AN ACT Relating to a comprehensive health insurance pool for persons uninsurable due to chronic health conditions; adding a new section to chapter 48.14 RCW; adding a new section to chapter 82.04 RCW; and adding a new chapter to Title 48 RCW.

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

NEW SECTION. Sec. 1. This chapter shall be known and may be cited as the comprehensive health insurance pool act.

NEW SECTION. Sec. 2. (1) The legislature finds that many persons with high requirements for health care services do not have health benefits plans available through their employment because such plans are either unavailable for purchase or health benefits carriers impose restrictions on insuring or enrolling such persons which makes them uninsurable.

(2) The legislature further finds that such persons are unable to purchase a health benefit plan because their health status prevents their acceptance by health benefits carriers or because health benefits carriers impose unreasonable restrictions on insuring or enrolling such persons.

(3) The legislature finds that because such persons are unable to obtain coverage, even though they could afford reasonable premiums or rates, they often face catastrophic health care costs which could force many of them eventually to seek assistance from the state medical assistance program.

(4) It is the intent of the legislature to provide those who are medically uninsurable with an opportunity to obtain health care coverage through the establishment of an organization that provides coverage to these individuals by pooling the risks involved in providing coverage to them.

NEW SECTION. Sec. 3. The definitions in this section apply throughout this chapter unless the context requires to the contrary.

(1) "Pool" means the comprehensive health insurance pool.

(2) "Board" means the board of directors of the pool.

(3) "Commissioner" means the insurance commissioner.

(4) "Administrator" means the entity chosen by the board to administer the pool pursuant to section 8 of this act.

(5) "Health insurance" means any hospital and medical expense incurred policy, health care contractor contract, and health maintenance organization subscriber contracts. The term does not include short-term, accident, fixed indemnity, disability income contracts, limited benefit or credit insurance, coverage issued as a supplement to liability insurance, insurance arising out of the worker's compensation or similar law, automobile medical payment insurance, or insurance under which benefits are payable with or without regard to fault and which is statutorily required to be contained in any liability insurance policy or equivalent self-insurance.

(6) "Insured" means any individual resident of this state who is eligible to receive benefits from any insurer or other health care plan.

(7) "Insurer" means any commercial insurance company authorized to transact accident and sickness insurance business in this state, any hospital and medical insurance corporation, any health care contractor, and any health maintenance organization.

(8) "Medicare" means coverage under both part A and B of Title XVIII of the federal social security act, 42 U.S.C. Sec. 1395 et seq., as amended.

(9) "Medical assistance" means coverage under Title XIX of the federal social security act (42 U.S.C. Sec. 1396 et seq., as amended) and chapter 74.09 RCW.

(10) "Health care institution" means any health care facility, institution, agency, or place.

(11) "Health maintenance organization" means an organization under chapter 48.46 RCW.

(12) "Health care provider" means any physician, institution, or health care professional, who is licensed in this state and entitled to reimbursement for health care services.

(13) "Health care services" means any services or products included in the furnishing to any individual of medical care, or hospitalization, or incidental to the furnishing of such care or hospitalization, as well as the furnishing to any person of any other services or products for the purpose of preventing, alleviating, curing, or healing human illness or injury.

(14) "Plan of operation" means the pool, including articles, bylaws, and operating rules, adopted by the board pursuant to section 5 of this act.

(15) "Health plan" means any arrangement by which persons, including dependents or spouses, covered or making application to be covered under this pool, have access to hospital and medical benefits or reimbursement, including group or individual insurance or subscriber contracts; coverage through health maintenance organizations, preferred provider organization, or other alternate delivery systems; coverage under prepayment, group practice, or individual practice plans; coverage under uninsured arrangements of group or group-type contracts including employer self-insured, cost-plus, or other benefit methodologies not involving insurance; coverage under group-type contracts which are not available to the general public and can be obtained only because of connection with a particular organization or group; and coverage by medicare or other governmental benefits. This term includes coverage through health insurance and specifically excludes those types of programs excluded under the definition of health insurance in this section.

(16) "Substantially equivalent health plan" means a health plan which, in the judgment of the board or the administrator, under authority delegated by the board, offers persons, including dependents or spouses covered or making application to be covered by this pool, an overall level of benefits deemed approximately equivalent to the minimum benefits available under this pool at a cost that is not in excess of policies available through the pool.

NEW SECTION. Sec. 4. (1) There is created a nonprofit entity to be known as the comprehensive health insurance pool. All licensed commercial insurers issuing health insurance in this state and health care service contractors and health maintenance organizations providing health plan benefits in this state on or after the effective date of this section shall be members of the pool.

(2) The commissioner shall, within ninety days after the effective date of this section, give notice to all members of the time and place for the initial organizational meetings of the pool. The commissioner shall select the initial members of the board of directors, which shall consist of nine members. The board shall, to the extent possible, be broadly representative of members of the pool, uninsurable persons, and the general public. The board shall include the secretary of social and health services or the secretary's designee, and the commissioner or the commissioner's designee. Members of the board shall serve for four-year terms. However, of the members initially appointed after the effective date of this section, three shall be appointed to four-year terms, three to three-year terms, two to two-year terms, and one to a one-year term. Appointments shall require senate confirmation. No member of the board may serve for more than two consecutive terms. A vacancy shall be filled by appointment for the remainder of the unexpired term and the initial appointments and vacancies shall not require senate confirmation until the legislature next convenes.

The members of the board shall be compensated in accordance with RCW 43.03.250 and shall be reimbursed for their travel expenses in accordance with RCW 43.03.050 and 43.03.060.

(3) The board shall submit to the commissioner a plan of operation for the pool and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the pool. The commissioner shall, after notice and hearing pursuant to chapter 34.04 RCW, approve the plan of operation if it is determined to assure the fair, reasonable, and equitable administration of the pool and provides for the sharing of pool losses on an equitable, proportionate basis among the members of the pool. The plan of operation shall become effective upon approval in writing by the commissioner consistent with the date on which the coverage under this chapter must be made available. If the board fails to submit a plan of operation within one hundred eighty days after the appointment of the board, or any time thereafter fails to submit acceptable amendments to the plan, the commissioner shall, after notice and hearing pursuant to chapters 34.04 and 48.04 RCW, adopt such rules as are necessary or advisable to effectuate this chapter. The rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the board and approved by the commissioner.

NEW SECTION. Sec. 5. The plan of operation shall:

(1) Establish procedures for the handling and accounting of assets and moneys of the pool, including management of any net annual operating fund surplus as provided in section 9 of this act;

(2) Establish regular times and places for meetings of the board of directors;

(3) Establish procedures for records to be kept of all financial transactions and for an annual fiscal reporting to the commissioner;

(4) Contain additional provisions necessary and proper for the execution of the powers and duties of the pool;

(5) Establish procedures for the collection of assessments from all members to provide for claims paid under the plan and for administrative expenses incurred or estimated to be incurred during the period for which the assessment is made;

(6) Establish the amount of assessment pursuant to section 9 of this act, which shall occur annually at the end of each calendar year, and which shall be due and payable within thirty days of the receipt of the assessment notice;

(7) Select an administrator in accordance with section 8 of this act;

(8) Develop and implement a program to publicize the existence of the plan, the eligibility requirements, and procedures for enrollment, and to maintain public awareness of the plan; and

(9) Establish procedures under which applicants and participants may have grievances reviewed by an impartial body and reported to the board.

NEW SECTION. Sec. 6. The board has the general powers and authority granted under the laws of this state to insurance companies licensed to transact business under this title. In addition, the board has the specific authority to:

(1) Enter into contracts as are necessary or proper to carry out this chapter, including the authority, with the approval of the commissioner, to enter into contracts with similar pools of other states for the joint performance of common administrative functions, or with persons or other organizations for the performance of administrative functions;

(2) Sue or be sued, including taking any legal action as necessary to recover any assessments for, on behalf of, or against pool members, or to avoid the payment of improper claims against the pool or the coverage provided by or through the pool;

(3) Establish appropriate rates, rate schedules, rate adjustments, expense allowances, agent referral fees or commissions, claim reserve formulas and any other actuarial functions appropriate to the operation of the pool;

(4) Assess members of the pool in accordance with section 9 of this act and to make advance interim assessments as may be reasonable and necessary for the organizational or interim operating expenses. Any such interim expenses shall be credited as offsets against any regular assessments due following the close of the calendar year;

(5) Issue policies of insurance in accordance with the requirements of this chapter;

(6) Appoint appropriate legal, actuarial, and other committees as necessary to provide technical assistance in the operation of the pool, policy, and other contract design, and any other function within the authority of the pool;

(7) Conduct periodic audits to assure the general accuracy of the financial data submitted to the pool, and the board shall cause the pool to have an annual audit of its operations by an independent certified public accountant, following standard insurance company examination procedures except for reserving requirements.

NEW SECTION. Sec. 7. The pool shall be subject to examination by the commissioner as provided under this title. The board of directors shall submit, not later than March 1 of each year, a financial report for the preceding calendar year in a form approved by the commissioner. The board of directors shall further report to the appropriate standing committees of each house of the legislature by March 1 of each year.

NEW SECTION. Sec. 8. (1) The board shall select an administrator through a competitive bidding process to administer the pool. The board shall evaluate bids based on criteria established by the board, which shall include:

(a) The administrator's proven ability to handle large group accident and health insurance;

(b) The efficiency of the administrator's claim paying procedures;

(d) The administrator's ability to administer the pool in a cost-effective manner.

(2) The administrator shall serve for a period of three years, subject to removal for cause. At least one year prior to the expiration of each three-year period of service by the administrator, the board shall invite all interested parties, including the current administrator, to submit bids to serve as the administrator for the succeeding three-year period. Selection of the administrator for this succeeding period shall be made at least six months prior to the end of the current three-year period.

(3) The duties of the administrator shall include:

(a) Preparation of a brochure, outlining the benefits and exclusions of the pool benefit policy in easy-to-read language, and application and claim forms. The brochure and forms shall be submitted to the board for prior approval. Following approval, the brochure and forms shall be made reasonably available to participants and potential participants;

(b) Performance of all eligibility and administrative claim payment functions relating to the pool;

(c) Establishment of a premium billing procedure for collection of premiums from insured persons. Billings shall be made on a periodic basis as determined by the board, which shall not be more frequent than monthly;

(d) Performance of all necessary functions to assure timely payment of benefits to covered persons under the pool, including:

(i) Making available information relating to the proper manner of submitting a claim for benefits to the pool, and distributing forms upon which submission shall be made;

(ii) Evaluating the eligibility of each claim for payment by the pool; and

(iii) Notifying each claimant within thirty days after receiving a properly completed and executed claim whether the claim is accepted, rejected, or compromised;

(e) Submittal of regular reports to the board regarding the operation of the pool. The frequency, content, and form of the report shall be as determined by the board; and

(f) The determination, following the close of each calendar year, of net written and earned premiums, the expense of administration, and the paid and incurred losses for the year and report this information to the board and the commissioner on a form as prescribed by the commissioner.

(4) The administrator shall be paid as provided in the plan of operation for its expenses incurred in the performance of its services.

NEW SECTION. Sec. 9. (1) Following the close of each calendar year, the pool administrator shall determine the net premium (premiums less administrative expense allowances), the pool expenses of administration, and incurred losses for the year, taking into account investment income and other appropriate gains and losses.

(2)(a) Each member's proportion of participation in the pool shall be determined annually by the board based on annual statements and other reports deemed necessary by the board and filed by the member with the commissioner; and by multiplying the total cost of pool operation by a fraction, the numerator of which equals that insurer's premium and subscriber contract charges for health insurance written in the state during the preceding calendar year, and the denominator of which equals the total of all premiums and subscriber contract charges of pool members written in the state.

(b) Any deficit incurred by the pool shall be recouped by assessments among members apportioned under this subsection pursuant to the formula set forth by the board among members.

(3) The board may abate or defer, in whole or in part, the assessment of a member if, in the opinion of the board, payment of the assessment would endanger the ability of the member to fulfill its contractual obligations. If an assessment against a member is abated or deferred in whole or in part, the amount by which such assessment is abated or deferred may be assessed against the other members in a manner consistent with the basis for assessments set forth in subsection (2) of this section. The member receiving such abatement or deferment shall remain liable to the pool for the deficiency for four years.

(4) If assessments exceed actual losses and administrative expenses of the pool, the excess shall be held at interest and used by the board to offset future losses or to reduce pool premiums. As used in this subsection, "future losses" includes reserves for incurred but not reported claims.

NEW SECTION. Sec. 10. (1) Any individual person who is a resident of this state is eligible for coverage upon providing evidence of rejection, a requirement of restrictive riders, an uprated premium, or a preexisting conditions limitation on health insurance, the effect of which is to substantially reduce coverage from that received by a person considered a standard risk, by at least one insurer within six months of the date of application.

(2) The following persons are not eligible for coverage by the pool:

(a) Any person who is at the time of pool application eligible for medical assistance;

(b) Any person having terminated coverage in the pool unless (i) twelve months have lapsed since termination, or (ii) that person can show continuous other coverage which has been involuntarily terminated for any reason other than nonpayment of premiums;

(c) Any person on whose behalf the pool has paid out five hundred thousand dollars in benefits, or one hundred thousand dollars in benefits for the medicare supplement plan;

(d) Inmates of public institutions and persons whose benefits are duplicated under public programs.

(3) Any person whose health insurance coverage is involuntarily terminated for any reason other than nonpayment of premium and who is not eligible for conversion may apply for coverage under the plan. If such coverage is applied for within thirty days after the involuntary termination, and if premiums are paid for the entire coverage period, the effective date of the coverage shall be the date of termination of the previous coverage.

NEW SECTION. Sec. 11. (1) The health insurance policy issued by the pool shall pay only usual, customary, and reasonable charges for medically necessary eligible health care services rendered or furnished for the diagnosis or treatment of illness or injury that exceed the deductible and coinsurance amounts applicable under section 13 of this act and which are not otherwise limited or excluded. Such benefits shall at minimum include, but not be limited to, the following services or related items:

(a) Hospital services, including charges for the most common semiprivate room, for the most common private room if semiprivate rooms do not exist in the health care facility, or for a private room if medically necessary, but limited to a total of one hundred eighty inpatient days in a calendar year, and limited to thirty days' inpatient care for mental disorders per calendar year;

(b) Professional services, including surgery for the treatment of injuries, illnesses, or conditions, other than mental, nervous, or dental, which are rendered by a health care provider or at the direction of a health care provider, by a staff of registered or licensed practical nurses or other health care providers;

(c) The first twenty outpatient professional visits for the diagnosis or treatment of one or more mental or nervous conditions or alcohol, drug, or chemical dependency or abuse rendered during a calendar year by one or more physicians or, at the direction of a physician, by other qualified licensed health care practitioners;

(d) Drugs and contraceptive devices requiring a prescription;

(e) Services of a skilled nursing facility for not more than one hundred eighty days in a calendar year;

(f) Services of a home health agency for up to two hundred seventy visits of service in a calendar year;

(g) Chemotherapy, radioisotope, radiation, and nuclear medicine therapy;

(h) Oxygen;

(i) Anesthesia services;

(j) Prostheses, other than dental;

(k) Durable medical equipment which has no personal use in the absence of the condition for which prescribed;

(l) Diagnostic x-rays and laboratory tests;

(m) Oral surgery limited to the following: Fractures of facial bones; excisions of mandibular joints, lesions of the mouth, lip, or tongue, tumors, or cysts; incision of accessory sinuses, mouth salivary glands, or ducts; dislocations of the jaw; plastic reconstruction or repair of traumatic injuries occurring while covered under the pool; and excision of impacted wisdom teeth;

(n) Services of a physical therapist and services of a speech therapist;

(o) Professional ambulance service to the nearest health care facility qualified to treat the illness or injury;

(p) Other medical equipment, services, or supplies required by physician's orders and necessary consistent with the diagnosis, treatment, and condition.

(2) The board may at its discretion design and employ cost containment measures and requirements such as, but not limited to, preadmission certification and concurrent inpatient review which may make the pool more cost-effective.

NEW SECTION. Sec. 12. The pool shall determine the standard risk rate by calculating the average group standard rate charged by the five largest insurers offering coverages in the state comparable to the pool coverage. If five insurers do not offer comparable coverage, the standard risk rate shall be established using reasonable actuarial techniques and shall reflect anticipated experience and expenses for such coverage. Maximum rates for pool coverage shall be one hundred thirty-five percent of the rates established as applicable for group standard risks. All rates and rate schedules shall be submitted to the commissioner for approval.

NEW SECTION. Sec. 13. Deductibles of five hundred dollars or one thousand dollars on a per person per calendar year basis shall be provided under the pool. The board may authorize deductibles in other amounts.

(2) Subject to the limitations provided in subsection (3) of this section, a mandatory coinsurance requirement shall be imposed at the rate of twenty percent of eligible expenses in excess of the mandatory deductible.

(3) The maximum aggregate out-of-pocket payments for eligible expenses by the insured in the form of deductibles and coinsurance shall not exceed in a policy year:

(a) One thousand five hundred dollars per individual, or two thousand five hundred dollars per family, per policy year for the five hundred dollar deductible policy;

(b) Two thousand five hundred dollars per individual, or three thousand five hundred dollars per family per policy year for the one thousand dollar deductible policy;

(d) An amount authorized by the board for any other deductible policy.

(4) Eligible expenses incurred by a covered person in the last three months of a calendar year, and fully applied toward a deductible, shall be applied toward the deductible amount in the next calendar year.

NEW SECTION. Sec. 14. (1) A pool policy shall provide that coverage of a dependent unmarried person terminates when the person becomes nineteen years of age or, if the person is enrolled full time in an accredited educational institution, terminates at twenty-five years of age. The policy also shall provide that attainment of the limiting age does not operate to terminate coverage when the person is and continues to be: (a) Incapable of self-sustaining employment by reason of mental retardation or physical handicap; and (b) primarily dependent for support and maintenance upon the person in whose name the contract is issued. Proof of such incapacity and dependency must be furnished to the administrator within one hundred twenty days of the person's attainment of the limiting age, and subsequently as may be required by the administrator, but not more frequently than annually after the two-year period following the person's attainment of the limiting age.

(2) A pool that provides coverage for a family member of the person in whose name the contract is issued must, as to the family member's coverage, also provide that health insurance benefits applicable for children are payable with respect to a newly born child of the person in whose name the policy is issued from the moment of birth for coverage of injury or illness, including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities. If payment of a specific premium is required to provide coverage for the child, the policy may require that notification of the birth of a child and payment of the required premium must be furnished to the administrator within sixty days after the date of birth in order to have the coverage continued beyond the sixty day period.

(3) A pool policy may exclude coverage of charges or expenses incurred during a period of six months following the effective date of coverage as to any condition if:

(a) The condition manifested itself within a period of six months before the effective date of coverage in such a manner as would cause an ordinarily prudent person to seek diagnosis, care, or treatment; or

(b) Medical advice or treatment was recommended or received within a period of six months before the effective date of coverage.

!ixThese preexisting condition exclusions shall be waived to the extent to which similar exclusions have been satisfied under any prior health insurance which was involuntarily terminated for any reason other than nonpayment of premium, if the application for pool coverage is made not later than thirty days following the involuntary termination. In that case, with payment of the appropriate premium, coverage in the pool shall be effective from the date on which the prior coverage was terminated.

(4) If the pool policy excludes coverage during a period of six months following the effective date of coverage for preexisting conditions as provided in subsection (3) of this section, the board shall provide for waiver of such preexisting condition exclusion upon payment by an applicant of an additional premium in the amount of twenty-five percent of the pool policy premium for the life of the policy.

NEW SECTION. Sec. 15. The board shall offer a medicare supplement policy for persons receiving medicare benefits. The supplement policy shall provide coverage of fifty percent of the deductible and copayment required under medicare and eighty percent of the charges for covered services under this chapter that are not paid by medicare. The coverage may include a limitation of one thousand dollars per person on total annual out-of-pocket expenses for the covered services. The coverage shall be subject to a maximum lifetime benefit of not less than one hundred thousand dollars.

NEW SECTION. Sec. 16. (1) A pool policy offered under this chapter shall contain provisions under which the pool is obligated to renew the contract as long as the insured meets the eligibility requirements of this chapter and is current in premium payments.

(2) The pool shall not change the rates for pool policies except on a class basis, with a clear disclosure in the policy of the pool's right to do so.

(3) A pool policy offered under this chapter must provide that, upon the death of the individual in whose name the policy is issued, every other individual then covered under the policy may elect, within a period specified in the policy, to continue coverage under the same or a different policy until such time as the person would have ceased to be entitled to coverage had the individual in whose name the policy was issued lived.

NEW SECTION. Sec. 17. The commissioner may adopt rules consistent with this chapter to carry out the purposes of this chapter. All rules shall be adopted in accordance with chapter 34.04 RCW.

NEW SECTION. Sec. 18. (1) Commencing with the effective date of this section, every carrier, including health maintenance organizations and health care service contractors, authorized to provide health care insurance or coverage for health care services in this state, shall provide a notice and an application for coverage by the pool to any person who receives a rejection of coverage for health insurance or health care services, or a notice to any person who is informed that a rate for health insurance or coverage for health care services will exceed the rate for a pool policy or has any health condition limited or excluded. The notice shall state that the person is eligible to apply for health insurance provided by the pool.

(2) Members of the pool shall provide the brochure outlining the benefits and exclusions of the pool policy to any person who is rejected by an insurer or who is offered a policy containing restrictive riders, up-rated premiums, or a preexisting conditions limitation on a health insurance plan.

NEW SECTION. Sec. 19. Neither the participation by insurers and members in the pool, the establishment of rates, forms, or procedures for coverages issued by the pool, nor any other joint or collective action required by this chapter shall be the basis of any legal action, civil or criminal liability, or penalty against the pool or members of it either jointly or separately.

NEW SECTION. Sec. 20. It is the express intent of this chapter that the pool be the last payor of benefits whenever any other benefit is available.

Benefits otherwise payable under pool coverage shall be reduced by all amounts paid or payable through any other health insurance or health benefit plans, including but not limited to self-insured plans and by all hospital and medical expense benefits paid or payable under any worker's compensation coverage, automobile medical payment or liability insurance whether provided on the basis of fault of nonfault, and by any hospital or medical benefits paid or payable under or provided pursuant to any state or federal law or program, so that not more than one hundred percent of allowable medical expenses are covered.

The administrator or the pool has a cause of action against an eligible person for the recovery of the amount of benefits paid which are not for covered expenses. Benefits due from the pool may be reduced or refused as a set-off against any amount recoverable under this section.

NEW SECTION. Sec. 21. A new section is added to chapter 82.04 RCW to read as follows:

A credit is allowed against the tax due under this chapter equal to twenty percent of all amounts of assessments paid to the comprehensive health insurance pool under chapter 48.--!sc ,1RCW (sections 1 through 20 of this act).

NEW SECTION. Sec. 22. A new section is added to chapter 48.14 RCW to read as follows:

A credit is allowed against the tax due under RCW 48.14.020 equal to twenty percent of all amounts of assessments paid to the comprehensive health insurance pool under chapter 48.--!sc ,1RCW (sections 1 through 20 of this act).

NEW SECTION. Sec. 23. Sections 1 through 20 of this act shall constitute a new chapter in Title 48 RCW.

NEW SECTION. Sec. 24. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.