SB1584 - 501R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 38-651, Arizona Revised Statutes, is amended to read:

START_STATUTE38-651. Expenditure of monies for health and accident insurance; definition

A. The department of administration may expend spend public monies appropriated for such purpose to procure health and accident coverage for full‑time officers and employees of this state and its departments and agencies, except for officers and employees of the department of PUBLIC safety. The department of administration may adopt rules that provide that if an employee dies while the employee's surviving spouse's health insurance is in force, the surviving spouse is entitled to no more than thirty‑six months of extended coverage at one hundred two per cent of the group rates by paying the premiums. Except as provided by section 38‑1103, no public monies may be expended to pay all or any part of the premium of health insurance continued in force by the surviving spouse. The department of administration shall seek a variety of plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations. On a recommendation of the department of administration and the review of the joint legislative budget committee, the department of administration may self‑insure for the purposes of this subsection. If the department of administration self‑insures, the department may contract directly with preferred provider organizations, physician and hospital networks, indemnity health insurers, hospital and medical service plans, dental plans and health maintenance organizations. If the department self‑insures, the department shall provide that the self‑insurance program include all health coverage benefits that are mandated pursuant to title 20. The self‑insurance program shall include provisions to provide for the protection of the officers and employees, including grievance procedures for claim or treatment denials, creditable coverage determinations, dissatisfaction with care and access to care issues. The department of administration by rule shall designate and adopt performance standards, including cost competitiveness, utilization review issues, network development and access, conversion and implementation, report timeliness, quality outcomes and customer satisfaction for qualifying plans. The qualifying plans for which the standards are adopted include indemnity health insurance, hospital and medical service plans, closed panel medical and dental plans and health maintenance organizations, and for eligibility of officers and employees to participate in such plans. Any indemnity health insurance or hospital and medical service plan designated as a qualifying plan by the department of administration must be open for enrollment to all permanent full‑time state employees, except that any plan established prior to June 6, 1977 may be continued as a separate plan. Any closed panel medical or dental plan or health maintenance organization designated as the qualifying plan by the department of administration must be open for enrollment to all permanent full‑time state employees residing within the geographic area or area to be served by the plan or organization. Officers and employees may select coverage under the available options.

B. The department of administration may expend public monies appropriated for such purpose to procure health and accident coverage for the dependents of full‑time officers and employees of this state and its departments and agencies. The department of administration shall seek a variety of plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations. On a recommendation of the department of administration and the review of the joint legislative budget committee, the department of administration may self‑insure for the purposes of this subsection. If the department of administration self‑insures, the department may contract directly with preferred provider organizations, physician and hospital networks, indemnity health insurers, hospital and medical service plans, dental plans and health maintenance organizations. If the department self‑insures, the department shall provide that the self‑insurance program include all health coverage benefits that are mandated pursuant to title 20. The self‑insurance program shall include provisions to provide for the protection of the officers and employees, including grievance procedures for claim or treatment denials, creditable coverage determinations, dissatisfaction with care and access to care issues. The department of administration by rule shall designate and adopt performance standards, including cost competitiveness, utilization review issues, network development and access, conversion and implementation, report timeliness, quality outcomes and customer satisfaction for qualifying plans. The qualifying plans for which the standards are adopted include indemnity health insurance, hospital and medical service plans, closed panel medical and dental plans and health maintenance organizations, and for eligibility of the dependents of officers and employees to participate in such plans. Any indemnity health insurance or hospital and medical service plan designated as a qualifying plan by the department of administration must be open for enrollment to all permanent full‑time state employees, except that any plan established prior to June 6, 1977 may be continued as a separate plan. Any closed panel medical or dental plan or health maintenance organization designated as a qualifying plan by the department of administration must be open for enrollment to all permanent full‑time state employees residing within the geographic area or area to be served by the plan or organization. Officers and employees may select coverage under the available options.

C. The department of administration may designate the Arizona health care cost containment system established by title 36, chapter 29 as a qualifying plan for the provision of health and accident coverage to full‑time state officers and employees and their dependents. The Arizona health care cost containment system shall not be the exclusive qualifying plan for health and accident coverage for state officers and employees either on a statewide or regional basis.

D. Except as provided in section 38‑652, public monies expended pursuant to this section each month shall not exceed:

1. Five hundred dollars multiplied by the number of officers and employees who receive individual coverage.

2. One thousand two hundred dollars multiplied by the number of married couples if both members of the couple are either officers or employees and each receives individual coverage or family coverage.

3. One thousand two hundred dollars multiplied by the number of officers or employees who receive family coverage if the spouses of the officers or employees are not officers or employees.

E. Subsection D of this section:

1. Establishes a total maximum expenditure of public monies pursuant to this section.

2. Does not establish a minimum or maximum expenditure for each individual officer or employee.

F. In order to ensure that an officer or employee does not suffer a financial penalty or receive a financial benefit based on the officer's or employee's age, gender or health status, the department of administration shall consider implementing the following:

1. Requests for proposals for health insurance that specify that the carrier's proposed premiums for each plan be based on the expected age, gender and health status of the entire pool of employees and officers and their family members enrolled in all qualifying plans and not on the age, gender or health status of the individuals expected to enroll in the particular plan for which the premium is proposed.

2. Recommendations from a legislatively established study group on risk adjustments relating to a system for reallocating premium revenues among the contracting qualifying plans to the extent necessary to adjust the revenues received by any carrier to reflect differences between the average age, gender and health status of the enrollees in that carrier's plan or plans and the average age, gender and health status of all enrollees in all qualifying plans.

G. Each officer or employee shall certify on the initial application for family coverage that the officer or employee is not receiving more than the contribution for which eligible pursuant to subsection D of this section. Each officer or employee shall also provide the certification on any change of coverage or marital status.

H. If a qualifying health maintenance organization is not available to an officer or employee within fifty miles of the officer's or employee's residence and the officer or employee is enrolled in a qualifying plan, the officer or employee shall be offered the opportunity to enroll with a health maintenance organization when the option becomes available. If a health maintenance organization is available within fifty miles and it is determined by the department of administration that there is an insufficient number of medical providers in the organization, the department may provide for a change in enrollment from plans designated by the director when additional medical providers join the organization.

I. Notwithstanding subsection H of this section, officers and employees who enroll in a qualifying plan and reside outside the area of a qualifying health maintenance organization shall be offered the option to enroll with a qualified health maintenance organization offered through their provider under the same premiums as if they lived within the area boundaries of the qualified health maintenance organization, if:

1. All medical services are rendered and received at an office designated by the qualifying health maintenance organization or at a facility referred by the health maintenance organization.

2. All nonemergency or nonurgent travel, ambulatory and other expenses from the residence area of the officer or employee to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are the responsibility of and at the expense of the officer or employee.

3. All emergency or urgent travel, ambulatory and other expenses from the residence area of the officer or employee to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are paid pursuant to any agreement between the health maintenance organization and the officer or employee living outside the area of the qualifying health maintenance organization.

J. The department of administration shall allow any school district in this state that meets the requirements of section 15‑388, a charter school in this state that meets the requirements of section 15‑187.01 or a city, town, county, community college district, special taxing district, authority or public entity organized pursuant to the laws of this state that meets the requirements of section 38‑656 to participate in the health and accident coverage prescribed in this section, except that participation is only allowed in a health plan that is offered by the department and that is subject to title 20, chapter 1, article 1. A school district, a charter school, a city, a town, a county, a community college district, a special taxing district, an authority or any public entity organized pursuant to the laws of this state rather than this state shall pay directly to the benefits provider the premium for its employees.

K. The department of administration shall determine the actual administrative and operational costs associated with school districts, charter schools, cities, towns, counties, community college districts, special taxing districts, authorities and public entities organized pursuant to the laws of this state participating in the state health and accident insurance coverage. These costs shall be allocated to each school district, charter school, city, town, county, community college district, special taxing district, authority and public entity organized pursuant to the laws of this state based on the total number of employees participating in the coverage. This subsection only applies to a health plan that is offered by the department and that is subject to title 20, chapter 1, article 1.

L. Insurance providers contracting with this state shall separately maintain records that delineate claims and other expenses attributable to participation of a school district, charter school, city, town, county, community college district, special taxing district, authority and public entity organized pursuant to the laws of this state in the state health and accident insurance coverage and, by November 1 of each year, shall report to the department of administration the extent to which state costs are impacted by participation of school districts, charter schools, cities, towns, counties, community college districts, special taxing districts, authorities and public entities organized pursuant to the laws of this state in the state health and accident insurance coverage. By December 1 of each year, the director of the department of administration shall submit a report to the president of the senate and the speaker of the house of representatives detailing the information provided to the department by the insurance providers and including any recommendations for possible legislative action.

M. Notwithstanding subsection J of this section, any school district in this state that meets the requirements of section 15‑388, a charter school in this state that meets the requirements of section 15‑187.01 or a city, town, county, community college district, special taxing district, authority or public entity organized pursuant to the laws of this state that meets the requirements of section 38‑656 may apply to the department of administration to participate in the self‑insurance program that is provided by this section pursuant to rules adopted by the department. A participating entity shall reimburse the department for all premiums and administrative or other insurance costs. The department shall actuarially prescribe the annual premium for each participating entity to reflect the actual cost of each participating entity.

N. Any person that submits a bid to provide health and accident coverage pursuant to this section shall disclose any court or administrative judgments or orders issued against that person within the last ten years before the submittal.

O. For the purposes of this section, "dependent" means a spouse under the laws of this state, a child who is under twenty‑six years of age or a child who was disabled before reaching nineteen years of age, who continues to be disabled under 42 United States Code section 1382c and for whom the employee had custody before reaching nineteen years of age. END_STATUTE

Sec. 2. Section 38-651.05, Arizona Revised Statutes, is amended to read:

START_STATUTE38-651.05. Flexible or cafeteria employee benefit plan; fund; exception

A. The department of administration is authorized to may establish a flexible or cafeteria employee benefit plan which may provide for deductions or salary reductions for group life insurance, disability insurance, group accidental death and dismemberment insurance, long‑term care coverage, health and accident insurance or other authorized employee benefits, which meet the requirements of the United States internal revenue code of 1986 and regulations thereunder, and to adopt rules for its administration.

B. The department of administration shall determine the frequency of payroll deductions for purposes of this section for those state officers or employees under payroll systems under the direction of the department of administration. For all other state officers or employees under other state payroll systems, the appropriate state agency, board, commission or institution shall determine the frequency of payroll deductions for purposes of this section.

C. A flexible or cafeteria employee benefit plan fund is established. Monies received by the department of administration from employee contributions to the flexible or cafeteria employee benefit plan established pursuant to subsection A of this section shall be deposited in the fund or deposited directly with a third party under contract with the department of administration to administer the plan, except that contributions received from employees of the department of public safety shall be deposited in the department of public safety health insurance trust fund established by section 41‑1830.42. Investment earnings shall be deposited to the credit of the fund.

D. The department of administration shall use any monies remaining in the fund or on deposit with a third party under contract to administer the plan at the end of each fiscal year in the following priority:

1. To cover the costs to this state of administering the flexible or cafeteria employee benefit plan under subsection A of this section.

2. After payment of the administrative costs, the remainder shall be used to reduce in a uniform manner the employee and employer contributions to benefits included under a flexible or cafeteria employee benefit plan.

E. Notwithstanding the provisions of subsection A of this section, the flexible or cafeteria employee benefit plan shall not provide cash as an employee benefit. Monies used in accordance with subsection D of this section to establish, fund and administer dependent care accounts or similar accounts, shall not be considered providing cash as an employee benefit. END_STATUTE

Sec. 3. Title 41, chapter 12, Arizona Revised Statutes, is amended by adding article 12, to read:

ARTICLE 12. EMPLOYEE HEALTH INSURANCE

START_STATUTE41-1830.41. Definitions

In this article, unless the context otherwise requires:

1. "Association" means an organization that is recognized as an association for which an employee may deduct dues pursuant to section 38‑612 and that:

(a) Allows as full voting members only employees prescribed in section 41-1714 and retirees of the department.

(b) Allows as full voting members all employees prescribed in section 41-1714.

(c) Is not affiliated with any national or international union or association that requires as a condition of affiliation that affiliated local associations comply with any regulation or bylaw.

2. "Board" means the health insurance trust fund board established by this article.

3. "Department" means the department of public safety.

4. "Fund" means the department of public safety health insurance trust fund established by this article. END_STATUTE

START_STATUTE41-1830.42. Authority to procure health insurance; department of public safety health insurance trust fund; exemption

A. The department of public safety may spend public monies appropriated for such a purpose to procure health and accident coverage for full‑time officers and employees of the department and for the purposes prescribed in section 38‑651.05.

B. The department of public safety health insurance trust fund is established consisting of legislative appropriations, monies collected from full‑time officers and employees of the DEPARTMENT for health insurance benefit plans or flexible or cafeteria employee benefit plans and investment earnings on monies deposited in the fund. The health insurance trust fund board shall administer the fund.

C. Monies deposited in or credited to the fund are exempt from the provisions of section 35-190 relating to lapsing of appropriations. END_STATUTE

START_STATUTE41-1830.43. Health insurance trust fund board; membership; appointment; terms; vacancies; meetings; compensation

A. The health insurance trust fund board is established consisting of seven members who are appointed by the governor for three year terms beginning on the third Monday in January. The membership consists of:

1. Two executive board members of an association.

2. Two members of an association, one of whom is a peace officer.

3. The director of the department.

4. A public member who is an attorney and whose practice is in an area of law that is related to trust funds.

5. A public member.

B. The governor shall appoint a chairperson from among the members at the board's first meeting and every year thereafter, except that the director shall not be appointed chairperson. A board member who was qualified at the time of appointment does not become disqualified unless the member ceases to hold the office that qualified the member for appointment.

C. Meetings shall be held at least quarterly. Additional meetings may be held on the call by the chairperson, by written request of at least three members or on the call of the governor. A vacancy on the board occurs if a member, except the director, is absent without the permission of the chairperson for three consecutive meetings. The governor may remove any member, except the director, for cause.

D. Board members are not eligible to receive compensation but are eligible for reimbursement of expenses pursuant to title 38, chapter 4, article 2.

E. Membership on the board does not constitute holding an office. A member of the board is not required to take or file oaths of office before serving on the board. Notwithstanding any other law, a member of the board is not disqualified from holding any public office or employment and the member does not forfeit any office or employment by reason of the member's appointment to the board. END_STATUTE

START_STATUTE41-1830.44. Depository; powers and duties of board

A. All monies in the fund shall be deposited and held in a health insurance trust fund depository. Monies in the fund shall be disbursed from the depository separate and apart from all monies or funds of this state and agencies, instrumentalities and political subdivisions of this state. The monies shall be secured by the depository in which they are deposited and held to the same extent and in the same manner as required by the general depository law of this state. The fund is subject to the sole management of the board for the purpose of investment. The board may select third parties to make approved investments. The board may invest in portfolios of securities chosen and managed by a third party. The board's decision to invest in securities such as mutual funds, commingled investment funds, exchange traded funds, private equity or venture capital limited partnerships, real estate limited partnerships or limited liability companies and real estate investment trusts whose assets are managed by third parties does not constitute an improper delegation of the board's investment authority.

B. The board may invest, reinvest, alter and change the monies accumulated in the fund.

C. The board shall:

1. Establish group health and accident coverage for all eligible officers and employees and their dependants.

2. Seek a variety of plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations.

3. Designate and adopt performance standards, including cost competitiveness, utilization review issues, network development and access, conversion and implementation, report timeliness, quality outcomes and customer satisfaction for qualifying plans.

4. Adopt rules necessary to administer this article.

D. The board may:

1. Establish group health and accident coverage for all eligible retirees and their dependants. If the board elects to establish group health and accident coverage for eligible retirees, the board shall seek a variety of plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations.

2. Spend fund monies to reduce the cost of health and accident coverage for all eligible officers and employees or retirees.

3. Offer periodic wellness plans or programs to eligible officers and employees or retirees.

4. Contract with third parties to achieve the requirements of this section. END_STATUTE

START_STATUTE41-1830.45. Program termination

The program established by this article ends on July 1, 2021 pursuant to section 41-3102.

Sec. 4. Initial terms of members of the health insurance trust fund board

A. Notwithstanding section 41‑1830.43, Arizona Revised Statutes, as added by this act, the initial terms of members of the health insurance trust fund board are:

1. For the members who are appointed pursuant to section 41‑1830.43, subsection A, paragraph 1, Arizona Revised Statutes, as added by this act, one term ending on the third Monday in January, 2013 and one term ending on the third Monday in January, 2015.

2. For the members who are appointed pursuant to section 41‑1830.43, subsection A, paragraph 2, Arizona Revised Statutes, as added by this act, two terms ending on the third Monday in January, 2014.

3. For the member who is appointed pursuant to section 41‑1830.43, subsection A, paragraph 4, Arizona Revised Statutes, as added by this act, a term ending on the third Monday in January, 2015.

4. For the member who is appointed pursuant to section 41‑1830.43, subsection A, paragraph 5, Arizona Revised Statutes, as added by this act, a term ending on the third Monday in January, 2013.

B. The governor shall make all subsequent appointments as prescribed by statute.