When used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:

(1) EMPLOYEE. Any person covered by the Public Education Employees' Health Insurance Plan pursuant to Section 16-25A-11 or person who is employed full-time in any public institution of education within the State of Alabama which provides instruction at any combination of grades K through 14 exclusively, under the auspices of the State Board of Education or the Alabama Institute for Deaf and Blind; provided, any person employed part-time by any public institution of education within the State of Alabama which provides instruction at any combination of grades K through 14, exclusively, under the auspices of the State Board of Education or the Alabama Institute for the Deaf and Blind, shall be included in the definition of employee if such person shall agree to have deducted from his or her compensation a pro rata portion of the premium cost of a full-time employee, based on the percentage of time such person is employed, in accordance with such rules and regulations as shall be adopted by the board.

(2) RETIRED EMPLOYEE. Any person receiving a monthly benefit from the Teachers' Retirement System who at the time of his retirement was employed by a public institution of education within the State of Alabama which provided instruction at any combination of grades K through 14, exclusively, under the auspices of the State Board of Education or pursuant to Section 16-25A-11. Any person receiving a monthly benefit from the Teachers' Retirement System who at the time of his or her retirement was employed by a state-supported postsecondary institution and any person receiving a monthly benefit from the Employees' Retirement System whose retirement under the Employees' Retirement System was from a local board of education or a state-supported postsecondary institution who participated pursuant to Section 36-27-6.

(3) BOARD. The Public Education Employees' Health Insurance Board.

(4) CLASS. An employee or retiree shall be included in one of the following classes: (i) Active employee single, (ii) Active employee family, (iii) non-Medicare retiree single, (iv) non-Medicare retiree family, (v) Medicare retiree single, (vi) Medicare retiree family, (vii) non-Medicare retiree with Medicare eligible dependent(s), or (viii) Medicare retiree with non-Medicare dependent(s).

(5) EMPLOYEE CONTRIBUTION. The amount of the total health insurance premium to be paid by the employee or retiree as determined by the Board.

(6) EMPLOYER CONTRIBUTION. The amount of the total health insurance premium to be paid by the employer as determined by the Board.

(7) FEDERAL POVERTY LEVEL. Income level determined in Section 673(2) of the Community Services Block Grant Act 2 (42 U.S.C. § 9902(2)). Should the federal government no longer derive or substantially change its derivation of the federal poverty level, the Public Education Employees' Insurance Board has the authority to derive and apply an alternate poverty level to carry out its obligations under this chapter.

(8) HEALTH INSURANCE PREMIUM. The total health insurance cost under a health insurance plan with respect to each class of employees or retirees. Individual premiums may include adjustments and surcharges for (i) family size including, but not limited to, a husband and wife both being covered by a health insurance plan as defined herein, (ii) smokers and users of tobacco products, (iii) preventive care and wellness care participation, and (iv) any such other categories of risk that the board shall approve.

(9) MEDICARE RETIREE. A retiree entitled to benefits under the federal Medicare program (Subchapter XVIII of the Social Security Act, (42 U.S.C. §§ 1395 et seq.).

(10) NON-MEDICARE RETIREE. A retiree not entitled to benefits under the federal Medicare program (Subchapter XVIII of the Social Security Act, (42 U.S.C. §§ 1395 et seq.).

(11) OPTIONAL COVERAGE. Health insurance coverage offered to employees and retirees for dental, cancer, indemnity, vision, or such other coverage the Public Education Employees' Health Insurance Board deems appropriate in lieu of coverage under the basic medical plan.

(12) OTHER EMPLOYER GROUP HEALTH INSURANCE COVERAGE. Group health insurance coverage available to an employee or retiree through an employer other than the State of Alabama. Other employer group health insurance coverage does not include the State Employees' Health Insurance Plan, the Public Education Employees' Health Insurance Plan or the Local Government Health Insurance Plan.

(13) RETIREE. Same as "Retired Employee".

(14) SUPPLEMENTAL COVERAGE. Coverage offered to employees and retirees by the Public Education Employees' Health Insurance Board in lieu of coverage in the basic medical plan of the Public Education Employees' Health Insurance Plan that supplements an employee's or retiree's other employer group health insurance coverage.

(15) SUPPLEMENTAL POLICY. Policy offered to employees and retirees by the Public Education Employees' Health Insurance Board in lieu of or in addition to coverage in the basic medical plan of the Public Education Employees' Health Insurance Plan that provides a defined set of benefits.

(16) YEARS OF SERVICE. The number of years and months of creditable service by an employee prior to retirement as determined by the Teachers' Retirement System or Employees' Retirement System including any periods of full time permanent employment subsequent to retirement up to a maximum of five years.

Any benefits payable under the plan adopted may be paid either directly to the attending physician, hospital, medical group or other furnishing the service upon which the claim is based or to the insured employee upon presentation of valid bills for such services; subject to such provisions designed to facilitate payment as may be made by the board.

Any board, agency, organization, or association which participates in the Teachers' Retirement System of Alabama, but whose employees are not included in the definition of employee in Section 16-25A-1 may, by resolution legally adopted to conform to rules prescribed by the board and upon a majority vote of its employees, elect to have its employees and under certain conditions its retired employees covered by the provisions of this chapter, provided such board, agency, organization, or association shall contract to pay the full cost of coverage for each such employee in the amounts set forth by the board and as defined in Section 16-25A-1 for a full-time employee; participation, once elected, is irrevocable. Each retired employee shall be given the option to participate under the provisions of Section 16-25A-8(c) provided any employer electing to have its employees covered by this section, shall contribute on account of each of its retired employees an amount equal to any amount appropriated by the state to fund benefits for retired employees. The board shall develop rules and regulations governing the operation of this section which shall contain but not be limited to entry and withdrawal from the plan.

(a) Any board of education, institution, or other employer with employees as defined by Section 16-25A-1, may, upon a majority vote of its employees, elect not to participate in the basic medical plan authorized by the provisions of this chapter; provided, however, that for any fiscal year ending September 30 the Legislature appropriates the full amount certified pursuant to Section 16-25A-8(b), the board shall declare the plan of insurance coverage to be fully state-funded whereupon all employees of any board of education, institution, or other employer as defined hereinabove shall for that fiscal year and all subsequent fiscal years be declared members of the Public Education Employees' Health Insurance Plan.

(b) Any employer electing not to participate in the basic medical plan shall certify to the board the names of their employees otherwise electing hospital/medical coverage. The board shall disburse monthly to each employer so electing, the amount appropriated per individual by the Legislature so certified in accordance with such rules and regulations as the board shall adopt; such amount shall be used to purchase plan(s) as approved by election of the majority of the participating employees; provided, however, any funds not so used in the fiscal year shall revert to the fund.

(c) Once an employer has elected not to participate in the basic medical plan authorized by this chapter, such employer may subsequently elect, under such rules and regulations and at such times as the board shall prescribe, to participate in the basic medical plan authorized by this chapter; participation, once elected, is irrevocable.

A legislative advisory committee is hereby created of three members of the House appointed by the Speaker of the House and three members of the Senate appointed by the Lieutenant Governor. The function of such committee shall be to advise the board on matters including, but not limited to, cost containment and appropriations. Members of the advisory committee shall be entitled to not more than regular interim committee compensation and shall be paid from funds appropriated to the Legislature.

All insurance companies presently providing hospital indemnity coverage, cancer insurance and dental coverage as supplemental coverage for the employees of any board of education, institution, or other employer as defined in Section 16-25A-1 at July 14, 1983, shall have access to payroll deduction.

The Public Education Employees' Health Insurance Board shall promulgate such rules and regulations as may be required for the effective administration of the provisions of this chapter.

Once the Legislature has fully funded the Public Education Employees' Health Insurance Program, the Public Education Employees' Health Insurance Board and the State Employees' Health Insurance Board shall coordinate and equalize benefits so that both groups shall be insured and funded equally.

(a)(1) Any premiums paid to the Public Education Employees' Health Insurance Board for active employees shall include an amount to partially fund the cost of coverage for retired employees. Notwithstanding the foregoing, if the plan becomes fully funded pursuant to this chapter, this section shall not apply.

(2) The amount authorized by subdivision (1) of this subsection shall not be less than an amount determined by multiplying the number of retired employees by an individual retired employee rate. The individual retired employee rate shall be determined by multiplying the full cost of coverage for a retired employee eligible to receive benefits under the federal Medicare program times the fractional amount derived by dividing the current individual premium for an employee not eligible for benefits under the federal Medicare program by the full cost of coverage for an employee not eligible to receive benefits under the federal Medicare program. The Public Education Employees' Health Insurance Board may provide additional premium payments for retirees in addition to the minimum amount guaranteed herein to the extent that it does not exceed the amount of their premium as established by the board. Any additional funding for premium amounts which may be provided to retirees with individual coverage who are not eligible for benefits under the federal Medicare program by the Public Education Employees' Health Insurance Board shall not have the effect of reducing the out-of-pocket cost below the total out-of-pocket cost paid by retirees with individual coverage who are eligible for benefits under the federal Medicare program. The total out-of-pocket cost for the retirees with individual coverage who are eligible for benefits under the federal Medicare program shall be determined by the combined cost of part B of the federal Medicare program and the Medicare supplement program provided by the Public Education Employees' Health Insurance Program.

(3) Any premium payments made pursuant to this section shall be deposited in the same fund and handled pursuant to the same manner as if made under this chapter.

(b) This section is supplemental and shall be construed in pari materia with other statutes relating to health insurance coverage for educational personnel.

As a condition of participation in the Public Education Employees Health Insurance Programs (PEEHIP), a pharmacist shall dispense a generic equivalent medication to fill a prescription for a patient covered by PEEHIP when one is available unless the physician indicates in longhand writing on the prescription "medically Necessary" or "dispense as written" or "do not substitute". The generic equivalent drug product dispensed shall be pharmaceutically and therapeutically equivalent and contain the same active ingredient, or ingredients and shall be of the same dosage, form, and strength.

(a) The Public Education Employees' Health Insurance Board shall consist of the members of the Board of Control of the Teachers' Retirement System of Alabama;

(b) Board members shall serve without compensation for their services as board members, but shall be reimbursed from the fund established in subsection (f) of Section 16-25A-8 for all necessary expenses that they may incur through service on the board;

(c) Each board member shall, within 10 days after his appointment or election to the Board of Control of the Teachers' Retirement System, take an oath of office that, so far as it devolves on him, he will diligently and honestly administer the affairs of the board herein established, and that he will not knowingly violate, or willingly permit to be violated, any of the provisions of law applicable to the Public Employees' Health Insurance Plan. Such oath shall be subscribed to by the member making it, certified by the officer before whom it is taken, and immediately filed in the office of the Secretary of State;

(d) Each board member shall be entitled to one vote in matters concerning the board. Six votes shall be necessary for a decision at any meeting of said board. In case of a tie vote, the decision shall fail;

(e) The chairman and vice-chairman of the board shall be the chairman and vice-chairman of the Teachers' Retirement System Board of Control. The Secretary-Treasurer of the Teachers' Retirement System shall serve as chief executive officer of the Public Education Employees' Health Insurance Plan. In addition thereto, the board may engage such actuarial, administrative, legal, and other special services as shall be deemed necessary to transact the business of the insurance plan. The compensation and expenses for these special services shall be paid at such rates and in such amounts as the board shall approve. All other employees not in these categories of employment shall be employed under the provisions of the Merit System Act;

(f) The board shall keep in convenient form such data as shall be necessary for actuarial valuation of the funds of the insurance plan and for checking the experience of the plan.

The members of the Public Employees' Health Insurance Board and their employees shall not be liable for punitive damages for acts arising out of the good faith performance of their duties in administering the health insurance plan.

The health insurance plan provided for in this chapter shall be designed by the board to provide a reasonable relationship between the hospital, surgical, and medical benefits to be included and the expected hospital, surgical, and medical expenses to be incurred by the affected employee and retiree and dependents and to include reasonable controls, which may include, but not limited to, deductible, copayment, coinsurance and other cost containment measures to prevent unnecessary utilization of the various hospital, surgical, and medical services available and to provide reasonable assurance of stability in future years for the plan.

(a) The board is hereby empowered and authorized to establish a fully insured or self-insured health insurance plan for employees and, under certain conditions, retired employees and to adopt and promulgate rules and regulations for the administration of such plan subject to such limitations as may be contained in this chapter. Such plan may provide for group hospitalization, surgical, medical, cancer, cash indemnity, and dental insurance against the financial costs of hospitalization, surgical, and medical treatment and care and may also include, among other things, prescribed drugs, medicines, prosthetic appliances, hospital inpatient and outpatient service benefits, and hospital/medical expenses indemnity benefits, including major medical benefits or such other coverage or benefits as may be deemed appropriate and desirable by the board, within the limits of such funds as may be available.

(b) Any member employee or, under certain conditions, retired employee may elect an optional or supplemental coverage provided by the board which shall include but is not limited to dental, cancer, or indemnity benefits. Such election shall be in accordance with the rules and regulations and at such times as the board shall prescribe. Election of an optional or supplemental coverage shall be in lieu of primary coverage under the basic medical plan, provided any individual covered under the basic medical plan may elect an optional coverage upon agreeing to pay the costs of such coverage. Any member employee or retired employee who does not elect an optional or supplemental coverage shall be deemed as a matter of law to have elected basic medical primary coverage.

Such health insurance shall not include the following:

(1) Expenses incurred by or on account of an individual prior to the effective date of the plan as to him;

(2) Hearing aids and examinations for the prescription or fitting thereof;

(3) Cosmetic surgery or treatment, except to the extent necessary for correction of damage caused by accidental injury while covered by the plan or as a direct result of disease covered by the plan;

(4) Services received in a hospital owned or operated by the United States government for which no charge is made;

(5) Services received for injury or sickness due to war or any act of war, whether declared or undeclared, which war or act of war shall have occurred after the effective date of this plan;

(6) Expenses for which the individual is not required to make payment;

(7) Expenses to the extent of benefits provided under any employer group plan other than this plan in which the state participates in the cost thereof;

(8) Such other expenses as may be excluded by regulations of the board; and

(9) Coordination of benefit of basic hospital/medical coverage provided herein and any supplemental hospital indemnity, cancer or dental coverage provided herein under the provisions of this chapter or as may privately be purchased by any employee.

(a) The board is hereby authorized to execute a contract or contracts to provide for the benefits or the administration of the plan determined in accordance with the provisions of this chapter. Such contract or contracts may be executed with one or more agencies or corporations licensed to transact or administer group health insurance business in this state. All of the benefits to be provided under this chapter may be included in one or more similar contracts issued by the same or different companies. The board is further authorized to develop a plan whereby it may become self-insured upon its finding that such arrangement would be financially advantageous to the state and plan participants;

(b) Before entering into any contract or contracts authorized by subsection (a) of this section, said board shall invite competitive bids from all qualified entities who may wish to administer or offer plans for the health insurance coverage or the administrative services desired. The board shall award such contract or contracts on a competitive basis as determined by the benefits afforded, administrative costs, the costs to be incurred by employee, retiree and employer, the experience of the offering company or agency in the group health insurance field and its facilities for the handling of claims. In evaluating these factors the board may employ the services of impartial professional insurance analysts or actuaries. The board shall reevaluate the contract or contracts yearly, and renegotiate on a competitive basis at least every three years.

(c) The board may authorize the carrier with whom the primary contracts are executed to reinsure portions of such contract with other such carriers which elect to be a reinsurer and who are legally qualified to enter into reinsurance agreement under the laws of this state;

(d) Each employee or retired employee who is covered by the plan provided pursuant to this chapter shall receive evidence of such coverage. In addition, each employee or retired employee shall receive upon request information setting forth the benefits to which the employee or retired employee and his dependents are entitled, to whom such benefits shall be payable, to whom claims shall be submitted, and a summary of the provisions of the plan as they affect the employee and his dependents;

(e) The plan shall require adequate notice in writing to any participant whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial and shall afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the claims administrator upon the written request of the participant, within 60 days of the date of denial, setting forth the specific reasons for review. The claims administrator shall provide in writing, within 60 days of the request for review, a final determination of the claim provided that an extension of 60 days may be obtained upon written notification to the participant. Review of a final decision by the claims administrator shall be by the Circuit Court of Montgomery County as provided for the review of contested cases under the Alabama Administrative Procedure Act, Section 41-22-20;

(f) The board may at the end of any contract period discontinue any contract or contracts it has executed with any carrier and replace same with a contract or contracts with any other carrier or carriers meeting the requirements of this chapter.

(g) The Public Education Employees' Health Insurance Board may enter into contracts of the State Employees' Insurance Board that were awarded through a competitive bid process, upon the mutual consent of the State Employees' Insurance Board and the contractor.

(a) The Public Education Employees' Health Insurance Board is hereby authorized to provide under the contract or contracts entered into under the provisions of this chapter an insurance benefit plan for each covered employee and, under certain conditions, retired employees; the cost of such plan may be funded in part or in full through monthly premiums per active employee from the same source of funds as those used for the payment of salaries of active members and in part from other funds.

(b) On or before January 1 next preceding each regular meeting of the Legislature, the board shall certify to the Governor and to the Legislature the amount or amounts necessary to fund coverage for benefits authorized by this chapter for the following fiscal year for employees and for retired employees as a monthly premium per active member per month. The Legislature shall set the premium rate in the annual appropriation bill.

(c) Any eligible retired employee may elect to participate in the plan authorized by this chapter provided that such retired employee shall agree to have withheld the employee contribution from each monthly retirement payment.

(d) For any fiscal year in which the monthly premium certified under subsection (a) for hospital/medical insurance per eligible employee is less than the cost of said coverage per eligible employee, then the difference in cost per eligible employee shall be submitted for each eligible employee by the employing board, institution or agency monthly to the board, the sum of which may be any combination of employee funds collected through monthly payroll deduction and employing board, institution or agency funds; in any fiscal year in which the monthly premium for hospital/medical insurance for retired employees is less than the cost of said coverage, then the difference in cost per eligible retired employee as defined in subsection (c) shall be withheld from the monthly retirement check of said retired employee.

(e) Each employee and retired employee shall be entitled to have his spouse and dependent children, as defined by the rules and regulations of the board, included in the coverage provided upon agreeing to pay the employee's contribution of the health insurance premium for such dependents. The board shall adopt regulations governing the discontinuance and resumption by such employees of coverage for dependents, and in the event of the death of an employee or retired employee, provisions whereby their spouse and dependents may elect to continue that coverage; provided, however, that the spouse and dependents shall pay the full cost of their coverage. During any period in which an employee's or retired employee's dependents are covered under this chapter, there shall be withheld from the salary payment of such employee or the monthly retirement allowance of such retired employee, the employee's contribution of the health insurance premium for coverage of such dependents under the terms of any contract, contracts, or arrangement entered into in accordance with the provisions of this chapter.

(f) There is hereby created in the State Treasury a fund to be known as the Public Education Employees' Health Insurance Fund. Such fund shall consist of and there shall be deposited into such fund all employer paid premiums under the provisions of subsection (b) of this section and all premiums paid by employees and retired employees under the provisions of this section and any other premiums paid under the provisions of this chapter. The board shall designate a custodian of this fund who shall be authorized to make deposits into and payments therefrom in accordance with contracts entered into by said board; in addition, any income arising from the investment or deposit of the assets of said fund shall accrue solely to the benefit of said fund.

(g) Any state appropriation from the Education Trust Fund for the fiscal year ending September 30, 1984, and any subsequent fiscal year employer premium payments for hospital/medical insurance for eligible employees as defined under the provisions of this chapter which are made by any institution, board or agency whether heretofore or hereafter made, shall be deposited in the fund created in subsection (f) of this section and shall be used to fund coverage for the benefits authorized by the provisions of this chapter. Disbursement of such funds shall be in accordance with the provisions of subsection (b) of this section.

(h) Premiums required to be paid by the employer together with any premiums deducted from employees' compensation shall be paid to the Public Education Employees' Health Insurance Fund on the first day of the month for which coverage is applicable and the first day of each month thereafter. Monthly reports of the coverage type and premium amount for each covered employee shall be submitted in a format prescribed by the Public Education Employees' Health Insurance Fund.

(i) Each university which has not elected to participate in the Public Education Employees' Health Insurance Plan shall pay the cost of insuring each employee retired from such university who elects to participate under the Public Education Employee Health Insurance Plan. Such costs shall be determined in the same manner as is determined for all other retired employees by using the previous fiscal year's claims for all retired employees increased by the expected claims trend for the current fiscal year, as provided by the Public Education Employees' Health Insurance Board's claims administrator. Such amount shall be reduced by the premiums to be paid by the retired employees during the current fiscal year. The Public Education Employees' Health Insurance Board shall invoice each university monthly, and the university shall pay the board within 30 days of the date of the date of the invoice. If payment is not made within 30 days, the Department of Finance is hereby authorized to pay the amount due to the Public Education Employees' Health Insurance Fund directly from funds appropriated to the university.

(a) All employees and, under certain conditions, retired employees as defined in Section 16-25A-1 at the time of adoption and execution by the board of a contract or other arrangement providing for group health insurance plans and who are eligible for coverage under the provisions of this chapter and the rules and regulations of the board adopted pursuant thereto shall have the option to be included in such coverage of the plan and shall have an option as to whether they will subscribe to such coverage for their dependents, such option to be exercised in the manner and within the time limitation prescribed by the board;

(b) All persons who become employees, as defined by the terms of this chapter and the rules and regulations promulgated by the board pursuant thereto, shall become eligible for membership in the group health insurance plan offered by their employing board and shall have an option as to whether they will subscribe to such coverage for their dependents; provided, that such coverage may be deferred during any reasonable waiting period provided in the contract or contracts.