AN ACT Relating to the public employees' insurance board; amending RCW 41.05.005, 41.05.010, 41.05.025, 41.05.030, 41.05.040, 41.05.050, 41.05.070, 41.04.205, 41.04.230, 41.40.380, 47.64.270, 48.24.010, and 70.14.010; making an appropriation; providing an effective date; and declaring an emergency.

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

Sec. 1. Section 1, chapter 136, Laws of 1977 ex. sess. and RCW 41.05.005 are each amended to read as follows:

The legislature, recognizing the desirability of maintaining a healthy work force in order to promote the efficiency and productivity of the employees and officials working for the state and political subdivisions, ((~~declares~~)) finds it to be in the best interest of the state and political subdivisions to provide comprehensive health care to ((~~state~~)) public employees and officials and their dependents, while at the same time there is an increased need for comprehensive public oversight of the costs of and expenditures for health care services. The legislature also finds that, by increasing the coverage group, the state may affect the cost not only to the state for employee costs but also the overall costs in the state.

It is therefore the purpose of this chapter to establish health care plans that provide comprehensive health care for all qualified ((~~state~~)) public employees and officials and their dependents((~~, which plans will be funded by the employer to the fullest extent possible~~)).

Sec. 2. Section 1, chapter 39, Laws of 1970 ex. sess. as last amended by section 90, chapter 3, Laws of 1983 and RCW 41.05.010 are each amended to read as follows:

Unless the context clearly indicates otherwise, words used in this chapter have the following meaning:

(1) "Board" means the ((~~state~~)) public employees' insurance board established under the provisions of RCW 41.05.025.

(2) "Employee" shall include all full time, certificated, and career seasonal employees of the state, a county, a municipality, or other political subdivision of the state, whether or not covered by civil service; certificated and classified employees of a school district; elected and appointed officials of the executive branch of government, including full time members of boards, commissions, or committees; and shall include any or all permanent part time ((~~and temporary~~)) employees under the terms and conditions established by the board; 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.

(3) "Fund" means the public employees' insurance fund created in this chapter.

(4) "Panel medicine plan" means a health care plan which can be offered by a health care service contractor which itself furnishes the health care service contracted for by means of a group practice prepaid medical care plan, and also includes a health maintenance organization holding a valid certificate of registration under chapter 48.46 RCW.

((~~(4)~~)) (5) "Trustee" shall mean the director of personnel.

Sec. 3. Section 2, chapter 136, Laws of 1977 ex. sess. as last amended by section 68, chapter 287, Laws of 1984 and RCW 41.05.025 are each amended to read as follows:

(1) (a) There is hereby created a ((~~state~~)) public employees' insurance board to be composed of the members of the present board holding office on the day prior to July 1, ((~~1977~~)) 1987, which such members shall serve until the expiration of the period of time of the term for which they were appointed and until their successors are appointed and qualified. Thereafter the board shall be composed as follows: ((The governor or the governor's designee; one administrative officer representing all of higher education to be appointed by the governor; two higher education faculty members to be appointed by the governor; the director of the department of personnel who shall act as trustee; one representative of an employee association certified as an exclusive representative of at least one bargaining unit of classified employees and one representative of an employee union certified as exclusive representative of at least one bargaining unit of classified employees, both to be appointed by the governor; one person who is retired and is covered by a program under the jurisdiction of the board, to be appointed by the governor; one member of the senate who shall be appointed by the president of the senate; and one member of the house of representatives who shall be appointed by the speaker of the house. The terms of office of the administrative officer representing higher education, the two higher education faculty members, the representative of an employee association, the retired person, and the representative of an employee union shall be for four years: PROVIDED, That the first term of one faculty member and one employee association or union representative member shall be for three years. Meetings of the board shall be at the call of the director of personnel.))

(i) Four representatives for the executive branch consisting of agency directors, presidents of four-year institutions of higher education and community colleges, and school district superintendents;

(ii) Four representatives of employee unions and associations, including retirees;

(iii) Four public members who are knowledgeable about the provision and management of employee benefits.

(b) All members shall be appointed by the governor. The term of office shall be four years for each member. However, in making the initial appointments, the governor shall designate two members from each of the three groups to serve initial terms of two years. The governor shall designate a chair from among the public members.

The board shall prescribe rules for the conduct of its business and shall elect a ((~~chairman and vice chairman~~)) vice-chair annually, except that the vice-chair shall not serve successive terms of office. Members of the board shall be compensated in accordance with RCW 43.03.240 and shall be paid for their travel expenses while on official business in accordance with RCW 43.03.050 and 43.03.060((~~, and legislative members shall receive allowances provided for in RCW 44.04.120~~)).

(2) The board shall study all matters connected with the providing of adequate health care coverage, life insurance, liability insurance, accidental death and dismemberment insurance, and disability income insurance or any one of, or a combination of, the enumerated types of insurance and health care plans for employees and their dependents on the best basis possible with relation both to the welfare of the employees and to the state: PROVIDED, That liability insurance shall not be made available to dependents. The board shall design benefits, devise specifications, analyze carrier responses to advertisements for bids, determine the terms and conditions of employee participation and coverage, and decide on the award of contracts which shall be signed by the trustee on behalf of the board: PROVIDED, That all contracts for insurance, health care plans, including panel medicine plans, or protection applying to employees covered by RCW 28B.10.660 and chapters 41.04 and 41.05 RCW shall provide that the beneficiaries of such insurance, health care plans, or protection may utilize on an equal participation basis the services of practitioners licensed pursuant to chapters 18.22, 18.25, 18.32, 18.53, 18.57, 18.71, 18.74, 18.83, and 18.88 RCW: PROVIDED FURTHER, That the boards of trustees and boards of regents of the several institutions of higher education shall retain sole authority to provide liability insurance as provided in RCW 28B.10.660. The board shall from time to time review and amend such plans. Contracts for all plans shall be rebid and awarded at least every ((~~five~~)) four years, commencing December 1, 1987.

(3) The board shall develop and provide as a part of the employee insurance benefit program an employee health care benefit plan which may be provided through a contract or contracts with regularly constituted insurance carriers or health care service contractors as defined in chapter 48.44 RCW, and a plan to be provided by a panel medicine plan in its service area only when approved by the board. The board may but shall not be required to pay more for health benefits under a panel medicine plan than it would otherwise be required to pay for health benefits by a contract with a regularly constituted insurance carrier or health care service contractor in effect at the time the panel medicine plan is included in the employee health care benefit plan. Except for panel medicine plans, the board may but is not required to contract with more than one insurance carrier or health care service contractor to provide similar benefits: PROVIDED, That employees may choose participation in only one of the health care benefit plans sponsored by the board. Active employees, as defined in RCW 41.05.010(2), eligible for medicare benefits shall have the option of continuing participation in health care programs on the same basis as all other employees or participation in medicare supplemental programs as may be developed by the board. These health care benefit plans shall provide coverage for all officials and employees and their dependents without premium or subscription cost to the individual employees and officials, unless the board approves a ((~~panel medicine plan at a~~)) subscription rate in excess of the premium of the regularly constituted insurance carrier ((or)), health care service contractor, or panel plan, in which circumstances an employee contribution ((~~may be authorized at an~~)) shall be the amount equal to such excess. Rates for self pay segments of state employee groups will be developed from the experience of the entire group. Such self pay rates will be established based on a separate rate for the employee, the spouse, and children.

(4) The board shall review plans proposed by insurance carriers who desire to offer property insurance and/or accident and casualty insurance to state employees through payroll deduction. The board may approve any such plan for payroll deduction by carriers holding a valid certificate of authority in the state of Washington and which the board determines to be in the best interests of employees and the state. The board shall promulgate rules setting forth criteria by which it shall evaluate the plans.

(5) The board shall maintain necessary statistics regarding membership demographics, including marital mix, revenue and claims experience, utilization, and whatever additional data may be required by an actuary to provide reports or information to the board and others. (6) (a) The board may self-fund, self-insure, or enter into other methods of providing for programs under its jurisdiction, except property and casualty insurance authorized under subsection (4) of this section. The board may contract for payment of claims or other administrative services including the purchase of reinsurance for programs under its jurisdiction. If programs do not require the prepayment of reserves, the board shall establish that such reserves be maintained for the payment of claims as are normally required for that method of providing that type of insurance. Reserves established by the board shall be held in respective separate trust accounts of the public employees' insurance fund by the state treasurer. The state investment board is authorized to invest moneys in the public employees' insurance fund in accordance with RCW 43.84.150. Except as provided in RCW 43.33A.160, one hundred percent of all earnings from these investments shall accrue directly to the public employees' insurance fund and the separate accounts which may be created.

(b) Group disability coverage provided as a self-insured program of the board shall provide conversion rights in accordance with RCW 48.21.210.

(c) Group disability coverage provided as a self-insured program of the board shall provide coverage as required by RCW 48.21.130, 48.21.140, 48.21.141, 48.21.142, 48.21.144, 48.21.146, 48.21.150, 48.21.155, and 48.21.180.

(d) Group disability coverage provided as a self-insured program of the board shall conform with the requirements of RCW 48.21.200 (1) and (2).

(e) Any savings realized as a result of a program created under this subsection (6) shall not be used to increase benefits unless such use is authorized by statute.

(f) The board shall keep or cause to be kept full and adequate accounts and records of the assets, obligations, transactions, and affairs of any program created under this subsection (6).

(g) The board shall file an annual report of the financial condition, transactions, and affairs of any program under the board's jurisdiction. The report shall also contain actuarial information regarding the adequacy of the reserves established for the type of insurance being offered. A copy of the annual report shall be filed with the speaker of the house of representatives, the president of the senate, and the office of the state auditor. The statement shall be signed by a member of the American academy of actuaries certifying that the actuarial amounts are computed in accordance with commonly accepted actuarial standards and shall include all actuarial reserves and related statement items required for the sound operation of any employee benefits program.

(h) Members of the board are deemed to stand in a fiduciary relationship to the employees covered by any insurance program created under this subsection (6) and shall discharge the duties of their respective positions in good faith and with that diligence, care, and skill which ordinary prudent persons would exercise under similar circumstances in like positions.

Sec. 4. Section 3, chapter 39, Laws of 1970 ex. sess. as last amended by section 1, chapter 38, Laws of 1975 1st ex. sess. and RCW 41.05.030 are each amended to read as follows:

(1) The ((~~state employees' insurance~~)) board shall have the following powers and duties, in addition to any other powers and duties prescribed by law: (a) To authorize the ((~~director of personnel~~)) trustee to appoint a benefits supervisor, to whom the ((~~director~~)) trustee may delegate his duties hereunder, and other necessary personnel, subject to the jurisdiction of the state civil service law, chapter 41.06 RCW; (b) to authorize other necessary administrative expenses; and (c) to provide for the expenditure of funds ((~~in the state employees' insurance revolving fund~~)) for payment of premiums, to reduce employee contributions or increase benefits, and, subject to legislative appropriation, to pay salaries and wages and other necessary administrative expenses.

(2) The ((~~director of the department of personnel shall be~~)) trustee ((~~and~~)) shall be administrator of all health benefit and insurance contracts((.

He)) and shall transmit contributions for health care and other insurance plans in payment of premiums and receive and deposit contributions and dividends or refunds into the ((~~state employees insurance revolving~~)) fund. ((He)) The trustee shall provide facilities and services necessary for the purpose of the board and its operations, subject to full reimbursement by the board for the cost thereof.

(3) Every division, department, or separate agency of state government and each participating political subdivision shall fully cooperate in administration of the plans, education of employees, claims administration, and other duties as required by the trustee or the board.

Sec. 5. Section 4, chapter 39, Laws of 1970 ex. sess. as last amended by section 901, chapter 312, Laws of 1986 and RCW 41.05.040 are each amended to read as follows:

There is hereby created a fund within the state treasury, designated as the "((~~state~~)) public employees' insurance fund", to be used by the trustee as a revolving fund for the deposit of contributions, dividends and refunds, and for payment of premiums for employee insurance benefit contracts entered into in accordance with instructions of the board and payments authorized by RCW 41.05.030(2). Moneys from the ((~~state employees insurance~~)) fund shall be disbursed by the state treasurer by warrants on vouchers duly authorized by the trustee. ((~~However, before June 30, 1987, the treasurer shall not disburse moneys from the fund when the disbursement would result in a fund balance of less than $11,597,000.~~)) Notwithstanding RCW 43.84.090, all earnings of investments of balances in the state employees insurance fund shall be credited to this fund.

Sec. 6. Section 9, chapter 2, Laws of 1983 as last amended by section 1, chapter 107, Laws of 1984 and RCW 41.05.050 are each amended to read as follows:

(1) Every department, division, or separate agency of state government, each school district, and such county, municipal, or other political subdivisions as are covered by this chapter, shall provide contributions to insurance and health care plans for its employees and their dependents, the content of such plans to be determined by the ((~~state employees insurance~~)) board. Such contributions, which shall be paid by the county, the municipality, or other political subdivision for their employees, shall include an amount determined by the ((~~state employee's insurance~~)) board to pay the administrative expenses of the board and the salaries and wages and expenses of the benefits supervisor and other necessary personnel: PROVIDED, That this administrative service charge for ((~~state~~)) employees shall not result in an employer contribution in excess of the amount authorized by the governor and the legislature as prescribed in RCW 41.05.050(2), and that the sum of an employee's insurance premiums and administrative service charge in excess of such employer contribution shall be paid by the employee. All such contributions will be paid into the ((~~state employees insurance~~)) fund to be expended in accordance with RCW 41.05.030.

(2) The contributions of any department, division, or separate agency of the state government, and such county, municipal, or other political subdivisions as are covered by this chapter, shall be set by the ((~~state employees insurance~~)) board, subject to the approval of the governor for availability of funds as specifically appropriated by the legislature for that purpose: PROVIDED, ((~~That provision for school district personnel shall not be made under this chapter: PROVIDED FURTHER,~~)) That insurance and health care contributions for ferry employees shall be governed by RCW 47.64.270.

(3) The ((~~trustee with the assistance of the~~)) department of personnel shall survey representative private industry and public employers in the state of Washington to determine ((~~the average employer contribution for group insurance programs under the jurisdiction of the state employees insurance board~~)) (a) the type of coverage provided, the number of employees covered, and the premium per type of coverage, (b) the major components within the type of coverage, and (c) utilization. Such survey shall be conducted ((~~during each even-numbered year~~)) by the state actuary at least every four years but may be conducted more frequently. The results of the survey shall be reported to the board ((~~for its use in setting the amount of the recommended employer contribution to the employee insurance benefit program covered by this chapter~~)) and the legislature.

(4) The board shall transmit a recommendation for the amount of the employer contribution to the governor and the director of financial management for inclusion in the proposed budgets submitted to the legislature.

Sec. 7. Section 7, chapter 39, Laws of 1970 ex. sess. as last amended by section 5, chapter 136, Laws of 1977 ex. sess. and RCW 41.05.070 are each amended to read as follows:

The cost of any health care insurance contracts or plans to any department, division or separate agency of state, county, municipal, or other political subdivision of the state ((~~government~~)) shall be paid by any officer authorized to disburse such funds to the trustee for payment of the contributions due pursuant to any such contract authorized by the board.

Sec. 8. Section 1, chapter 106, Laws of 1975-'76 2nd ex. sess. and RCW 41.04.205 are each amended to read as follows:

(1) Notwithstanding the provisions of RCW 41.04.180, the employees, with their dependents, of any county, municipality, or other political subdivision of this state shall be eligible to participate in any insurance program administered under chapter 41.05 RCW if the legislative authority of any such county, municipality, or other political subdivisions of this state determines a transfer to an insurance program administered under chapter 41.05 RCW should be made: PROVIDED, That this section shall have no application to ((~~school district personnel provided for in RCW 28A.58.420 and~~)) members of the law enforcement officers' and fire fighters' retirement system under chapter 41.26 RCW: PROVIDED FURTHER, That in the event of a special district employee transfer pursuant to this section, members of the governing authority shall be eligible to be included in such transfer if such members are authorized by law as of June 25, 1976 to participate in the insurance program being transferred from and subject to payment by such members of all costs of insurance for members.

(2) When the legislative authority of a county, municipality, or other political subdivision determines to so transfer, the ((~~state~~)) public employees' insurance board, as defined in RCW 41.05.010 ((~~as now or hereafter amended~~)), shall:

(a) Establish the conditions under which the transfer may be made, which shall include the requirements that:

(i) All the eligible employees of the political subdivision transfer as a unit, and

(ii) the political subdivision involved obligate itself to make employer contributions in an amount at least equal to those provided by the state as employer; and

(b) Hold public hearings on the application for transfer; and

Approval of the application by the ((~~state~~)) public employees' insurance board shall effect a transfer of the employees involved to the insurance or health care program applied for.

Sec. 9. Section 5, chapter 59, Laws of 1969 as last amended by section 1, chapter 271, Laws of 1985 and RCW 41.04.230 are each amended to read as follows:

Any official of the state authorized to disburse funds in payment of salaries and wages of public officers or employees is authorized, upon written request of the officer or employee, to deduct from the salaries or wages of the officers or employees, the amount or amounts of subscription payments, premiums, contributions, or continuation thereof, for payment of the following:

(1) Credit union deductions: PROVIDED, That the credit union is organized solely for public employees: AND PROVIDED FURTHER, That twenty-five or more employees of a single state agency or a total of one hundred or more state employees of several agencies have authorized such a deduction for payment to the same credit union.

(2) Parking fee deductions: PROVIDED, That payment is made for parking facilities furnished by the agency or by the department of general administration.

(3) U.S. savings bond deductions: PROVIDED, That a person within the particular agency shall be appointed to act as trustee. The trustee will receive all contributions; purchase and deliver all bond certificates; and keep such records and furnish such bond or security as will render full accountability for all bond contributions.

(4) Board, lodging or uniform deductions when such board, lodging and uniforms are furnished by the state, or deductions for academic tuitions or fees or scholarship contributions payable to the employing institution.

(5) Dues and other fees deductions: PROVIDED, That the deduction is for payment of membership dues to any professional organization formed primarily for public employees or college and university professors: AND PROVIDED, FURTHER, That twenty-five or more employees of a single state agency, or a total of one hundred or more state employees of several agencies have authorized such a deduction for payment to the same professional organization.

(6) Labor or employee organization dues may be deducted in the event that a payroll deduction is not provided under a collective bargaining agreement under the provisions of RCW 41.06.150: PROVIDED, That twenty-five or more officers or employees of a single agency, or a total of one hundred or more officers or employees of several agencies have authorized such a deduction for payment to the same labor or employee organization: PROVIDED, FURTHER, That labor or employee organizations with five hundred or more members in state government may have payroll deduction for employee benefit programs.

(7) Voluntary deductions for political committees duly registered with the public disclosure commission and/or the federal election commission: PROVIDED, That twenty-five or more officers or employees of a single agency or a total of one hundred or more officers or employees of several agencies have authorized such a deduction for payment to the same political committee.

(8) Insurance contributions to the trustee of contracts for payment of premiums under contracts authorized by the ((~~state~~)) public employees' insurance board.

Deductions from salaries and wages of public officers and employees other than those enumerated in this section or by other law, may be authorized by the director of financial management for purposes clearly related to state employment or goals and objectives of the agency and for plans authorized by the ((~~state~~)) public employees' insurance board.

The authority to make deductions from the salaries and wages of public officers and employees as provided for in this section shall be in addition to such other authority as may be provided by law: PROVIDED, That the state or any department, division, or separate agency of the state shall not be liable to any insurance carrier or contractor for the failure to make or transmit any such deduction.

Sec. 10. Section 39, chapter 274, Laws of 1947 as last amended by section 2, chapter 135, Laws of 1982 and RCW 41.40.380 are each amended to read as follows:

(1) Subject to subsections (2) and (3) of this section, the right of a person to a pension, an annuity, or retirement allowance, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are hereby exempt from any state, county, municipal, or other local tax, and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and shall be unassignable.

(2) This section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions and which has been approved for deduction in accordance with rules and regulations that may be promulgated by the ((~~state~~)) public employees' insurance board and/or the department of retirement systems, and this section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of dues and other membership fees to any retirement association or organization the membership of which is composed of retired public employees, if a total of three hundred or more of such retired employees have authorized such deduction for payment to the same retirement association or organization.

(3) Benefits under this chapter shall be payable to a spouse or ex-spouse to the extent expressly provided for in any court decree of dissolution or legal separation or in any court order or court-approved property settlement agreement incident to any court decree of dissolution or legal separation.

Sec. 11. Section 18, chapter 15, Laws of 1983 and RCW 47.64.270 are each amended to read as follows:

Absent a collective bargaining agreement to the contrary, the department of transportation shall provide contributions to insurance and health care plans for ferry system employees and dependents, as determined by the ((~~state~~)) public employees' insurance board, under chapter 41.05 RCW. The ferry system management and employee organizations may collectively bargain for other insurance and health care plans, and employer contributions may exceed that of other state agencies as provided in RCW 41.05.050, subject to RCW 47.64.180. However, after July 1, 1984, any amount by which the employer contribution for ferry system employees' and dependents' insurance and health care plans exceeds that provided for other state agencies shall reduce the funds available for compensation purposes, pursuant to RCW 47.64.180.

Sec. 12. Section .24.01, chapter 79, Laws of 1947 as amended by section 11, chapter 147, Laws of 1973 1st ex. sess. and RCW 48.24.010 are each amended to read as follows:

(1) No contract of life insurance shall hereafter be delivered or issued for delivery in this state insuring the lives of more than one individual unless to one of the groups as provided for in this chapter, and unless in compliance with the other provisions of this chapter.

(2) Subsection (1) of this section shall not apply to contracts of life insurance

(a) insuring only individuals related by marriage, by blood, or by legal adoption; or

(b) insuring only individuals having a common interest through ownership of a business enterprise, or of a substantial legal interest or equity therein, and who are actively engaged in the management thereof; or

(c) insuring the lives of employees and retirees under contracts executed with the ((~~state~~)) public employees' insurance board under the provisions of chapter 41.05 RCW.

Sec. 13. Section 6, chapter 303, Laws of 1986 and RCW 70.14.010 are each amended to read as follows:

The following state agencies are directed to cooperate with the office of financial management in order to establish appropriate health care information systems in their programs: The department of social and health services, the department of labor and industries, the ((~~state~~)) public employees' insurance board, the department of veterans affairs, and the department of corrections.

The office of financial management, in conjunction with such agencies, shall determine:

(1) Definitions of health care services;

(2) Health care data elements common to all agencies;

(3) Health care data elements unique to each agency;

(4) A mechanism for program and budget review of health care data; and

(5) Executive review of health care data.

NEW SECTION. Sec. 14. There is appropriated for the biennium ending June 30, 1989, from the public employees' insurance fund to the department of personnel, the sum of seventy-five thousand dollars, or so much thereof as may be necessary, for the contractual services to assist the public employees' insurance board in the conversion to a self-insured health benefit program.

NEW SECTION. Sec. 15. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect July 1, 1987.