WSR 13-17-106
PROPOSED RULES
DEPARTMENT OF
ENTERPRISE SERVICES
[Filed August 21, 2013, 9:55 a.m.]
Original Notice.
Preproposal statement of inquiry was filed as WSR 13-14-065.
Title of Rule and Other Identifying Information: Chapter 200-100 WAC, Self-insurance requirements governing local government and nonprofit self-insurance.
Hearing Location(s): Department of Enterprise Services (DES), 1500 Jefferson Street, Room 1213, Olympia, WA 98504, on September 30, 2013, at 9:00 a.m.; and at the Central Washington University, Student Union Building, Room 137B, 400 East University Way, Ellensburg, WA 98926, on October 2, 2013, at 12:00 p.m.
Date of Intended Adoption: December 4, 2013.
Submit Written Comments to: Online https://www.surveymonkey.com/s/RiskPoolRulemaking, e-mail rules@des.wa.gov, by mail to Devin Proctor, Rules and Policy Coordinator, DES, Contracts and Legal Services Division, P.O. Box 41410, Olympia, WA 98504-1410, fax (360) 586-2426 (comments submitted by fax must be ten pages or less), comments will be accepted through October 11, 2013.
Assistance for Persons with Disabilities: Contact Amy Julsrud by phone (360) 407-9317 or e-mail amy.julsrud@des.wa.gov.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The following amendments were made:
WAC 200-100-02023 Standards for operation—Elections of the governing body.
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The proposed changes provide flexibility to the risk pools to establish the governance structure best suited to the size of their membership.
WAC 200-100-03001 Standards for solvency—Actuarially determined liabilities, program funding and liquidity requirements.
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The proposed changes:
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Clarify that estimates must be written, and standardizes current actuarial practice of providing estimates at various actuarial confidence levels as indicated in the proposed change. The proposed change allows the pool, its members and the state risk manager to clearly identify the level of funds available to pay claims.
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Provide clarity as to when a pool has met the primary asset test.
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Increases the amount of combined assets needed from the seventy percent to the eighty percent confidence level.
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Establish criteria for and clearly identifies a second solvency test as the total asset test.
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Establish a remedy to be taken by the state risk manager when a pool fails to respond to the state risk manager's requests for an improvement plan.
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Identifies the procedure to be followed by the state risk manager when a pool operating under supervisory watch of the state risk manager declines to the point that monetary reserves available to pay claims fall below the seventy percent confidence level.
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Clarify the specific work to be done by an independent actuary on behalf of the state risk manager.
WAC 200-100-037 Standards for management and operations—Financial plans.
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The proposed changes:
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Reduce the time that audited financial statements are to be provided to the state risk manager from one year to eight months from a pool's fiscal year end.
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Prevents loaning of moneys needed to pay claims to any entity.
WAC 200-100-060 Standards for management and operations—State risk manager reports.
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The proposed changes reduce the time that audited financial statements are to be provided to the state risk manager from one year to eight months from a pool's fiscal year end. This change also appears in WAC 200-100-037.
Reasons Supporting Proposal: The department took input from a wide-ranging group of stakeholders and these are highlights of the changes that came out of that exchange:
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Increases the combined asset requirements for risk pools from the current seventy percent to the eighty percent confidence level.
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Clarifies when a pool has met the primary asset test.
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Establishes criteria for and clearly identifies a second solvency test as the total asset test.
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Identifies the procedure to be followed by the state risk manager when a pool operating under supervisory watch of the state risk manager declines to the point that monetary reserves available to pay claims fall below the seventy percent confidence level.
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Clarifies the specific work to be done by an independent actuary on behalf of the state risk manager.
Statutory Authority for Adoption: RCW 48.62.061.
Statute Being Implemented: Chapter 48.62 RCW.
Rule is not necessitated by federal law, federal or state court decision.
Agency Comments or Recommendations, if any, as to Statutory Language, Implementation, Enforcement, and Fiscal Matters: To obtain a copy of the rules, or to submit written comments on the rules, please contact Devin Proctor, Rules and Policy Coordinator, phone (360) 407-8269, e-mail devin.proctor@des.wa.gov, written comments online https://www.surveymonkey.com/s/RiskPoolRulemaking, e-mail rules@des.wa.gov.
Name of Proponent: DES, governmental.
Name of Agency Personnel Responsible for Drafting: Jack Zeigler, 1500 Jefferson Avenue, Olympia, WA 98504, (360) 407-9209; Implementation: Ro Marcus, 1500 Jefferson Avenue, Olympia, WA 98504, (360) 407-8569; and Enforcement: Lucy Isaki, 1500 Jefferson Avenue, Olympia, WA 98504, (360) 407-8143.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The implementation of these rules have no or minimal cost to small business.
A cost-benefit analysis is not required under RCW 34.05.328. DES is not an agency listed in RCW 34.05.328 (5)(a)(i). Further DES does not voluntarily make section 201 applicable to this rule adoption nor to date, has joint administrative rules review committee made section 201 applicable to this rule adoption.
August 21, 2013
Jack Zeigler
Policy and Rules Manager
AMENDATORY SECTION (Amending WSR 11-23-093, filed 11/17/11, effective 11/17/11)
WAC 200-100-02023 Standards for operation—Elections of the governing body.
The governing body of every joint self-insurance program shall be elected by a majority of the members. Elections may be conducted during a regular meeting of the governing body or by mail-in ballot. If mail-in ballots are used, the ballots are to be secured and remain unopened until the next regular meeting of the governing body. The opening and counting of the ballots shall be conducted by the governing body of the joint self-insurance program during the next regular meeting and retained in compliance with public records retention laws. ((Each ballot shall be read orally as to the member name and vote and recorded in the meeting minutes.)) Joint self-insurance programs governed by a governing body which requires the inclusion of a voting representative from each member entity in such governing body are exempt from the requirements of this section.
AMENDATORY SECTION (Amending WSR 11-23-093, filed 11/17/11, effective 11/17/11)
WAC 200-100-03001 Standards for solvency—Actuarially determined liabilities, program funding and liquidity requirements.
(1) All joint self-insurance programs shall obtain an annual actuarial review as of fiscal year end which provides written estimates of the liability for unpaid claims measured at the expected level and the seventy, eighty, and ninety percent confidence level.
(2) The governing body of the joint self-insurance program shall establish and maintain primary assets in an amount at least equal to the unpaid claims estimate at the expected level as determined by the program's actuary as of fiscal year end. All joint self-insurance programs meeting this requirement shall be considered in compliance with the primary asset test. All joint self-insurance programs that do not meet the requirements ((to maintain sufficient primary assets)) of the primary asset test shall notify the state risk manager in writing of the condition. The state risk manager shall take corrective action, which may include the service of a cease and desist order upon the program, to require that the program increase primary assets in an amount equal to the unpaid claims estimate at the expected level as determined by the program's actuary as of fiscal year end.
(3) The governing body of ((the)) every joint self-insurance program operating under this chapter shall establish and maintain total primary and secondary assets in an amount equal to or greater than the unpaid claim estimate at the ((seventy)) eighty percent confidence level as determined by the program's actuary as of fiscal year end.
(4) All joint self-insurance programs authorized by chapter 48.62 RCW shall meet the requirements of both the primary asset test and the total asset test. The governing body of all joint self-insurance programs that do not meet ((the reserve)) requirements ((to maintain sufficient primary and secondary assets)) of the total asset test shall notify the state risk manager in writing of the condition. The state risk manager shall require that the program submit a written corrective action plan to the state risk manager within sixty days of notification. Such plan shall include a proposal for improving the financial condition of the self-insurance program and a time frame for completion. The state risk manager shall approve or deny the proposed plan in writing within thirty days of receipt of the final plan submission.
Joint self-insurance programs operating under an approved plan and making satisfactory progress according to the terms of the plan shall remain under supervisory watch by the state risk manager until the terms of the approved plan have been met. Programs under supervisory watch but not making satisfactory progress may be subject to the following requirements:
(a) Increase in frequency of examinations, the cost of which shall be the responsibility of the program;
(b) Submission of quarterly reports;
(c) On-site monitoring by the state risk manager; or
(d) Service of a cease and desist order upon the program.
(5) Failure by the joint self-insurance program to respond or submit a plan to improve the financial condition of the program shall cause the state risk manager to take corrective action, which may include written notification to every member of the joint self-insurance program, the service of a cease and desist order upon the program, and other available remedies necessary to ensure the program operates in a financially sound manner.
(6) All joint self-insurance programs that do not maintain total primary and secondary assets in an amount equal to or greater than unpaid claim estimate at the seventy percent, confidence level, as determined by the program's actuary, as of fiscal year end shall be issued a cease and desist order by the state risk manager. Such programs will be considered under a supervisory cease and desist order.
(((4))) (7) The state risk manager shall evaluate the operational safety and soundness of the program by monitoring changes in liquidity, claims reserves and liabilities, member equity, self-insured retention, and other financial trends over time. Programs experiencing adverse trends may cause the state risk manager to increase frequency of on-site program review and monitoring, including increased communication with the governing body and requirements for corrective plans.
(((5))) (8) When the state risk manager determines it necessary to analyze the program's soundness and financial safety, the state risk manager may obtain an independent actuarial evaluation to determine the ((adequacy of reserves)) accuracy of the estimate for unpaid claims liabilities, including the estimate of unallocated loss adjustment expenses. Costs of these services shall be the responsibility of the joint self-insurance program.
AMENDATORY SECTION (Amending WSR 11-23-093, filed 11/17/11, effective 11/17/11)
WAC 200-100-037 Standards for management and operations—Financial plans.
(1) All joint self-insurance programs shall maintain a written plan for managing the financial resources of the program. The financial plan shall include:
(a) A procedure for accounting for moneys received, payments made and liabilities of the joint program which complies with generally accepted accounting principles;
(b) An investment policy which conforms to RCW 48.62.111 governing the investments of the program; and
(c) The preparation and submission of accurate and timely annual financial reports of the program as prescribed by the state auditor's office.
(d) The submission of audited financial statements to the state risk manager within ((one year)) eight months of the program's fiscal year end which meet the requirements of the state auditor and state risk manager as described in ((RCW 82.60.060(3))) this chapter.
(2) No financial plan of a joint self-insurance program shall permit any loans ((to any member)) from primary assets held for payment of unpaid claims at the expected level as determined by an actuary as of fiscal year end.
AMENDATORY SECTION (Amending WSR 11-23-093, filed 11/17/11, effective 11/17/11)
WAC 200-100-060 Standards for management and operations—State risk manager reports.
(1) Every joint property and liability self-insurance program authorized to transact business in the state of Washington shall submit the annual report to the state risk manager.
(2) The annual report to the state risk manager shall require the following information to be submitted in electronic form:
(a) Unaudited annual financial statements, including attestation, as provided to the state auditors office;
(b) Actuarial reserve review report on which the net claims liabilities at fiscal year end reported in the unaudited financial statements are based;
(c) Copies of all insurance coverage documents;
(d) List of contracted consultants;
(e) Details of changes in articles of incorporation, bylaws or foundation agreement;
(f) Details of services provided by contract to nonmembers;
(g) List of members added or terminated.
Such reports shall be submitted to the state risk manager no later than one hundred fifty days following the completion of the joint program's fiscal year.
(3) Audited financial statements shall be provided to the state risk manager within ((one year)) eight months of the program's fiscal year end and comply with requirements for submission of audited financial statements established by the state risk manager.
(4) All joint self-insurance programs shall submit quarterly financial reports if, in the estimation of the state risk manager, the financial condition of a program warrants additional quarterly reporting requirements.
(5) Failure to provide required financial reports may result in corrective action by the state risk manager. Such actions may include:
(a) Increase in frequency of examinations, the cost of which shall be the responsibility of the program;
(b) On-site monitoring by the state risk manager;
(c) Service of a cease and desist order upon the program.