Washington’s law regulating “health care benefit managers” (“HCBMs”) went into effect on January 1, 2022. Although Washington’s regulatory scheme for HCBMs has some similarities with how other states regulate “third party administrators” (“TPAs”), the Washington law is much broader. It subjects more entities to regulation than a typical TPA statute and imposes additional burdens on carriers that rely on third parties to perform certain core plan functions. As such, Washington-regulated health plans and the entities that provide services to Washington-regulated health plans should become acquainted with the rules governing HCBMs to ensure compliance with the law’s broad registration and reporting requirements.

I. Identifying “HCBMs”

The statutory and regulatory definition of HCBM is broad and ambiguous. Specifically, an HCBM is defined as “a person or entity providing services to, or acting on behalf of, a health carrier or employee benefits programs, that directly or indirectly impacts the determination or utilization of benefits for, or patient access to, health care services, drugs, and supplies.”[1] The statute provides an illustrative (i.e., non-exclusive) list of these so-called HCBM services, which include preauthorization of benefits or care, utilization review, credentialing, network management, and disease management. However, to date, the Washington State Office of the Insurance Commissioner (the “OIC”) has declined to provide further guidance on what it means to “indirectly impact[] the determination or utilization of benefits.”

The breadth and ambiguity of the statutory definition of HCBM has led to difficult questions regarding the scope of the law. By way of example, it is not clear from the text of the statute and regulations whether entities providing clinical and quasi-clinical provider functions qualify as HCBMs. On the one hand, there is contextual evidence suggesting that neither the state legislature nor the OIC intended the HCBM statute to regulate industry-standard contracts between carriers and their participating providers. However, there is no clear statutory exemption that covers, for instance, a provider who performs limited disease management functions on behalf of a plan. As such, it is possible for providers to qualify as HCBMs by virtue of the administrative services they provide on behalf of Washington health carriers.

II. Obligations Under the HCBM Statute

The HCBM statute explicitly states that the definition of HCBM “does not include” certain types of entities that routinely provide HCBM services, including health care service contractors, health maintenance organizations, an employer administering its employee benefit, or a hospital licensed under RCW 70.41. However, the OIC has advised us (and others) that entities listed as exempt still may be subject to HCBM registration if they perform HCBM functions on behalf of a Washington-regulated health carrier or employee benefit plan. As such, these exemptions do not provide as much protection as many practitioners had initially thought.

The HCBM statute imposes requirements on both HCBMs and the carriers that contract with them. HCBMs operating in Washington must register with the OIC and renew the registration annually. Registration includes, among other things, identifying the individuals or entities with an ownership or controlling interest in the applicant and paying annual registration fees—currently $200. Health carriers must file all HCBM contracts with the OIC and identify all their HCBMs on their websites. HCBMs, in turn, must file with the OIC every contract with a third party that “directly or indirectly” supports “a contract with a carrier or employee benefits program.”[2]

With respect to a carrier’s obligation to identify its HCBMs, carriers must post information that easily identifies the HCBMs and their contracted HCBM services and update the same within 30 business days of any change to the same. Carriers must notify their enrollees in writing and at least annually, including at plan enrollment and renewal, of each HCBM contracted to provide services to the carriers. This notice must identify the website address where enrollees can view an updated HCBM listing.

For the annual registration renewal, each HCBM will be required to complete an annual report for the gross business income generated during the immediately preceding calendar year in Washington. The renewal fee will be a prorated share of the costs of regulating HCBMs in the ensuing fiscal year (but no less than $500), based on the gross business income the HCBM had generated during the immediately preceding calendar year.

[1] RCW 48.200.020(4)(a) (emphasis added).

[2] WAC 284-180-460(1).