FINAL BILL REPORT

SHB 3001

                                  C 119 L 90

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Zellinsky, R. Meyers, Dellwo and Crane;by request of Insurance Commissioner)

Concerning solvency protection for health maintenance organizations.

House Committe on Financial Institutions & Insurance

Senate Committee on Financial Institutions & Insurance

SYNOPSIS AS ENACTED

BACKGROUND:

Health maintenance organizations (HMOs) must apply for and receive the Insurance Commissioner's permission before selling health coverage in Washington.  However, the insurance code does not require HMOs to meet capital, surplus, or other minimum net worth standards as a condition of obtaining authority to conduct business.

Unlike health insurance companies, HMOs do not agree to indemnify consumers (policyholders) for costs incurred in obtaining health care services. Rather, HMOs directly provide health care services or enter into agreements with providers of health care who in turn agree to provide services to consumers.  The contracting health care providers must obtain compensation for services from the HMO, not from the consumer using the services.  Alternatively, if the consumer obtains health care services from a provider who has not entered into a contract with the HMO (a non-participating provider), the consumer is directly liable for the costs of such health services.

To protect the consumer in the event the contractor cannot pay for services for which the consumer may be liable, the insurance code requires HMOs to deposit cash, bonds, or other securities with the commissioner to cover the consumer's liability for health care services performed by a non-participating provider.  If the HMO becomes insolvent, this source of funds is available to pay claims for care rendered by a non-participating provider.

In addition to the financial losses faced by a consumer of an insolvent HMO, the consumer must obtain coverage for health care services from another insurance company, health care service contractor, or HMO.  Obtaining other coverage may be impossible if the consumer has a health condition that is unacceptable to other companies.

SUMMARY:

Insurance code provisions governing HMOs are amended to provide new procedures and standards for the protection of consumers in the event of HMO insolvency.

Any rehabilitation, liquidation, or conservation of a HMO is to be conducted in accordance with procedures applicable to the rehabilitation, liquidation, or conservation of an insurance company.

Consumers of an HMO are given the same priority to any assets of their insolvent HMO as is given to policyholders of an insolvent insurance company. Consumer liability for health care services rendered by a non-participating health care provider is treated as a participant claim against the HMO.

HMOs must meet new net-worth standards and increased standards for deposits to protect consumers from liability for health care services rendered by non-participating health care providers.

If an HMO becomes insolvent, the other health care service contractors and HMOs doing business in Washington must permit consumers of the insolvent HMO to enroll in a health plan without proof of insurability.

A health care service contractor who offers only limited benefits is not required to offer greater benefits to persons covered by an insolvent contractor who offered broad benefits.

VOTES ON FINAL PASSAGE:

      House 95   0

      Senate    47     0 (Senate amended)

      House 93   0 (House concurred)

EFFECTIVE:June 7, 1990