This document comprises the mandatory report of the Superintendent of Public Instruction to the Washington State legislature on proposed methods of controlling health care costs for school employees. It focuses on the costs to Washington's 296 school districts of providing health care coverage for approximately 80,000 employees. The introduction outlines four types of health care containment strategies, which, respectively, affect the providers, the benefits themselves, those who seek services and treatment, or the system as a whole. The second section lists many of the reasons for the increasing costs of health care. This is followed by discussions of state law governing school district insurance benefits and of the role of the superintendent of public instruction. A detailed review follows of legislatively authorized benefit levels and of the data on employee benefits. The report concludes with a set of specific policy recommendations. Appended are statistical tables and other pertinent documents pertaining to health insurance costs for school employees. (TE)