Garrett and Kreidler; by request of Washington Health Care Project Commission

Enacting the health care access act of 1987.

Senate Committee on Ways & Means

Senate Hearing Date(s):

Senate Staff:W. Featherstone Reid (786-7411)

AS OF JANUARY 29, 1987

BACKGROUND:

The Washington Health Care Project Commission was established, pursuant to Chapter 303, Laws of 1986 (SHB 2021), composed of four Senators, four State Representatives, and seven citizen members.  Their mission was to identify, quantify and describe the numbers of uninsured in the state, propose approaches that would meet the health care needs of such persons, and ways to fund the cost of such a program.

As set forth in the Commission's Final Report submitted December 1, 1986 a significant percentage of the population in the state does not have access to affordable health care insurance or other coverage of the costs of necessary basic health care services.  This group not only includes the unemployed and injured workers who often have lost access to health insurance in the workplace, but an increasing number of employed individuals who do not have access to health care coverage through their employer.  When these individuals need health care badly enough, they often appear in hospital emergency rooms or the offices of other health care providers and in many instances receive care at the expense of other consumers and their third-party payers.

The Commission estimated there are 720,000 persons under the age of 65 in Washington without any health insurance; the uninsured are largely young (37 percent are children, and half are under age 25), white (90 percent), and employed (41 percent are employed full time, an additional 14 percent work part time).  Of that total, some 410,000 persons have gross family incomes below 200 percent of the federal poverty level.  A telephone survey conducted for the Commission established that low-income individuals are highly interested in state-sponsored basic health plan that covers ambulatory, hospital and emergency care:  nearly 90 percent indicated willingness to enroll (which, according to the empirical literature, suggests that 40 percent would actually enroll), and of those, 96 percent could pay an average of $28 per household per month for such coverage.

SUMMARY:

A Washington Basic Health Plan is established, governed by a five-member board and financed from the Basic Health Plan Trust Account in the State Treasury.  Specific tax revenues would be dedicated to that trust account and all funds are subject to appropriations, which may not exceed 90 percent of the ending fund balance expected to accrue during a fiscal period.  A maximum of seven exempt staff positions are provided, including an Executive Director and Medical Director.

The Board, appointed by the Governor and subject to confirmation by the Senate, is required to design a schedule of basic health care benefits, including physician and hospital services, that emphasize preventive, primary, prenatal, postnatal, and well-child care.  The schedule of basic health care benefits is to include a separate schedule and payment structure for those eligible individuals who choose to enroll only their dependent children, age 18 and under.

The Board may, after July 1, 1988, enroll up to 28,000 individuals eligible for subsidies who:  (1) are all under the age of 65; (2) are residents of an area served by the plan; (3) have gross family income not exceeding 200 percent of the federal poverty level; (4) choose to obtain basic health care coverage from a particular managed health care system participating in the plan; and (5) remain current in payment of premiums that are based upon a sliding scale established by the Board.

The Board is required to establish a structure of periodic premiums from enrollees that is based upon gross family income. The Board is also required to establish a system of nominal copayments, to discourage inappropriate utilization of services, that would be due participating managed health care systems from enrollees.  The rates negotiated by the Board with participating managed health care systems for the actual delivery of basic health care services to enrollees will be subsidized from appropriations made available from the Basic Health Plan Trust Account.

Only those enrollees below 200 percent of poverty are eligible for any subsidy.  Enrollees may continue in the plan if their income rises above 200 percent of poverty, but they must then pay full premiums and no funds from the Trust Account can be used to subsidize their costs.  An enrollee with gross income above 200 percent of poverty for six consecutive months would no longer be eligible for the program.

The Board is required to solicit participation agreements from managed health care systems and a standard procedure is established for the Board to negotiate such agreements.  The Board is to consider and make suitable allowance for the need for health care services and the differences in local availability of health care resources, along with other resources, within and among different areas of the state.  The Board is expected to seek multiple participation agreements so that any enrollee will be allowed a choice between two or more managed health care systems.

Limitations on the number of subsidized enrollees is 28,000 prior to July 1, 1989; 84,000 prior to July 1, 1990; and 139,000 prior to July l, 1991.  The Commission recommendations projected a maximum enrollment of 167,200 that might be reached in Fiscal Year 1992.

A managed health care system is defined as any organization of health care providers that agree to deliver, directly or by contract, the schedule of basic health care services defined by the Board.  This would include well known health maintenance organizations already active in the delivery of health care and, conceptually, any group of health care providers.  Participating systems may offer, but not require acceptance of, additional health care benefits or services that will be the sole responsibility of the enrollee.  Participating systems may not discriminate on the basis of health status, sex, race, ethnicity, or religion.

The Board is required to adopt a schedule for the orderly development of the delivery of services and availability of the plan to residents of the state.  Initially, the Board is to endeavor to secure contracts for participation in at least four congressional districts of the state and, before July l, 1991, to expand operations into all congressional districts.

In the selection of any locality for the initial operation of the plan, the Board is required to take into account the levels of unemployment in different areas of the state, the need to provide basic health care coverage to a population reasonably representative of the portion of the state's population that lacks such coverage, and the need for geographic, demographic, and economic diversity.

The Board may contract with public or private agencies, including health care service contractors, for administrative services necessary for operation of the Plan.  It may also contract with such agencies for assistance in benefit design or the monitoring of services rendered under the plan, or for technical and professional assistance to health care providers wishing to form managed health care systems and participate in the Plan.

Provision is made for coordination of benefits if any enrollee health care costs may also be covered by other insurance, such as third party coverage of auto accidents.  The Board is to monitor access that state residents have to necessary health care services and make whatever recommendations it deems appropriate to the Legislature.

The Departments of Employment Security, Labor and Industries and Social and Health Services are required to cooperate in the operation of the Plan and to help inform any unemployed workers, injured workers and unsuccessful applicants for DSHS medical assistance of the possible availability of the Plan.

Effective July 1, 1988 the retail sales tax would be extended to most of the currently exempt services categories at a rate of 1.25 percent.  Those business activities exempted from the tax are:  banking, credit agencies other than banks, holding and other investment offices; educational services; private households; public utilities; insurance business; and employees.

Effective January 1, 1989 a tax of 2 percent would be imposed upon employers subject to unemployment insurance, based upon gross wages paid any employees up to a level of $18,000 per employee, provided, that any employer who either purchases or provides health care benefits to their employees may offset any amount due under the tax up to the amount expended by the employer for such benefits.

All the revenue derived from both taxes would be credited to the Basic Health Plan Trust Account in the State Treasury.

The Commission also recommended the expansion of state medical assistance programs to the maximum extent eligible for federal funding and in appropriations to DSHS this has been facilitated.

Appropriation:    $600,000 from the general fund to the Basic Health Plan Trust Account, to be repaid prior to the end of the 1987-89 biennium, and $28,000,000 from the Basic Health Plan Trust Account to the Board for the 1987-89 biennium.  In addition, $38,084,000 from the Basic Health Plan Trust Account to the Department of Social and Health Services.

Revenue:    Official estimates of the revenues that might be generated has been requested from the Department of Revenue and the Department of Employment Security.

Fiscal Note:      requested

Effective Date:The sections establishing the Basic Health Plan have an emergency clause and take effect immediately.

The tax on services would take effect July 1, 1988 and the tax on employers would take effect January 1, 1989.