This bill amends multiple sections of existing law (including RCW 41.05.065, 41.05.740, 41.80.020, 41.56.500, 41.59.105, and 47.64.270) and creates a new section to change how employee health benefits are governed. Key changes require the public employees' benefits board (PEBB) and the school employees' benefits board (SEBB) to stop offering the "smart health" program (including the wellness incentive and online portal) effective January 1, 2028; employees who met eligibility for a wellness incentive by December 31, 2027, will still receive that incentive in plan year 2028, but no new wellness incentives may be earned beginning January 1, 2028. The bill also modifies PEBB duties and plan-design elements (including studies of coverage, cost containment, provider arrangements, utilization review, coordination of benefits, and minimum standards) and directs benefit designs to be substantially equivalent to the state employees' plan in effect January 1, 1993, with specified exceptions. The bill changes collective bargaining and funding procedures for health benefits. For the 2027–2029 fiscal biennium the legislature will set the dollar amount expended on behalf of each employee for health care benefits in the omnibus operating appropriations act, and bargaining agreements for that biennium may not include employer health care contributions, wellness incentives, flexible spending account contributions, benefit allocation factors, or other provisions related to employee health care expenses. It establishes coalition bargaining procedures (one coalition of all exclusive bargaining representatives negotiating with the governor or designee), requires the governor to submit funding requests to the Office of Financial Management by October 1 for OFM certification before legislative consideration, and provides processes for reopening or modifying agreements if OFM does not certify or the legislature rejects a funding request; an OFM certification/legislative submission subsection is expressly made not to apply for the 2027–2029 biennium. RCW 47.64.270 is also amended to apply the same 2027–2029 funding rule to certain Department of Transportation employees and to address ferry employee contributions. The bill includes other administrative and programmatic provisions found in existing law or prior enactments (for example, duties regarding offering HSA/HDHP options, long-term care insurance availability and related advisory committees, and SEBB membership, reporting, and duties), but the extracted text is incomplete in places. Important specifics are missing from the provided excerpts: the precise employer contribution rates or formulas for the 2027–2029 biennium are not stated, full amendment language for several cited RCWs is truncated or absent, and definitions or detailed provisions for the "smart health program," "wellness incentive," and some cross-referenced subsections are not included.

If enacted, the state legislature takes direct control of how much is spent per employee on health benefits for the 2027–2029 budget period by setting that dollar amount in the omnibus operating appropriations act, and employers and unions cannot bargain over employer health contributions, wellness programs, flexible spending account contributions, benefit allocation factors, or other employee health expense provisions for that biennium. Also, the statewide “smart health” wellness program (including the wellness incentive and online portal) will be discontinued as of January 1, 2028; anyone who qualified for a wellness incentive by December 31, 2027 will still receive it in plan year 2028, but no new incentives can be earned after that date. The biggest effects fall on state and school employees, their unions, and the agencies that manage benefits (PEBB, SEBB, the health care authority, the governor’s office and OFM). Employees lose the ability to earn wellness incentives and may see less flexibility in benefit-related negotiations during 2027–2029, while unions lose leverage to negotiate employer health contributions for that period. Agencies and the legislature gain budgetary control over health benefit funding, but the actual contribution amounts and several implementation details are not included in the provided text, so the precise fiscal impact and how some procedural exceptions will operate remain unclear.