5304-S2.E AMH DYER H2495.2

5304-S2.E AMH DYER H2495.2

E2SSB 5304 - H AMD 000344 LOST 4-8-93

By Representative Dyer

Strike everything after the enacting clause and insert the following:

"PART I. FINDINGS, GOALS, AND INTENT

NEW SECTION. Sec. 101. FINDINGS. The legislature finds that our health and financial security are jeopardized by our ever increasing demand for medical care and by current medical insurance and medical system practices. Current medical system practices encourage public demand for unneeded, ineffective, and sometimes dangerous medical treatments. These practices often result in unaffordable cost increases that far exceed ordinary inflation for essential care. Current total medical and health care expenditure rates should be sufficient to provide access to essential health and medical care interventions to all within a reformed, efficient system.

The legislature finds that too many of our state's residents are without medical insurance, that each year many individuals and families are forced into poverty because of serious illness, and that many must leave gainful employment to be eligible for publicly funded medical services. Additionally, thousands of citizens are at risk of losing adequate medical insurance, have had insurance canceled recently, or cannot afford to renew existing coverage.

The legislature finds that businesses find it difficult to pay for medical insurance and remain competitive in a global economy, and that individuals, the poor, and small businesses bear an inequitable medical insurance burden.

The legislature finds that persons of color have significantly higher rates of mortality, poor health outcomes, and substantially lower numbers and percentages of persons covered by health insurance than general population. It is intended that chapter ..., Laws of 1993 (this act) make provisions to address the special health care needs of these racial and ethnic populations in order to improve their health status.

The legislature finds that uncontrolled demand and expenditures for medical care are eroding the ability of families, businesses, communities, and governments to invest in other enterprises that promote health, maintain independence, and ensure continued economic welfare. Housing, nutrition, education, and the environment are all diminished as we invest ever increasing shares of wealth in medical treatments.

The legislature finds that while immediate steps must be taken, a long-term plan of reform is also needed.

NEW SECTION. Sec. 102. LEGISLATIVE INTENT AND GOALS. (1) The legislature intends that state government policy stabilize health services costs, assure access to essential services for all residents, actively address the health care needs of persons of color, improve the public's health, and reduce unwarranted health services costs to preserve the viability of nonmedical care businesses.

(2) The legislature intends that:

(a) Total health services costs be stabilized and controlled within a managed, competitive marketplace;

(b) State residents be enrolled in the certified health plan of their choice that meets state standards regarding affordability, accessibility, cost-effectiveness, and comprehensiveness;

(c) State residents be able to choose health services in a manner consistent with good health service management, quality assurance, and cost effectiveness;

(d) Individuals and businesses have the option to purchase any health or medical services they may choose in addition to those contained in the uniform benefits package;

(e) These goals be accomplished within a reformed system using private service providers and facilities in a way that allows consumers to choose among competing plans; and

(f) That a policy of facilitating communication and networking in the delivery, purchase, and provision of health services among the federal, state, local, and tribal governments be encouraged and accomplished by chapter . . ., Laws of 1993 (this act).

(3) Accordingly, the legislature intends that chapter . . ., Laws of 1993 (this act) provide both early implementation measures and a process for overall reform of the health services system.

PART II. EARLY IMPLEMENTATION

A. BASIC HEALTH PLAN EXPANSION

Sec. 201. RCW 70.47.010 and 1987 1st ex.s. c 5 s 3 are each amended to read as follows:

BASIC HEALTH PLAN‑-FINDINGS. (1) The legislature finds that:

(a) A significant percentage of the population of this state does not have reasonably available insurance or other coverage of the costs of necessary basic health care services;

(b) This lack of basic health care coverage is detrimental to the health of the individuals lacking coverage and to the public welfare, and results in substantial expenditures for emergency and remedial health care, often at the expense of health care providers, health care facilities, and all purchasers of health care, including the state; and

(c) The use of managed health care systems has significant potential to reduce the growth of health care costs incurred by the people of this state generally, and by low-income pregnant women ((~~who are an especially vulnerable population, along with their children~~)), and at-risk children and adolescents who need greater access to managed health care.

(2) The purpose of this chapter is to provide or make more readily available necessary basic health care services in an appropriate setting to working persons and others who lack coverage, at a cost to these persons that does not create barriers to the utilization of necessary health care services. To that end, this chapter establishes a program to be made available to those residents ((~~under sixty-five years of age~~)) not ((~~otherwise~~)) eligible for medicare ((~~with gross family income at or below two hundred percent of the federal poverty guidelines~~)) or medical assistance who share in a portion of the cost or who pay the full cost of receiving basic health care services from a managed health care system.

(3) It is not the intent of this chapter to provide health care services for those persons who are presently covered through private employer-based health plans, nor to replace employer-based health plans. Further, it is the intent of the legislature to expand, wherever possible, the availability of private health care coverage and to discourage the decline of employer-based coverage.

(4) ((The program authorized under this chapter is strictly limited in respect to the total number of individuals who may be allowed to participate and the specific areas within the state where it may be established. All such restrictions or limitations shall remain in full force and effect until quantifiable evidence based upon the actual operation of the program, including detailed cost benefit analysis, has been presented to the legislature and the legislature, by specific act at that time, may then modify such limitations.))

(a) It is the purpose of this chapter to acknowledge the initial success of this program that has (i) assisted thousands of families in their search for affordable health care; (ii) demonstrated that low-income, uninsured families are willing to pay for their own health care coverage to the extent of their ability to pay; and (iii) proved that local health care providers are willing to enter into a public-private partnership as a managed care system.

(b) As a consequence, the legislature intends to extend an option to enroll to certain citizens below three hundred percent of the federal poverty guidelines within the state who reside in communities where the plan is operational and who collectively or individually wish to exercise the opportunity to purchase health care coverage through the basic health plan if the purchase is done at no cost to the state. It is also the intent of the legislature to allow employers and other financial sponsors to financially assist such individuals to purchase health care through the program. It is also the intent of the legislature to condition access to this plan for nonsubsidized enrollees upon the prior placement of subsidized enrollees, to the extent funding is available.

(c) The legislature directs that the basic health plan administrator identify enrollees who are likely to be eligible for medical assistance and assist these individuals in applying for and receiving medical assistance. The administrator and the department of social and health services shall implement a seamless system to coordinate eligibility determinations and benefit coverage for enrollees of the basic health plan and medical assistance recipients.

Sec. 202. RCW 70.47.020 and 1987 1st ex.s. c 5 s 4 are each amended to read as follows:

BASIC HEALTH PLAN‑-DEFINITIONS. As used in this chapter:

(1) "Washington basic health plan" or "plan" means the system of enrollment and payment on a prepaid capitated basis for basic health care services, administered by the plan administrator through participating managed health care systems, created by this chapter.

(2) "Administrator" means the Washington basic health plan administrator.

(3) "Managed health care system" means any health care organization, including health care providers, insurers, health care service contractors, health maintenance organizations, or any combination thereof, that provides directly or by contract basic health care services, as defined by the administrator and rendered by duly licensed providers, on a prepaid capitated basis to a defined patient population enrolled in the plan and in the managed health care system. (4) "Subsidized enrollee" means an individual, or an individual plus the individual's spouse ((~~and/or~~)) or dependent children, ((~~all under the age of sixty-five and~~)) not ((~~otherwise~~)) eligible for medicare or medical assistance, who resides in an area of the state served by a managed health care system participating in the plan, whose gross family income at the time of enrollment does not exceed twice the federal poverty level as adjusted for family size and determined annually by the federal department of health and human services, who chooses to obtain basic health care coverage from a particular managed health care system in return for periodic payments to the plan.

(5) "Nonsubsidized enrollee" means an individual, or an individual plus the individual's spouse or dependent children, not eligible for medicare, who resides in an area of the state served by a managed health care system participating in the plan, who chooses to obtain basic health care coverage from a particular managed health care system and who pays or on whose behalf is paid the full costs for participation in the plan, without any subsidy from the plan.

(6) "Subsidy" means the difference between the amount of periodic payment the administrator makes((~~, from funds appropriated from the basic health plan trust account,~~)) to a managed health care system on behalf of ((an)) a subsidized enrollee plus the administrative cost to the plan of providing the plan to that subsidized enrollee, and the amount determined to be the subsidized enrollee's responsibility under RCW 70.47.060(2).

((~~(6)~~)) (7) "Premium" means a periodic payment, based upon gross family income ((~~and determined under RCW 70.47.060(2),~~)) which an ((~~enrollee~~)) individual, their employer or another financial sponsor makes to the plan as consideration for enrollment in the plan as a subsidized enrollee or a nonsubsidized enrollee.

((~~(7)~~)) (8) "Rate" means the per capita amount, negotiated by the administrator with and paid to a participating managed health care system, that is based upon the enrollment of subsidized and nonsubsidized enrollees in the plan and in that system.

Sec. 203. RCW 70.47.030 and 1992 c 232 s 907 are each amended to read as follows:

ACCOUNTS. (1) The basic health plan trust account is hereby established in the state treasury. ((~~All~~)) Any nongeneral fund-state funds collected for this program shall be deposited in the basic health plan trust account and may be expended without further appropriation. Moneys in the account shall be used exclusively for the purposes of this chapter, including payments to participating managed health care systems on behalf of enrollees in the plan and payment of costs of administering the plan. ((After July 1, 1993, the administrator shall not expend or encumber for an ensuing fiscal period amounts exceeding ninety-five percent of the amount anticipated to be spent for purchased services during the fiscal year.))

(2) The basic health plan subscription account is created in the custody of the state treasurer. All receipts from amounts due from or on behalf of nonsubsidized enrollees shall be deposited into the account. Funds in the account shall be used exclusively for the purposes of this chapter, including payments to participating managed health care systems on behalf of nonsubsidized enrollees in the plan and payment of costs of administering the plan. The account is subject to allotment procedures under chapter 43.88 RCW, but no appropriation is required for expenditures.

(3) The administrator shall take every precaution to see that none of the funds in the separate accounts created in this section or that any premiums paid either by subsidized or nonsubsidized enrollees are commingled in any way, except that the administrator may combine funds designated for administration of the plan into a single administrative account.

Sec. 204. RCW 70.47.040 and 1987 1st ex.s. c 5 s 6 are each amended to read as follows:

BASIC HEALTH PLAN--PROGRAM WITHIN STATE HEALTH CARE AUTHORITY. (1) The Washington basic health plan is created as an independent agency of the state. The administrative head and appointing authority of the plan shall be the administrator who shall be appointed by the governor, with the consent of the senate, and shall serve at the pleasure of the governor. The salary for this office shall be set by the governor pursuant to RCW 43.03.040. The administrator shall appoint a medical director. The ((~~administrator,~~)) medical director((,)) and up to five other employees of the plan shall be exempt from the civil service law, chapter 41.06 RCW.

(2) The administrator shall employ such other staff as are necessary to fulfill the responsibilities and duties of the administrator, such staff to be subject to the civil service law, chapter 41.06 RCW. In addition, the administrator may contract with third parties for services necessary to carry out its activities where this will promote economy, avoid duplication of effort, and make best use of available expertise. Any such contractor or consultant shall be prohibited from releasing, publishing, or otherwise using any information made available to it under its contractual responsibility without specific permission of the plan. The administrator may call upon other agencies of the state to provide available information as necessary to assist the administrator in meeting its responsibilities under this chapter, which information shall be supplied as promptly as circumstances permit.

(3) The administrator may appoint such technical or advisory committees as he or she deems necessary. The administrator shall appoint a standing technical advisory committee that is representative of health care professionals, health care providers, and those directly involved in the purchase, provision, or delivery of health care services, as well as consumers and those knowledgeable of the ethical issues involved with health care public policy. Individuals appointed to any technical or other advisory committee shall serve without compensation for their services as members, but may be reimbursed for their travel expenses pursuant to RCW 43.03.050 and 43.03.060.

(4) The administrator may apply for, receive, and accept grants, gifts, and other payments, including property and service, from any governmental or other public or private entity or person, and may make arrangements as to the use of these receipts, including the undertaking of special studies and other projects relating to health care costs and access to health care.

(5) ((In the design, organization, and administration of the plan under this chapter, the administrator shall consider the report of the Washington health care project commission established under chapter 303, Laws of 1986. Nothing in this chapter requires the administrator to follow any specific recommendation contained in that report except as it may also be included in this chapter or other law)) Whenever feasible, the administrator shall reduce the administrative cost of operating the program by adopting joint policies or procedures applicable to both the basic health plan and employee health plans.

Sec. 205. RCW 70.47.060 and 1992 c 232 s 908 are each amended to read as follows:

ADMINISTRATOR'S POWERS AND DUTIES. The administrator has the following powers and duties:

(1) To design and from time to time revise a schedule of covered basic health care services, including physician services, inpatient and outpatient hospital services, prescription drugs and medications, and other services that may be necessary for basic health care, which subsidized and nonsubsidized enrollees in any participating managed health care system under the Washington basic health plan shall be entitled to receive in return for premium payments to the plan. The schedule of services shall emphasize proven preventive and primary health care and shall include all services necessary for prenatal, postnatal, and well-child care. However, ((~~for the period ending June 30, 1993,~~)) with respect to coverage for groups of subsidized enrollees who are eligible to receive prenatal and postnatal services through the medical assistance program under chapter 74.09 RCW, the administrator shall not contract for ((~~prenatal or postnatal~~)) such services ((~~that are provided under the medical assistance program under chapter 74.09 RCW~~)) except to the extent that such services are necessary over not more than a one-month period in order to maintain continuity of care after diagnosis of pregnancy by the managed care provider((~~, or except to provide any such services associated with pregnancies diagnosed by the managed care provider before July 1, 1992~~)). The schedule of services shall also include a separate schedule of basic health care services for children, eighteen years of age and younger, for those subsidized or nonsubsidized enrollees who choose to secure basic coverage through the plan only for their dependent children. In designing and revising the schedule of services, the administrator shall consider the guidelines for assessing health services under the mandated benefits act of 1984, RCW 48.42.080, and such other factors as the administrator deems appropriate.

(2)(a) To design and implement a structure of periodic premiums due the administrator from subsidized enrollees that is based upon gross family income, giving appropriate consideration to family size ((~~as well as~~)) and the ages of all family members. The enrollment of children shall not require the enrollment of their parent or parents who are eligible for the plan. The structure of periodic premiums shall be applied to subsidized enrollees entering the plan as individuals pursuant to subsection (9) of this section.

(b) To determine the periodic premiums due the administrator from nonsubsidized enrollees. Premiums due from nonsubsidized enrollees shall be in an amount equal to the cost charged by the managed health care system provider to the state for the plan plus the administrative cost of providing the plan to those enrollees and the appropriate premium tax as provided by law.

(3) To design and implement a structure of ((~~nominal~~)) copayments due a managed health care system from subsidized and nonsubsidized enrollees. The structure shall discourage inappropriate enrollee utilization of health care services, but shall not be so costly to enrollees as to constitute a barrier to appropriate utilization of necessary health care services.

(4) ((To design and implement, in concert with a sufficient number of potential providers in a discrete area, an enrollee financial participation structure, separate from that otherwise established under this chapter, that has the following characteristics:

~~(a) Nominal premiums that are based upon ability to pay, but not set at a level that would discourage enrollment;~~

~~(b) A modified fee-for-services payment schedule for providers;~~

(c) Coinsurance rates that are established based on specific service and procedure costs and the enrollee's ability to pay for the care. However, coinsurance rates for families with incomes below one hundred twenty percent of the federal poverty level shall be nominal. No coinsurance shall be required for specific proven prevention programs, such as prenatal care. The coinsurance rate levels shall not have a measurable negative effect upon the enrollee's health status; and

(d) A case management system that fosters a provider-enrollee relationship whereby, in an effort to control cost, maintain or improve the health status of the enrollee, and maximize patient involvement in her or his health care decision-making process, every effort is made by the provider to inform the enrollee of the cost of the specific services and procedures and related health benefits.

The potential financial liability of the plan to any such providers shall not exceed in the aggregate an amount greater than that which might otherwise have been incurred by the plan on the basis of the number of enrollees multiplied by the average of the prepaid capitated rates negotiated with participating managed health care systems under RCW 70.47.100 and reduced by any sums charged enrollees on the basis of the coinsurance rates that are established under this subsection.

~~(5)~~)) To limit enrollment of persons who qualify for subsidies so as to prevent an overexpenditure of appropriations for such purposes. Whenever the administrator finds that there is danger of such an overexpenditure, the administrator shall close enrollment until the administrator finds the danger no longer exists.

(5) To limit the payment of subsidies to subsidized enrollees, as defined in RCW 70.47.020.

(6) To adopt a schedule for the orderly development of the delivery of services and availability of the plan to residents of the state, subject to the limitations contained in RCW 70.47.080 or any act appropriating funds for the plan.

((In the selection of any area of the state for the initial operation of the plan, the administrator shall take into account the levels and rates 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.

~~Before July 1, 1988, the administrator shall endeavor to secure participation contracts with managed health care systems in discrete geographic areas within at least five congressional districts.~~))

(7) To solicit and accept applications from managed health care systems, as defined in this chapter, for inclusion as eligible basic health care providers under the plan. The administrator shall endeavor to assure that covered basic health care services are available to any enrollee of the plan from among a selection of two or more participating managed health care systems. In adopting any rules or procedures applicable to managed health care systems and in its dealings with such systems, the administrator shall 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 the several areas of the state. Contracts with participating managed health care systems shall ensure that basic health plan enrollees who become eligible for medicaid, may, at their option, continue to receive services from their existing providers within the managed health care system if such providers have entered into provider agreements with the department of social and health services.

(8) To receive periodic premiums from or on behalf of subsidized and nonsubsidized enrollees, deposit them in the basic health plan operating account, keep records of enrollee status, and authorize periodic payments to managed health care systems on the basis of the number of enrollees participating in the respective managed health care systems.

(9) To accept applications from individuals residing in areas served by the plan, on behalf of themselves and their spouses and dependent children, for enrollment in the Washington basic health plan as subsidized or nonsubsidized enrollees, to establish appropriate minimum-enrollment periods for enrollees as may be necessary, and to determine, upon application and at least ((~~annually~~)) semiannually thereafter, or at the request of any enrollee, eligibility due to current gross family income for sliding scale premiums. ((An enrollee who remains current in payment of the sliding-scale premium, as determined under subsection (2) of this section, and whose gross family income has risen above twice the federal poverty level, may continue enrollment unless and until the enrollee's gross family income has remained above twice the poverty level for six consecutive months, by making payment at the unsubsidized rate required for the managed health care system in which he or she may be enrolled.)) No subsidy may be paid with respect to any enrollee whose current gross family income exceeds twice the federal poverty level or, subject to RCW 70.47.110, who is a recipient of medical assistance or medical care services under chapter 74.09 RCW. If, as a result of an eligibility review, the administrator determines that a subsidized enrollee's income exceeds twice the federal poverty level and that the enrollee knowingly failed to inform the plan of such increase in income, the administrator may bill the enrollee for the subsidy paid on the enrollee's behalf during the period of time that the enrollee's income exceeded twice the federal poverty level. If a number of enrollees drop their enrollment for no apparent good cause, the administrator may establish appropriate rules or requirements that are applicable to such individuals before they will be allowed to re-enroll in the plan.

(10) To determine the rate to be paid to each participating managed health care system in return for the provision of covered basic health care services to enrollees in the system. Although the schedule of covered basic health care services will be the same for similar enrollees, the rates negotiated with participating managed health care systems may vary among the systems. In negotiating rates with participating systems, the administrator shall consider the characteristics of the populations served by the respective systems, economic circumstances of the local area, the need to conserve the resources of the basic health plan trust account, and other factors the administrator finds relevant.

(11) To monitor the provision of covered services to enrollees by participating managed health care systems in order to assure enrollee access to good quality basic health care, to require periodic data reports concerning the utilization of health care services rendered to enrollees in order to provide adequate information for evaluation, and to inspect the books and records of participating managed health care systems to assure compliance with the purposes of this chapter. In requiring reports from participating managed health care systems, including data on services rendered enrollees, the administrator shall endeavor to minimize costs, both to the managed health care systems and to the ((~~administrator~~)) plan. The administrator shall coordinate any such reporting requirements with other state agencies, such as the insurance commissioner and the department of health, to minimize duplication of effort.

(12) ((To monitor the access that state residents have to adequate and necessary health care services, determine the extent of any unmet needs for such services or lack of access that may exist from time to time, and make such reports and recommendations to the legislature as the administrator deems appropriate.

~~(13)~~)) To evaluate the effects this chapter has on private employer-based health care coverage and to take appropriate measures consistent with state and federal statutes that will discourage the reduction of such coverage in the state.

((~~(14)~~)) (13) To develop a program of proven preventive health measures and to integrate it into the plan wherever possible and consistent with this chapter.

((~~(15) To provide, consistent with available resources, technical assistance for rural health activities that endeavor to develop needed health care services in rural parts of the state~~)) (14) To endeavor to expand enrollment as much as possible to correspond to the proportion of persons of color in the community served using the best available data that estimates representation of persons of color and describe these efforts in its annual report.

Sec. 206. RCW 70.47.080 and 1987 1st ex.s. c 5 s 10 are each amended to read as follows:

ENROLLMENT. On and after July 1, 1988, the administrator shall accept for enrollment applicants eligible to receive covered basic health care services from the respective managed health care systems which are then participating in the plan. ((~~The administrator shall not allow the total enrollment of those eligible for subsidies to exceed thirty thousand.~~))

Thereafter, total ((~~enrollment shall not exceed the number established by the legislature in any act appropriating funds to the plan.~~

Before July 1, 1988, the administrator shall endeavor to secure participation contracts from managed health care systems in discrete geographic areas within at least five congressional districts of the state and in such manner as to allow residents of both urban and rural areas access to enrollment in the plan. The administrator shall make a special effort to secure agreements with health care providers in one such area that meets the requirements set forth in RCW 70.47.060(4))) subsidized enrollment shall not result in expenditures that exceed the total amount that has been made available by the legislature in any act appropriating funds to the plan. To the extent that new funding is appropriated for expansion, the administrator shall endeavor to secure participation contracts from managed health care systems in geographic areas of the state that are unserved by the plan at the time at which the new funding is appropriated.

The administrator shall at all times closely monitor growth patterns of enrollment so as not to exceed that consistent with the orderly development of the plan as a whole, in any area of the state or in any participating managed health care system. The annual or biennial enrollment limitations derived from operation of the plan under this section do not apply to nonsubsidized enrollees as defined in RCW 70.47.020(5).

B. EXPANDED MANAGED CARE FOR STATE EMPLOYEES

Sec. 207. RCW 41.05.011 and 1990 c 222 s 2 are each amended to read as follows:

DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section shall apply throughout this chapter.

(1) "Administrator" means the administrator of the authority.

(2) "State purchased health care" or "health care" means medical and health care, pharmaceuticals, and medical equipment purchased with state and federal funds by the department of social and health services, the department of health, the basic health plan, the state health care authority, the department of labor and industries, the department of corrections, the department of veterans affairs, and local school districts.

(3) "Authority" means the Washington state health care authority.

(4) "Insuring entity" means an ((~~insurance carrier as defined in chapter 48.21 or 48.22~~)) insurer as defined in chapter 48.01 RCW, a health care service contractor as defined in chapter 48.44 RCW, or a health maintenance organization as defined in chapter 48.46 RCW.

(5) "Flexible benefit plan" means a benefit plan that allows employees to choose the level of health care coverage provided and the amount of employee contributions from among a range of choices offered by the authority.

(6) "Employee" includes all full-time and career seasonal employees of the state, whether or not covered by civil service; elected and appointed officials of the executive branch of government, including full-time members of boards, commissions, or committees; and includes any or all part-time and temporary employees under the terms and conditions established under this chapter by the authority; justices of the supreme court and judges of the court of appeals and the superior courts; and members of the state legislature or of the legislative authority of any county, city, or town who are elected to office after February 20, 1970. "Employee" also includes employees of a county, municipality, or other political subdivision of the state if the legislative authority of the county, municipality, or other political subdivision of the state seeks and receives the approval of the authority to provide any of its insurance programs by contract with the authority, as provided in RCW 41.04.205((, and employees of a school district if the board of directors of the school district seeks and receives the approval of the authority to provide any of its insurance programs by contract with the authority as provided in RCW 28A.400.350)).

(7) "Board" means the state employees' benefits board established under RCW 41.05.055.

C. HEALTH CARE PROVIDER CONFLICT OF INTEREST STANDARDS

Sec. 208. RCW 19.68.010 and 1973 1st ex.s. c 26 s 1 are each amended to read as follows:

It shall be unlawful for any person, firm, corporation or association, whether organized as a cooperative, or for profit or nonprofit, to pay, or offer to pay or allow, directly or indirectly, to any person licensed by the state of Washington to engage in the practice of medicine and surgery, drugless treatment in any form, dentistry, or pharmacy and it shall be unlawful for such person to request, receive or allow, directly or indirectly, a rebate, refund, commission, unearned discount or profit by means of a credit or other valuable consideration in connection with the referral of patients to any person, firm, corporation or association, or in connection with the furnishings of medical, surgical or dental care, diagnosis, treatment or service, on the sale, rental, furnishing or supplying of clinical laboratory supplies or services of any kind, drugs, medication, or medical supplies, or any other goods, services or supplies prescribed for medical diagnosis, care or treatment: PROVIDED, That ownership of a financial interest in any firm, corporation or association which furnishes any kind of clinical laboratory or other services prescribed for medical, surgical, or dental diagnosis shall not be prohibited under this section where (1) the referring practitioner affirmatively discloses to the patient in writing, the fact that such practitioner has a financial interest in such firm, corporation, or association; and (2) the referring practitioner provides the patient with a list of effective alternative facilities, informs the patient that he or she has the option to use one of the alternative facilities, and assures the patient that he or she will not be treated differently by the referring practitioner if the patient chooses one of the alternative facilities.

Any person violating the provisions of this section is guilty of a misdemeanor.

D. DATA COLLECTION

Sec. 209. RCW 70.170.100 and 1990 c 269 s 12 are each amended to read as follows:

(1) To promote the public interest consistent with the purposes of chapter . . ., Laws of 1993 (this act), the department is responsible for the development, implementation, and custody of a state-wide ((~~hospital~~)) health care data system, with policy direction and oversight to be provided by the Washington health services commission. As part of the design stage for development of the system, the department shall undertake a needs assessment of the types of, and format for, ((~~hospital~~)) health care data needed by consumers, purchasers, health care payers, ((~~hospitals~~)) providers, and state government as consistent with the intent of chapter . . ., Laws of 1993 (this act) ((~~chapter~~)). The department shall identify a set of ((~~hospital~~)) health care data elements and report specifications which satisfy these needs. The ((~~council~~)) Washington health services commission, created by section 301 of this act, shall review the design of the data system and ((~~may direct the department to~~)) establish a technical advisory committee on health data. The department shall contract with a private vendor for assistance in the design of the data system or for any part of the work to be performed under this section. The data elements, specifications, and other ((~~design~~)) distinguishing features of this data system shall be made available for public review and comment and shall be published, with comments, as the department's first data plan by ((~~January 1, 1990~~)) July 1, 1994.

(2) Subsequent to the initial development of the data system as published as the department's first data plan, revisions to the data system shall be considered ((~~through the department's development of a biennial data plan, as proposed to,~~)) with the oversight and policy guidance of the Washington health services commission or its technical advisory committee and funded by((,)) the legislature through the biennial appropriations process. ((~~Costs of data activities outside of these data plans except for special studies shall be funded through legislative appropriations.~~

~~(3)~~)) In designing the state-wide ((~~hospital~~)) health care data system and any data plans, the department shall identify ((~~hospital~~)) health care data elements relating to ((~~both hospital finances~~)) health care costs, the quality of health care services, the outcomes of health care services, and ((~~the~~)) use of ((~~services by patients~~)) health care by consumers. Data elements ((~~relating to hospital finances~~)) shall be reported ((~~by hospitals~~)) as the Washington health services commission directs by reporters in conformance with a uniform ((~~system of~~)) reporting ((~~as specified by the department and shall~~)) system established by the department, which shall be adopted by reporters. "Reporter" means an individual or business entity, other than a hospital, required to be registered with the department of revenue for payment of taxes imposed under chapter 82.04 RCW or Title 48 RCW, that is primarily engaged in furnishing or insuring for medical, surgical, and other health services to persons. In the case of hospitals this includes data elements identifying each hospital's revenues, expenses, contractual allowances, charity care, bad debt, other income, total units of inpatient and outpatient services, and other financial information reasonably necessary to fulfill the purposes of chapter . . ., Laws of 1993 (this ((~~chapter~~)) act), for hospital activities as a whole and, as feasible and appropriate, for specified classes of hospital purchasers and payers. Data elements relating to use of hospital services by patients shall, at least initially, be the same as those currently compiled by hospitals through inpatient discharge abstracts ((~~and reported to the Washington state hospital commission~~)). The commission and the department shall encourage and permit reporting by electronic transmission or hard copy as is practical and economical to reporters.

((~~(4)~~)) (3) The state-wide ((~~hospital~~)) health care data system shall be uniform in its identification of reporting requirements for ((~~hospitals~~)) reporters across the state to the extent that such uniformity is ((~~necessary~~)) useful to fulfill the purposes of chapter . . ., Laws of 1993 (this ((~~chapter~~)) act). Data reporting requirements may reflect differences ((~~in hospital size; urban or rural location; scope, type, and method of providing service; financial structure; or other pertinent distinguishing factors~~)) that involve pertinent distinguishing features as determined by the Washington health services commission by rule. So far as ((~~possible~~)) is practical, the data system shall be coordinated with any requirements of the trauma care data registry as authorized in RCW 70.168.090, the federal department of health and human services in its administration of the medicare program, ((~~and~~)) the state in its role of gathering public health statistics, or any other payer program of consequence so as to minimize any unduly burdensome reporting requirements imposed on ((~~hospitals~~)) reporters.

((~~(5)~~)) (4) In identifying financial reporting requirements under the state-wide ((~~hospital~~)) health care data system, the department may require both annual reports and condensed quarterly reports from reporters, so as to achieve both accuracy and timeliness in reporting, but shall craft such requirements with due regard of the data reporting burdens of reporters.

(((6) In designing the initial state-wide hospital data system as published in the department's first data plan, the department shall review all existing systems of hospital financial and utilization reporting used in this state to determine their usefulness for the purposes of this chapter, including their potential usefulness as revised or simplified.

(7) Until such time as the state-wide hospital data system and first data plan are developed and implemented and hospitals are able to comply with reporting requirements, the department shall require hospitals to continue to submit the hospital financial and patient discharge information previously required to be submitted to the Washington state hospital commission. Upon publication of the first data plan, hospitals shall have a reasonable period of time to comply with any new reporting requirements and, even in the event that new reporting requirements differ greatly from past requirements, shall comply within two years of July 1, 1989.

~~(8)~~)) (5) The ((~~hospital~~)) health care data collected ((~~and~~)), maintained, and studied by the department or the Washington health services commission shall only be available for retrieval in original or processed form to public and private requestors and shall be available within a reasonable period of time after the date of request. The cost of retrieving data for state officials and agencies shall be funded through the state general appropriation. The cost of retrieving data for individuals and organizations engaged in research or private use of data or studies shall be funded by a fee schedule developed by the department which reflects the direct cost of retrieving the data or study in the requested form.

(6) All persons subject to chapter . . ., Laws of 1993 (this act) shall comply with departmental or commission requirements established by rule in the acquisition of data.

Sec. 210. RCW 70.170.110 and 1989 1st ex.s. c 9 s 511 are each amended to read as follows:

The department shall provide, or may contract with a private entity to provide, ((~~hospital~~)) analyses and reports or any studies it chooses to conduct consistent with the purposes of chapter . . ., Laws of 1993 (this ((~~chapter~~)) act). Subject to the availability of funds and any policy direction that may be given by the Washington health services commission. ((Prior to release, the department shall provide affected hospitals with an opportunity to review and comment on reports which identify individual hospital data with respect to accuracy and completeness, and otherwise shall focus on aggregate reports of hospital performance.)) These studies, analyses, or reports shall include:

(1) Consumer guides on purchasing ((~~hospital care services and~~)) or consuming health care and publications providing verifiable and useful aggregate comparative information to ((~~consumers on hospitals and hospital services~~)) the public on health care services, their cost, and the quality of health care providers who participate in certified health plans;

(2) Reports for use by classes of purchasers, who purchase from certified health plans, health care payers, and providers as specified for content and format in the state-wide data system and data plan; ((~~and~~))

(3) Reports on relevant ((~~hospital~~)) health care policy ((~~issues~~)) including the distribution of hospital charity care obligations among hospitals; absolute and relative rankings of Washington and other states, regions, and the nation with respect to expenses, net revenues, and other key indicators; ((~~hospital~~)) provider efficiencies; and the effect of medicare, medicaid, and other public health care programs on rates paid by other purchasers of ((~~hospital~~)) health care; and

(4) Any other reports the commission or department deems useful to assist the public or purchasers of certified health plans in understanding the prudent and cost-effective use of all health services.

NEW SECTION. Sec. 211. A new section is added to chapter 70.170 RCW to read as follows:

Notwithstanding the provisions of chapter 42.17 RCW, any material contained within the state-wide health care data system or in the files of either the department or the Washington health services commission shall be subject to the following limitations: (1) Records obtained, reviewed by, or on file that contain information concerning medical treatment of individuals shall be exempt from public inspection and copying; and (2) any actuarial formulas, statistics, and assumptions submitted by a certified health plan to the commission or department upon request shall be exempt from public inspection and copying in order to preserve trade secrets or prevent unfair competition.

All persons and any public or private agencies or entities whatsoever subject to this chapter shall comply with any requirements established by rule relating to the acquisition or use of health services data and maintain the confidentiality of any information which may, in any manner, identify individual persons.

NEW SECTION. Sec. 212. A new section is added to chapter 70.170 RCW to read as follows:

The Washington health services commission shall have access to all health data presently available to the secretary of health. To the extent possible, the commission shall use existing data systems and coordinate among existing agencies. The department of health shall be the designated depository agency for all health data collected pursuant to chapter . . ., Laws of 1993 (this act). The following data sources shall be developed or made available:

(1) The commission shall coordinate with the secretary of health to utilize data collected by the state center for health statistics, including hospital charity care and related data, rural health data, epidemiological data, ethnicity data, social and economic status data, and other data relevant to the commission's responsibilities.

(2) The commission, in coordination with the department of health and the health science programs of the state universities shall develop procedures to analyze clinical and other health services outcome data, and conduct other research necessary for the specific purpose of assisting in the design of the uniform benefit package under chapter . . ., Laws of 1993 (this act).

(3) The commission shall establish cost data sources and shall require each certified health plan to provide the commission and the department of health with enrollee care and cost information, to include, but not be limited to: (a) Enrollee demographic data, including age, sex, and ethnicity; (b) provider identifier; (c) diagnosis; (d) health care services or procedures provided; (e) provider charges, if any; and (f) aggregated paid data. For the purposes of this subsection (3)(f), the commission shall assure that all data relating to amounts paid for health care services must be collected, compiled, and evaluated in a state-wide aggregated form. To protect a managed competitive health care market, the commission may not identify purchaser-specific or payer-specific information relating to amounts paid for health care services. The department shall establish by rule confidentiality standards to safeguard the information from inappropriate use or release.

NEW SECTION. Sec. 213. A new section is added to chapter 70.170 RCW to read as follows:

(1) The department is responsible for the implementation and custody of a state-wide personal health services data and information system. The data elements, specifications, and other design features of this data system shall be consistent with criteria adopted by the Washington health services commission. The department shall provide the commission with reasonable assistance in the development of these criteria, and shall provide the commission with periodic progress reports related to the implementation of the system or systems related to those criteria.

(2) The department shall coordinate the development and implementation of the personal health services data and information system with related private activities and with the implementation activities of the data sources identified by the commission. Data shall include, but not be limited to: (a) Enrollee demographic data, including age, sex, and ethnicity; (b) provider identifier; (c) diagnosis; (d) health services or procedures provided; (e) provider charges, if any; and (f) aggregated paid data. For the purposes of this subsection (2)(f), the commission shall assure that all data relating to amounts paid for health care services must be collected, compiled, and evaluated in a state-wide aggregated form. To protect a managed competitive health care market, the commission may not identify purchaser-specific or payer-specific information relating to amounts paid for health care services. The commission shall establish by rule, confidentiality standards to safeguard the information from inappropriate use or release. The department shall assist the commission in establishing reasonable time frames for the completion of the system development and system implementation.

E. DISCLOSURE OF HOSPITAL, NURSING HOME, AND PHARMACY CHARGES

NEW SECTION. Sec. 214. A new section is added to chapter 70.41 RCW to read as follows:

(1) The legislature finds that the spiraling costs of health care continue to surmount efforts to contain them, increasing at approximately twice the inflationary rate. The causes of this phenomenon are complex. By making physicians and other health care providers with hospital admitting privileges more aware of the cost consequences of health care services for consumers, these providers may be inclined to exercise more restraint in providing only the most relevant and cost-beneficial hospital services, with a potential for reducing the utilization of those services. The requirement of the hospital to inform physicians and other health care providers of the charges of the health care services that they order may have a positive effect on containing health costs. Further, the option of the physician or other health care provider to inform the patient of these charges may strengthen the necessary dialogue in the provider-patient relationship that tends to be diminished by intervening third-party payers.

(2) The chief executive officer of a hospital licensed under this chapter and the superintendent of a state hospital shall establish and maintain a procedure for disclosing to physicians and other health care providers with admitting privileges the charges of all health care services ordered for their patients. Copies of hospital charges shall be made available to any physician and/or other health care provider ordering care in hospital inpatient/outpatient services. The physician and/or other health care provider may inform the patient of these charges and may specifically review them. Hospitals are also directed to study methods for making daily charges available to prescribing physicians through the use of interactive software and/or computerized information thereby allowing physicians and other health care providers to review not only the costs of present and past services but also future contemplated costs for additional diagnostic studies and therapeutic medications.

NEW SECTION. Sec. 215. A new section is added to chapter 71.12 RCW to read as follows:

NEW SECTION. Sec. 216. A new section is added to chapter 18.68 RCW to read as follows:

The legislature finds that the spiraling costs of health care continue to surmount efforts to contain them, increasing at approximately twice the inflationary rate. One of the fastest growing segments of the health care expenditure involves prescription medications. By making physicians and other health care providers with prescriptive authority more aware of the cost consequences of health care treatments for consumers, these providers may be inclined to exercise more restraint in providing only the most relevant and cost-beneficial drug and medication treatments. The requirement of the pharmacy to inform physicians and other health care providers of the charges of prescription drugs and medications that they order may have a positive effect on containing health costs. Further, the option of the physician or other health care provider to inform the patient of these charges may strengthen the necessary dialogue in the provider-patient relationship that tends to be diminished by intervening third-party payers.

NEW SECTION. Sec. 217. A new section is added to chapter 18.68 RCW to read as follows:

The registered or licensed pharmacist of this chapter shall establish and maintain a procedure for disclosing to physicians and other health care providers with prescriptive authority information detailed by prescriber, of the cost and dispensation of all prescriptive medications prescribed by him or her for his or her patients on request. These charges should be made available on at least a quarterly basis for all requested patients and should include medication, dosage, number dispensed, and the cost of the prescription. Pharmacies may provide this information in a summary form for each prescribing physician for all patients rather than as individually itemized reports. All efforts should be made to utilize the existing computerized records and software to provide this information in the least costly format.

NEW SECTION. Sec. 218. A new section is added to chapter 18.51 RCW to read as follows:

(1) The legislature finds that the spiraling costs of nursing home care continue to surmount efforts to contain them, increasing at approximately twice the inflationary rate. The causes of this phenomenon are complex. By making nursing home facilities and care providers more aware of the cost consequences of care services for consumers, these providers may be inclined to exercise more restraint in providing only the most relevant and cost-beneficial services and care, with a potential for reducing the utilization of those services. The requirement of the nursing home to inform physicians, consumers, and other care providers of the charges of the services that they order may have a positive effect on containing health costs.

(2) The chief executive officer of a nursing home licensed under this chapter shall establish and maintain a procedure for disclosing to physicians, consumers, and other care providers the charges of all services to be ordered for residents. These charges shall be posted on the resident's bill and shall include total charges to date and an itemization of charges for each month.

NEW SECTION. Sec. 219. The department of health shall report to the legislature by December 31, 1994, with recommendations on any necessary revisions to sections 214 through 218 of this act, including their continued necessity and the appropriateness of their repeal.

F. HEALTH PROFESSIONAL SHORTAGES

Sec. 220. RCW 43.70.460 and 1992 c 113 s 2 are each amended to read as follows:

RETIRED PRIMARY CARE PROVIDERS‑-MALPRACTICE INSURANCE. (1) The department may establish a program to purchase and maintain liability malpractice insurance for retired ((~~physicians~~)) primary care providers who provide primary health care services at community clinics. The following conditions apply to the program:

(a) Primary health care services shall be provided at community clinics that are public or private tax-exempt corporations;

(b) Primary health care services provided at the clinics shall be offered to low-income patients based on their ability to pay;

(c) Retired ((~~physicians~~)) primary care providers providing health care services shall not receive compensation for their services; and

(d) The department shall contract only with a liability insurer authorized to offer liability malpractice insurance in the state.

(2) This section and RCW 43.70.470 shall not be interpreted to require a liability insurer to provide coverage to a ((~~physician~~)) primary care provider should the insurer determine that coverage should not be offered to a physician because of past claims experience or for other appropriate reasons.

(3) The state and its employees who operate the program shall be immune from any civil or criminal action involving claims against clinics or physicians that provided health care services under this section and RCW 43.70.470. This protection of immunity shall not extend to any clinic or ((~~physician~~)) primary care provider participating in the program.

(4) The department may monitor the claims experience of retired physicians covered by liability insurers contracting with the department.

(5) The department may provide liability insurance under chapter 113, Laws of 1992 only to the extent funds are provided for this purpose by the legislature.

Sec. 221. RCW 43.70.470 and 1992 c 113 s 3 are each amended to read as follows:

RETIRED PRIMARY CARE PROVIDERS‑-CONDITIONS. The department may establish by rule the conditions of participation in the liability insurance program by retired physicians at clinics utilizing retired physicians for the purposes of this section and RCW 43.70.460. These conditions shall include, but not be limited to, the following:

(1) The participating physician associated with the clinic shall hold a valid license to practice medicine and surgery as a physician under chapter 18.71 or 18.57 RCW, a physician assistant under chapter 18.36A, 18.71A, or 18.57A RCW, or an advanced registered nurse practitioner under chapter 18.88 RCW in this state and otherwise be in conformity with current requirements for licensure as a retired physician, including continuing education requirements;

(2) The participating physician shall limit the scope of practice in the clinic to primary care. Primary care shall be limited to noninvasive procedures and shall not include obstetrical care, or any specialized care and treatment. Noninvasive procedures include injections, suturing of minor lacerations, and incisions of boils or superficial abscesses;

(3) The provision of liability insurance coverage shall not extend to acts outside the scope of rendering medical services pursuant to this section and RCW 43.70.460;

(4) The participating physician shall limit the provision of health care services to primarily low-income persons provided that clinics may, but are not required to, provide means tests for eligibility as a condition for obtaining health care services;

(5) The participating physician shall not accept compensation for providing health care services from patients served pursuant to this section and RCW 43.70.460, nor from clinics serving these patients. "Compensation" shall mean any remuneration of value to the participating physician for services provided by the physician, but shall not be construed to include any nominal copayments charged by the clinic, nor reimbursement of related expenses of a participating physician authorized by the clinic in advance of being incurred; and

(6) The use of mediation or arbitration for resolving questions of potential liability may be used, however any mediation or arbitration agreement format shall be expressed in terms clear enough for a person with a sixth grade level of education to understand, and on a form no longer than one page in length.

G. SHORT-TERM HEALTH INSURANCE REFORM

NEW SECTION. Sec. 222. The legislature intends that, during the transition to a fully reformed health services system, certain health insurance practices be modified to increase access to health insurance coverage for some individuals and groups. The legislature recognizes that health insurance reform will not remedy the significant lack of access to coverage in Washington state without the implementation of strong cost control measures. The authority granted to the commissioner in chapter . . ., Laws of 1993 (this act) is in addition to any authority the commissioner currently has under Title 48 RCW to regulate insurers, health care service contractors, and health maintenance organizations.

NEW SECTION. Sec. 223. A new section is added to chapter 48.18 RCW to read as follows:

Every insurer upon canceling, denying, or refusing to renew any disability policy, shall, upon written request, directly notify in writing the applicant or insured, as the case may be, of the reasons for the action by the insurer and to any person covered under a group contract. Any benefits, terms, rates, or conditions of such a contract that are restricted, excluded, modified, increased, or reduced shall, upon written request, be set forth in writing and supplied to the insured and to any person covered under a group contract. The written communications required by this section shall be phrased in simple language that is readily understandable to a person of average intelligence, education, and reading ability.

Sec. 224. RCW 48.21.200 and 1983 c 202 s 16 and 1983 c 106 s 24 are each reenacted and amended to read as follows:

(1) No individual or group disability insurance policy, health care service contract, or health maintenance agreement which provides benefits for hospital, medical, or surgical expenses shall be delivered or issued for delivery in this state ((~~after September 8, 1975~~)) which contains any provision whereby the insurer, contractor, or health maintenance organization may reduce or refuse to pay such benefits otherwise payable thereunder solely on account of the existence of similar benefits provided under any ((~~individual~~)) disability insurance policy, ((~~or under any individual~~)) health care service contract, or health maintenance agreement.

(2) No individual or group disability insurance policy, health care service contract, or health maintenance agreement providing hospital, medical or surgical expense benefits and which contains a provision for the reduction of benefits otherwise payable or available thereunder on the basis of other existing coverages, shall provide that such reduction will operate to reduce total benefits payable below an amount equal to one hundred percent of total allowable expenses exclusive of copayments, deductibles, and other similar cost-sharing arrangements.

(3) The commissioner shall by rule establish guidelines for the application of this section, including:

(a) The procedures by which persons ((~~insured~~)) covered under such policies, contracts, and agreements are to be made aware of the existence of such a provision;

(b) The benefits which may be subject to such a provision;

(d) Establishment of the order of benefit determination; ((~~and~~))

(e) Exceptions necessary to maintain the integrity of policies, contracts, and agreements that may require the use of particular health care facilities or providers; and

(f) Reasonable claim administration procedures to expedite claim payments and prevent duplication of payments or benefits under such a provision((: PROVIDED, HOWEVER, That any group disability insurance policy which is issued as part of an employee insurance benefit program authorized by RCW 41.05.025(3) may exclude all or part of any deductible amounts from the definition of total allowable expenses for purposes of coordination of benefits within the plan and between such plan and other applicable group coverages: AND PROVIDED FURTHER, That any group disability insurance policy providing coverage for persons in this state may exclude all or part of any deductible amounts required by a group disability insurance policy from the definition of total allowable expenses for purposes of coordination of benefits between such policy and a group disability insurance policy issued as part of an employee insurance benefit program authorized by RCW 41.05.025(3).

~~(3) The provisions of this section shall apply to health care service contractor contracts and health maintenance organization agreements~~)).

NEW SECTION. Sec. 225. A new section is added to chapter 48.20 RCW to read as follows:

(1) After January 1, 1994, every disability insurer issuing coverage against loss arising from medical, surgical, hospital, or emergency care coverage shall waive any preexisting condition exclusion or limitation for persons who had similar coverage under a different policy, health care service contract, or health maintenance agreement in the three-month period immediately preceding the effective date of coverage under the new policy to the extent that such person has satisfied a waiting period under such preceding policy, contract, or agreement; however, if the person satisfied a twelve-month waiting period under such preceding policy, contract, or agreement, the insurer shall waive any preexisting condition exclusion or limitation. The insurer need not waive a preexisting condition exclusion or limitation under the new policy for coverage not provided under such preceding policy, contract, or agreement.

(2) The commissioner in consultation with insurers, health care service contractors, and health maintenance organizations shall study the effect of preexisting condition exclusions and limitations on the cost and availability of health care coverage and shall provide recommendations to the legislature on findings no later than January 1, 1994. No insurer, health care service contractor, or health maintenance organization may deny, exclude, or limit coverage for preexisting conditions for a period longer than that provided for in such rules after July 1, 1994.

(3) No disability insurer may waive or exclude any preexisting condition from coverage for more than a twelve-month period.

NEW SECTION. Sec. 226. A new section is added to chapter 48.21 RCW to read as follows:

(3) No disability insurer may waive or exclude any preexisting condition from coverage for more than a twelve-month period.

NEW SECTION. Sec. 227. A new section is added to chapter 48.44 RCW to read as follows:

(1) After January 1, 1994, every health care service contractor, except limited health care service contractors as defined under RCW 48.44.035, shall waive any preexisting condition exclusion or limitation for persons who had similar coverage under a different policy, health care service contract, or health maintenance agreement in the three-month period immediately preceding the effective date of coverage under the new contract to the extent that such person has satisfied a waiting period under such preceding policy, contract, or agreement; however, if the person satisfied a twelve-month waiting period under such preceding policy, contract, or agreement, the insurer shall waive any preexisting condition exclusion or limitation. The insurer need not waive a preexisting condition exclusion or limitation under the new policy for coverage not provided under such preceding policy, contract, or agreement.

(3) No health care service contractor may waive or exclude any preexisting condition from coverage for more than a twelve-month period.

NEW SECTION. Sec. 228. A new section is added to chapter 48.46 RCW to read as follows:

(1) After January 1, 1994, every health maintenance organization shall waive any preexisting condition exclusion or limitation for persons who had similar coverage under a different policy, health care service contract, or health maintenance agreement in the one-month period immediately preceding the effective date of coverage under the new agreement to the extent that such person has satisfied a waiting period under such preceding policy, contract, or agreement; however, if the person satisfied a twelve-month waiting period under such preceding policy, contract, or agreement, the insurer shall waive any preexisting condition exclusion or limitation. The insurer need not waive a preexisting condition exclusion or limitation under the new policy for coverage not provided under such preceding policy, contract, or agreement.

(3) No health maintenance organization may waive or exclude any preexisting condition from coverage for more than a twelve-month period.

Sec. 229. RCW 48.30.300 and 1975-'76 2nd ex.s. c 119 s 7 are each amended to read as follows:

Notwithstanding any provision contained in Title 48 RCW to the contrary:

(1) No person or entity engaged in the business of insurance in this state shall refuse to issue any contract of insurance or cancel or decline to renew such contract because of the sex or marital status, or the presence of any sensory, mental, or physical handicap of the insured or prospective insured. The amount of benefits payable, or any term, rate, condition, or type of coverage shall not be restricted, modified, excluded, increased or reduced on the basis of the sex or marital status, or be restricted, modified, excluded or reduced on the basis of the presence of any sensory, mental, or physical handicap of the insured or prospective insured. Subject to the provisions of subsection (2) of this section these provisions shall not prohibit fair discrimination on the basis of sex, or marital status, or the presence of any sensory, mental, or physical handicap when bona fide statistical differences in risk or exposure have been substantiated.

(2) With respect to disability policies issued or renewed on or after July 1, 1994, that provide coverage against loss arising from medical, surgical, hospital, or emergency care services:

(a) Policies shall guarantee continuity of coverage. Such provision, which shall be included in every policy, shall provide that:

(i) The policy may be canceled or nonrenewed without the prior written approval of the commissioner only for nonpayment of premium or as permitted under RCW 48.18.090; and

(ii) The policy may be canceled or nonrenewed because of a change in the physical or mental condition or health of a covered person only with the prior written approval of the commissioner. Such approval shall be granted only when the insurer has discharged its obligation to continue coverage for such person by obtaining coverage with another insurer, health care service contractor, or health maintenance organization, which coverage is comparable in terms of premiums and benefits as defined by rule of the commissioner.

(b) It is an unfair practice for a disability insurer to modify the coverage provided or rates applying to an in-force disability insurance policy and to fail to make such modification in all such issued and outstanding policies.

(i) Cease the sale of a policy form unless it has received prior written authorization from the commissioner and has offered all policyholders covered under such discontinued policy the opportunity to purchase comparable coverage without health screening; or

(ii) Engage in a practice that subjects policyholders to rate increases on discontinued policy forms unless such policyholders are offered the opportunity to purchase comparable coverage without health screening.

The insurer may limit an offer of comparable coverage without health screening to a period not less than thirty days from the date the offer is first made.

NEW SECTION. Sec. 230. A new section is added to chapter 48.44 RCW to read as follows:

(1) With respect to all health care service contracts issued or renewed on or after July 1, 1994, except limited health care service contracts as defined in RCW 48.44.035:

(a) Contracts shall guarantee continuity of coverage. Such provision, which shall be included in every contract, shall provide that:

(i) The contract may be canceled or nonrenewed without the prior written approval of the commissioner only for nonpayment of premiums, for violation of published policies of the contractor which have been approved by the commissioner, for persons who are entitled to become eligible for medicare benefits and fail to subscribe to a medicare supplement plan offered by the contractor, for failure of such subscriber to pay any deductible or copayment amount owed to the contractor and not the provider of health care services, for fraud, or for a material breach of the contract; and

(ii) The contract may be canceled or nonrenewed because of a change in the physical or mental condition or health of a covered person only with the prior written approval of the commissioner. Such approval shall be granted only when the contractor has discharged its obligation to continue coverage for such person by obtaining coverage with another insurer, health care service contractor, or health maintenance organization, which coverage is comparable in terms of premiums and benefits as defined by rule of the commissioner.

(b) It is an unfair practice for a contractor to modify the coverage provided or rates applying to an in-force contract and to fail to make such modification in all such issued and outstanding contracts.

(i) Cease the sale of a contract form unless it has received prior written authorization from the commissioner and has offered all subscribers covered under such discontinued contract the opportunity to purchase comparable coverage without health screening; or

(ii) Engage in a practice that subjects subscribers to rate increases on discontinued contract forms unless such subscribers are offered the opportunity to purchase comparable coverage without health screening.

(2) The health care service contractor may limit an offer of comparable coverage without health screening to a period not less than thirty days from the date the offer is first made.

NEW SECTION. Sec. 231. A new section is added to chapter 48.46 RCW to read as follows:

(1) With respect to all health maintenance agreements issued or renewed on or after July 1, 1994, and in addition to the restrictions and limitations contained in RCW 48.46.060(4):

(a) Agreements shall guarantee continuity of coverage. Such provision, which shall be included in every agreement, shall provide that the agreement may be canceled or nonrenewed because of a change in the physical or mental condition or health of a covered person only with the prior written approval of the commissioner. Such approval shall be granted only when the organization has discharged its obligation to continue coverage for such person by obtaining coverage with another insurer, health care service contractor, or health maintenance organization, which coverage is comparable in terms of premiums and benefits as defined by rule of the commissioner.

(b) It is an unfair practice for an organization to modify the coverage provided or rates applying to an in-force agreement and to fail to make such modification in all such issued and outstanding agreements.

(i) Cease the sale of an agreement form unless it has received prior written authorization from the commissioner and has offered all enrollees covered under such discontinued agreement the opportunity to purchase comparable coverage without health screening; or

(ii) Engage in a practice that subjects enrollees to rate increases on discontinued agreement forms unless such enrollees are offered the opportunity to purchase comparable coverage without health screening.

(2) The health maintenance organization may limit an offer of comparable coverage without health screening to a period not less than thirty days from the date the offer is first made.

Sec. 232. RCW 48.44.260 and 1979 c 133 s 3 are each amended to read as follows:

Every authorized health care service contractor, upon canceling, denying, or refusing to renew any individual health care service contract, shall, upon written request, directly notify in writing the applicant or ((~~insured~~)) subscriber, as the case may be, of the reasons for the action by the health care service contractor. Any benefits, terms, rates, or conditions of such a contract which are restricted, excluded, modified, increased, or reduced ((~~because of the presence of a sensory, mental, or physical handicap~~)) shall, upon written request, be set forth in writing and supplied to the ((~~insured~~)) subscriber. The written communications required by this section shall be phrased in simple language which is readily understandable to a person of average intelligence, education, and reading ability.

Sec. 233. RCW 48.46.380 and 1983 c 106 s 16 are each amended to read as follows:

Every authorized health maintenance organization, upon canceling, denying, or refusing to renew any individual health maintenance agreement, shall, upon written request, directly notify in writing the applicant or enrolled participant as appropriate, of the reasons for the action by the health maintenance organization. Any benefits, terms, rates, or conditions of such agreement which are restricted, excluded, modified, increased, or reduced ((~~because of the presence of a sensory, mental, or physical handicap~~)) shall, upon written request, be set forth in writing and supplied to the individual. The written communications required by this section shall be phrased in simple language which is readily understandable to a person of average intelligence, education, and reading ability.

NEW SECTION. Sec. 234. The following acts or parts of acts are each repealed:

(1) RCW 48.46.160 and 1975 1st ex.s. c 290 s 17; and

(2) RCW 48.46.905 and 1975 1st ex.s. c 290 s 25.

NEW SECTION. Sec. 235. RCW 48.44.410 and 1986 c 223 s 12 are each repealed, effective July 1, 1994.

NEW SECTION. Sec. 236. A new section is added to chapter 48.20 RCW to read as follows:

Whenever the provisions of this chapter governing the sale and content of disability insurance conflict with the provision of sections 301 through 306 and 328 through 347 of this act, sections 301 through 306 and 328 through 347 of this act shall control.

NEW SECTION. Sec. 237. A new section is added to chapter 48.21 RCW to read as follows:

NEW SECTION. Sec. 238. A new section is added to chapter 48.44 RCW to read as follows:

Whenever the provisions of this chapter governing the sale and content of health care service contracts conflict with the provision of sections 301 through 306 and 328 through 347 of this act, sections 301 through 306 and 328 through 347 of this act shall control.

NEW SECTION. Sec. 239. A new section is added to chapter 48.46 RCW to read as follows:

Whenever the provisions of this chapter governing the sale and content of health maintenance agreements conflict with the provision of sections 301 through 306 and 327 through 346 of this act, sections 301 through 306 and 327 through 346 of this act shall control.

H. LONG-TERM HEALTH CARE PARTNERSHIP

NEW SECTION. Sec. 240. The legislature recognizes that the elderly are the fastest-growing age group nation-wide and in Washington state, increasing in absolute terms and as a percentage of the total population. In addition, the older population itself is aging. The over eighty-five years of age group of elderly are growing faster than any other group. This is in large part due to the substantial advances in medical technology that have increased the elderly's life expectancy and have changed their prevalent causes of death. Living longer has meant that chronic conditions have become major causes of death, disability, and functional dependency. These conditions can effect the individual for years, impairing their ability to function and necessitating high use of long-term care and health care resources to manage, not cure, the conditions. On the average, the elderly's health care and long-term care utilization and expenditures are much greater than those of the nonelderly. While the elderly spend nearly three times the amount the population as a whole spends on health care, per capita, their largest source of out-of-pocket expenditures is for nursing home care. Currently, almost half of all the nursing home expenditures in the United States are financed by public tax dollars through the medicaid program. Almost all of the remaining expenditures nation-wide for nursing homes are financed privately and are primarily paid directly by individual out-of-pocket payments. Since private health insurance for long-term care has not been a major component of the financing for long-term care, the majority of the aged in our state face the risk of financial ruin from an extended nursing home stay.

The legislature finds that the aged in nursing homes often "spend down" their income and become dependent on tax-supported medicaid nursing home care. Approximately half of the people that medicaid pays for in nursing homes were not initially poor, but spent down their assets as a result of catastrophic nursing home bills. The current financing dilemma is likely to worsen. Additional demands are expected to be made on the long-term care system. At the same time, the public sector's ability to finance increased long-term care needs through tax-supported programs, will decline. The lack of elderly persons protected by private insurance further encourages them to seek medicaid eligibility, often by transferring their assets to family members. As a result, assets are lost that might be used advantageously to add to their income, for more appropriate housing, or for health and social services, to improve the quality of their lives, to prevent or delay institutional placement, and to prevent their becoming indigent.

The legislature further finds that the private long-term care insurance, as regulated and provided in this state, provides a proven and viable option for protecting many of our state's elderly from the devastating financial impact of a nursing home admission. If a sufficient quantity of long-term care policies were purchased, it could also reduce the state's large and growing burden for financing long-term care.

It is the purpose and intent of this chapter to provide a realistic approach to financing needed long-term care to the elderly by encouraging the private market to be an appealing and effective partner in long-term care financing and structuring linkages between private insurance options and access to an improved medicaid system. The approach will build upon the significant responsibilities and experience that we have developed in the finance and delivery of long-term care to address the challenge of coordinating the role of the private sector with rapidly changing public programs.

NEW SECTION. Sec. 241. The office of insurance commissioner shall, from July 1, 1993, to July 1, 2000, coordinate a pilot program entitled the Washington long-term care partnership, whereby private insurance and medicaid funds shall be combined to finance long-term care. This program will allow an individual to purchase a precertified long-term care insurance policy in an amount commensurate with his or her assets. Notwithstanding any provision of law, the resources of such an individual, to the extent such resources are equal to the amount of long-term care insurance benefit payments as provided in this section, shall not be considered by the department of social and health services in a determination of: (1) His or her eligibility for medicaid, (2) the amount of any medicaid payment, or (3) in any subsequent recovery by the state of a payment for medical services.

NEW SECTION. Sec. 242. The department of social and health services shall seek appropriate amendments to its medicaid regulations or any other regulations to allow protection of resources and income pursuant to section 240 of this act. The protection assets shall be provided, to the extent approved by the federal health care financing administration, for any purchaser of a precertified long-term care policy delivered, issued for delivery, or renewed from January 1, 1994, to December 31, 1999, inclusive, or the termination of the program, whichever is sooner. The projections shall last for the life of the purchaser. The department of social and health services shall count insurance benefit payments toward resource exclusion to the extent such payments are for: (1) Services medicaid approves or covers for its recipients; (2) the lower of the actual charge and the amount paid by the insurance company; (3) nursing home care or formal services delivered to those insured in the community as part of a care plan approved by a coordination assessment and monitoring agency approved by the department of social and health services; and (4) services provided after the individual meets the coverage requirements for long-term care benefits established by the department of social and health services for this program. The secretary of social and health services shall adopt rules, in accordance with current law, to implement the provisions of this chapter relating to determining eligibility of applicants for medicaid and the coverage requirements for long-term care benefits.

NEW SECTION. Sec. 243. The insurance commissioner may precertify only those long-term care insurance policies that: (1) Alert the purchaser to the availability of consumer information and public education provided by the department on aging and adult services pursuant to section 244 of this act; (2) offer the option of home and community-based services in lieu of nursing home care; (3) in all home care plans, offer case management services delivered by a coordination, assessment, and monitoring agency, approved by the department of social and health services or by a home health care agency separately licensed as a coordination, assessment, and monitoring agency under this chapter; (4) offer automatic inflation protection or optional periodic per diem upgrades until the insured begins to receive long-term care benefits; (5) provide for the keeping of records and an explanation of benefit reports on insurance payments that count toward medicaid resource exclusion; and (6) provide the management information and reports necessary to document the extent of medicaid resource protection offered and to evaluate the Washington long-term care partnership. No policy may be precertified if it requires prior hospitalization or a prior stay in a nursing home as a condition of providing long-term care benefits. The insurance commissioner shall adopt rules to carry out the precertification provisions of this chapter.

NEW SECTION. Sec. 244. The insurance commissioner shall require its senior health insurance department advisors program to educate consumers as to: (1) The need for long-term care; (2) mechanisms for financing such care; (3) the availability of long-term care insurance; and (4) the asset protection provided under this chapter. In addition the department of social and health services shall provide to the extent possible public information to assist individuals in choosing appropriate insurance coverage.

NEW SECTION. Sec. 245. The department of social and health services and the insurance commissioner shall seek the federal approvals necessary to carry out the purposes of this chapter. Each year, on January 1st, the insurance commissioner shall report to the legislature on the progress of the program. The report shall include: (1) The success in implementing the public and private partnership; (2) the number of policies precertified; (3) the number, age, and financial circumstances of individuals purchasing precertified policies; (4) the number of individuals seeking consumer information services; (5) the extent and type of benefits paid under precertified policies that could count toward medicaid resource protection; (6) estimates of impact on present and future medicaid expenditures; (7) the cost-effectiveness of the program; and (8) a determination regarding the appropriateness of continuing the program.

NEW SECTION. Sec. 246. Sections 240 through 245 of this act shall constitute a new chapter in Title 48 RCW.

I. UNIFORM ELECTRONIC CLAIMS PROCESSING

NEW SECTION. Sec. 247. A new section is added to chapter 48.20 RCW to read as follows:

APPLICATION TO DISABILITY INSURANCE POLICIES. (1) After January 1, 1995, all disability insurance policies that provide coverage for hospital or medical expenses shall use for all billing purposes in electronic format either the health care financing administration (HCFA) 1500 form, or its successor, or the uniform billing (UB) 82 form, or its successor. For billing purposes, this subsection does not apply to pharmacists, dentists, eyeglasses, transportation, or vocational services.