DISTRICTS ‑- SCHOOLS ‑- BOARD OF DIRECTORS ‑- HOSPITALIZATION AND MEDICAL INSURANCE FOR EMPLOYEES ‑- AUTHORITY LIMITED TO GROUP POLICIES.
RCW 41.04.180 authorizes a school district to contract for and make premium payments (either up to 50% or $5.00, whichever is less) toward the purchase of group disability insurance for its employees, but such authority does not authorize it to make payments under a "franchise plan."
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September 22, 1964
Honorable Charles O. Carroll
King County Court House
Seattle 4, Washington
Cite as: AGO 63-64 No. 122
By letter previously acknowledged you requested the opinion of this office on a question which we paraphrase as follows:
Does RCW 41.04.180 (chapter 75, Laws of 1963), authorize a school district to contract for and to make premium payments toward the purchase of disability insurance under a "franchise plan" as well as "group disability insurance"?
We answer your question in the negative for the reasons set forth in our analysis.
To answer your question we must first analyze the statutes relating to disability insurance and determine the distinction, if any, between group disability insurance and disability insurance issued on a franchise plan.
RCW 48.11.030 defines disability insurance as follows:
"'Disability insurance' is insurance against bodily injury, disablement or death by accident, against disablement resulting from sickness, and every insurance appertaining thereto."
[[Orig. Op. Page 2]]
It is clear from the above statute that insurance providing benefits for hospitalization and medical aid‑-which is the type of insurance referred to by chapter 75, Laws of 1963‑- is a type of disability insurance.
RCW 48.21.010 defines group disability insurance as follows:
"Group disability insurance is that form of disability insurance provided by a master policy issued to an employer, to a trustee appointed by an employer or employers, or to an association of employers formed for purposes other than obtaining such insurance, covering, with or without their dependents, the employees, or specified categories of the employees, of such employers or their subsidiaries or affiliates, or issued to a labor union, or to an association of employees formed for purposes other than obtaining such insurance, covering, with or without their dependents, the members, or specified categories of the members, of the labor union or association, or issued pursuant to RCW 48.21.030. Group disability insurance shall also include such other groups as qualify for group life insurance under the provisions of this code."
RCW 48.20.350 defines disability insurance issued on a franchise plan as follows:
"(1) Disability insurance on a franchise plan is that issued to
"(a) five or more employees of a common employer, or to
"(b) ten or more members of any bona fide trade or professional association or labor union, which association or union was formed and exists for purposes other than that of obtaining insurance, and under which such employees or members, with or without their dependents, are issued individual policies which may vary as to amounts and kinds of coverage as applied for, under an arrangement whereby [[Orig. Op. Page 3]] the premiums on the policies are to be paid to the insurer periodically by the employer, with or without payroll deductions, or by the association, or by some designated employee or officer of the association acting on behalf of the employer or association members.
"(2) An insurer may charge different rates, provide different benefits, or employ different underwriting procedure for individuals insured under a franchise plan, if such rates, benefits, or procedures as used do not discriminate as between franchise plans, and do not discriminate unfairly as between individuals insured under franchise plans and individuals otherwise insured under similar policies."
A comparison of the foregoing definitions reveals the following material distinctions between two types of insurance plans:
(1) In the case of group disability insurance, the policy is contracted for and negotiated by an employer, association or labor union on behalf of its employees or members. Under a franchise plan each employee or member negotiates and contracts for his or her own individual policy and the employer, association or union merely pays the premium therefor.
(2) In the case of group disability insurance, a single policy is issued to the employer, association or union as policyholder. Under a franchise plan several policies are issued, one to each employee or member covered thereunder.
(3) In the case of group disability insurance the rates are uniform and the amount of insurance is the same for all individuals for whom the policy is written. In a franchise plan the rates and amount of insurance may vary among each individual insured.
Chapter 75, Laws of 1963 (cf. RCW 41.04.180-41.04.190) provides as follows:
[[Orig. Op. Page 4]]
"Any department, division, or separate agency of the state government, and any county, municipality or other political subdivision of the state acting through its principal supervising official or governing body may, whenever funds shall be available for that purpose, provide for all or a part of hospitalization and medical aid for its employees and their dependents through contracts with regularly constituted insurance carriers or with health care service contractors as defined in chapter 48.44 RCW, for group hospitalization and medical aid policies or plans: Provided, That the contributions of any department, division or separate agency of the state government and school districts shall be limited to not to exceed fifty percent of any premium therefor, or five dollars per month per employee covered, whichever is less except that such limitation shall not apply to employees employed under chapter 47.64 RCW.
"The cost of any suchgroup policy or plan to any such public agency or body shall be deemed additional compensation to the employees covered thereby for services rendered, and any officer authorized to disburse such funds may pay in whole or in part to any such insurance carrier or health care service contractor the amount of the premiums due pursuant to any such contract." (Emphasis supplied.)
It is a fundamental rule of law that a statute is not subject to construction or interpretation where the words of the statute are clear, unambiguous and well understood according to their natural and ordinary sense and meaning. Parkhurst v. Everett, 51 Wn. (2d) 292, 294, 318 P. (2d) 327 (1957). In our opinion this rule is applicable here. Chapter 75, Laws of 1963, refers togroup policies or plans. As previously pointed out in this opinion the term "group" as it is used in the insurance code, Title 48 RCW, describes a certain type of disability policy or plan that differs from any other policy or plan such as insurance issued under a franchise plan. Accordingly, we conclude that the statute [[Orig. Op. Page 5]] permits a state department or political subdivision, including a school district, to contract for and to make premium payments toward hospitalization and medical aid insurance for its employees only if such insurance is or has been issued as a group policy or plan.
It is therefore our opinion that chapter 75, Laws of 1963, would not authorize a school district to contract for and to make premium payments toward the purchase of disability insurance issued under the "franchise plan."
We trust the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
BASIL L. BADLEY
Assistant Attorney General