HOUSE BILL REPORT

HB 2230

BYRepresentative Locke

Relating to health care.

House Committe on Appropriations

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (16)

      Signed by Representatives Locke, Chair; Silver, Ranking Republican Member; Appelwick, Belcher, Brekke, Dorn, Ebersole, Hine, Peery, Rust, Sayan, Spanel, Sprenkle, Valle, Wang and Wineberry.

Minority Report:  Do not pass.  (7)

      Signed by Representatives Youngsman, Assistant Ranking Republican Member; Bowman, Doty, Inslee, McLean, Nealey and Padden.

House Staff:Janet Peterson (786-7143)

AS REPORTED BY COMMITTEE ON APPROPRIATIONS FEBRUARY 26, 1990

BACKGROUND:

The 1988 Health Care Reform Act directed the Washington state Health Care Authority to conduct a study of school employees' health benefits.  The study, submitted to the Legislature in December, 1989, made several recommendations concerning pooling of state benefit allocations among employees, limiting funding to basic benefits, and requiring school districts to report demographic data on employees and dependents covered by school district benefit plans.

In school districts that do not pool benefit allocations, all individual employees can choose benefit options that exhaust their full state-funded benefit amount; currently $240 per month per employee.  This allows many single employees or employees with other coverage to choose special benefit options or to set money aside in a Voluntary Employee Beneficiary Association account (VEBA).  Employees who need health insurance for dependents, however, generally have payroll deductions to cover additional costs of family coverage.  These payroll deductions for employees with families have risen quickly in recent years, due to rapid inflation in health care costs.

SUMMARY:

SUBSTITUTE BILL:  The Washington state Health Care Authority will adopt rules to implement standards for school district employee benefit plans. The standards shall apply to each district's overall method of determining employee coverage and the amount of employer contributions, as well as to the specific characteristics of the benefits or coverage.  The standards shall not apply to coverage for which there is no employer contribution.

The standards for school employee benefit plans will be implemented in three phases:

PHASE I:  The first phase will include the adoption of preliminary standards that will apply to benefit plans offered in the 1990- 91 school year.  These standards must be adopted in rule by May 1, 1990.  Employer contributions will be authorized only for basic benefits, defined as medical, dental, vision, group life, and group long-term disability insurance.

However, the Health Care Authority may authorize school districts to offer optional benefit plans, in addition to basic benefits, if the district has maximized pooling of benefit allocations among employees in any bargaining unit or employee group for which the benefit plan is offered.  These optional benefit plans may not include employee beneficiary accounts that can be cashed out as severance pay.  Among employees in the pooling arrangement, those who enroll dependents in basic medical coverage must be charged the same amount for medical benefits as employees without dependent coverage, and must receive the same additional employer contribution for other coverage or optional benefits.

The Health Care Authority may also adopt standards for the 1990- 91 school year that include requirements for subscriber cost- sharing, such as deductibles or co-insurance payments.  The 1990- 91 standards may also address administrative expenses and loss ratios of provider plans.  However, the Health Care Authority must consider the feasibility of implementing these standards for the 1990-91 school year, and the need to allow time for providers and school districts to respond to new state requirements and for employees to review benefit choices.

The standards adopted by the Health Care Authority are not intended to prescribe a specific plan design, and should allow local flexibility.  If the limitations on benefit options result in fewer dollars allocated by the district for some employees, these dollars must be pooled to reduce out-of-pocket costs for employees needing basic coverage for dependents.

PHASE II:  In the second phase, the Health Care Authority will adopt by rule additional standards that were infeasible for implementation in the 1990-91 school year.  The second phase will also include the development of standards to further address the following:  pooling of benefit allocations among employees, giving highest priority to basic benefits, curbing overutilization of benefits through subscriber cost-sharing or other provisions, achieving a balance between equity with state employees and local flexibility, providing equitable coverage for part-time employees, negotiating employee benefits by multiple bargaining units, ensuring financial stability of plan providers, and related issues identified by the Health Care Authority.

By January 15, 1991, the Health Care Authority shall submit to the House Appropriations Committee and the Senate Ways and Means Committee recommendations proposing a revised or expanded set of standards to be implemented for school employee benefit plans offered in the 1991-92 school year.  The 1991-92 standards shall be adopted by the Health Care Authority by rule prior to April 15, 1991.

PHASE III:  The third phase shall include ongoing monitoring of school employee benefit issues, research, analysis of demographic data, development of recommended state policies, and annual review and revision of standards for school employee benefit plans.  These revisions shall be adopted by rule by April 15th prior to the school year for which the revisions will be implemented.

During all three phases, school districts may not contribute for benefit plans that do not meet standards adopted by the Health Care Authority.  However, districts may continue payments required under a pre-existing contract if the contract provisions do not allow modification for changes in state laws on school employee benefits. Any school district contract for employee benefits executed after the effective date of this act is null and void unless it contains an agreement to abide by the standards adopted by the Health Care Authority.

The Health Care Authority shall adopt procedures, including an appeals process, to monitor compliance with the standards adopted for school district employee benefit plans.  These procedures shall include requirements for school districts to submit summary descriptions of all benefits offered by the district and to report demographic data on covered employees, including the age and sex of the employee and dependents.  The Health Care Authority shall notify the school district and the state auditor if a district is found to be out of compliance with the Health Care Authority's standards.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute bill replaces a title only bill.

Fiscal Note:      Not Requested.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Susan O'Loughlin, Washington State Health Care Authority; and David Arbaugh, Public School Employees (qualified support).

House Committee - Testified Against:      Karen Davis, Washington Education Association; Kris Van Gorkom, Washington Association of School Administrators; Mark Wilkerson, VEBA consultants; Dr. Cliff Campbell, VEBA trustees; and Neal Nogler, Washington State Retired Teachers Association.

House Committee - Testimony For:    The bill is consistent with the recommendations of the Health Care Authority report on K-12 employee benefits.  The timelines established in the bill can be met.  The language on VEBA's in the bill will provide an incentive for districts to bargain for lower-cost benefit packages.  The bill is a move toward good public policy in directing how public dollars for benefits are used.  Data collection is important for establishing future policy directions.

House Committee - Testimony Against:      The bill gives the Health Care Authority too much power to dictate benefit design. The Health Care Authority has a conflict of interest since it will also be offering coverage for school district employees beginning in 1990-91.  Health Care Authority standards will be too prescriptive.  The bill inhibits local control, and will reduce VEBA options that are very popular with some employee groups.  The scope of the standards is too broad, and there needs to be more time for their development.  Data collection will be costly for school districts.