(a) For the 1989–90 fiscal year, a county shall not have the option to contract with the department for payment for treatment of children required pursuant to Section 16934. However, a county may elect to limit its liability for payment of that treatment to 15 percent of the amount the county actually received under this chapter for the 1989–90 fiscal year. Any county which elects to establish a 15 percent reserve shall notify the department within 45 days of the effective date of this section of its intention. A county electing to limit its liability pursuant to this section shall reserve 15 percent of the amount it received, if the county contracts with the department for administration of its physician services account pursuant to Section 16935. If the county does not contract with the department to administer its physician services account, the county’s liability shall be 15 percent of the total allocation it received under this chapter. Payment for service provided between July 1, 1989 and June 30, 1990, pursuant to Section 16934 which exceeds the amount reserved shall be the responsibility of the state, provided that the county provides documentation that it established a 15 percent reserve and met its applicable 15 percent obligation for services provided pursuant to Section 16934. The state shall recoup any funds remaining in the 15 percent reserve which were not expended and shall use the funds to pay for treatment services required under Section 16934 in future years.

1. (1) A county which elects not to establish a 15 percent reserve pursuant to subdivision (a), or fails to notify the department of its intention to participate, shall retain full liability for the payment of treatment of children required pursuant to Section 16934.
2. (2) In addition to contractual and other arrangements with providers, the county, or the department under this subdivision, pursuant to the obligation under Section 16934, may refer a child in need of inpatient care to children’s hospitals which have received funding under Chapter 6 (commencing with Section 16996), if the child meets the hospital’s specific criteria for inpatient care. The county or the department shall be under no obligation to reimburse the children’s hospital for these services.

(b) For the 1989–90 fiscal year, the department shall establish a separate Rural Health Services Reinsurance Account within the County Health Services Fund. For purposes of this chapter “reinsurance account” means the account established pursuant to this section.

1. (1) Moneys appropriated by the Legislature to establish the reinsurance account shall be deposited in the reinsurance account.
2. (2) Moneys deposited into the reinsurance account shall be used to pay for services provided pursuant to Section 16934 in those counties which have expended their 15 percent reserves established pursuant to subdivision (a).
3. (3) Any moneys remaining in the reinsurance account after June 30, 1990, which have not been expended or encumbered shall be transferred to the CHDP Treatment Account established pursuant to subdivision (b) of Section 16934.5.