Session of 1998
                   
HOUSE BILL No. 2705
         
By Health Care Reform Legislative Oversight Committee
         
1-23
            9             AN ACT concerning accident and health insurance; concerning group
10             employer health insurance coverage; amending K.S.A. 40-19c06, 40-
11             2209g, 40-2209m, and 40-2241 and K.S.A. 1997 Supp. 40-2122, 40-
12             2209, 40-2209d, 40-2209e, 40-2209f, 40-2228 and 40-3029 and re-
13             pealing the existing sections; also repealing K.S.A. 40-2209k and
14             40-22091.
15            
16       Be it enacted by the Legislature of the State of Kansas:
17           Section 1. K.S.A. 40-19c06 is hereby amended to read as follows: 40-
18       19c06. (a) No subscription agreement, except as provided in subsection
19       (d), between a corporation organized under the nonprofit medical and
20       hospital service corporation act and a subscriber, shall entitle more than
21       one person to benefits, except that a ``family subscription agreement'' may
22       be issued, at an established subscription charge, to a husband and wife,
23       or husband, wife, and their dependent child or children and any other
24       person dependent upon the subscriber. Only the subscriber must be
25       named in the subscription agreement.
26           (b) Every subscription agreement entered into by any such corpora-
27       tion with any subscriber shall be in writing and a certificate stating the
28       terms and conditions shall be furnished to the subscriber to be kept by
29       the subscriber. No such certificate form shall be made, issued or delivered
30       in this state unless it contains the following provisions: (1) A statement of
31       the nature of the benefits to be furnished and the period during which
32       they will be furnished, and if there are any benefits to be excepted, a
33       detailed statement of such exceptions printed as hereinafter specified; (2)
34       a statement of the terms and conditions, if any, upon which the subscrip-
35       tion agreement may be canceled or otherwise terminated at the option
36       of either party; (3) a statement that the subscription agreement includes
37       the endorsements and attached papers, if any, and contains the entire
38       contract; (4) a statement that no statement by the subscriber in the ap-
39       plication for a subscription agreement shall avoid the subscription agree-
40       ment or be used in any legal proceeding, unless such application or an
41       exact copy is included in or attached to such subscription agreement, and
42       that no agent or representative of such corporation, other than an officer
43       or officers designated therein, is authorized to change the subscription

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  1       agreement or waive any of its provisions; (5) a statement that if the sub-
  2       scriber defaults in making any payments under the subscription agree-
  3       ment, the subsequent acceptance of a payment by the corporation or by
  4       one of its duly authorized agents shall reinstate the subscription agree-
  5       ment but with respect to sickness and injury, only to cover such sickness
  6       as may be first manifested more than 10 days after the date of such
  7       acceptance; (6) a statement of the period of grace which will be allowed
  8       the subscriber for making any payment due under the subscription agree-
  9       ment. Such period shall not be less than 10 days; and (7) if applicable, a
10       statement of the kind of hospital in which the subscriber may receive
11       benefits and the types of benefits to which the subscriber may be entitled
12       to in such kinds of hospitals. The subscriber shall be entitled to benefits
13       in any nonparticipating hospital in Kansas which is licensed by the sec-
14       retary of health and environment and in which the average length of stay
15       of patient is similar to the average length of stay in participating hospitals.
16       The agreements issued by any corporation currently or previously organ-
17       ized under this act may include provisions allowing for direct payment of
18       benefits only to contracting health care providers.
19           (c) In every such subscription agreement made, issued or delivered
20       in this state: (1) All printed portions shall be plainly printed; (2) the ex-
21       ceptions of the subscription agreement shall appear with the same prom-
22       inence as the benefits to which they apply; (3) if the subscription agree-
23       ment contains any provisions purporting to make any portion of the
24       articles of incorporation or bylaws of the corporation a part of the sub-
25       scription agreement, such portion shall be set forth in full; and (4) there
26       shall be a brief description of the subscription agreement on the first page
27       and on its filing back.
28           (d) Any such corporations may issue a group or blanket subscription
29       agreement, provided the group of persons insured conforms to the
30       requirements of law applicable to other companies writing group or blan-
31       ket sickness and accident insurance policies and provided such subscrip-
32       tion agreement and the individual certificates issued to members of the
33       group shall comply in substance with this section. Any such subscription
34       agreement may provide for the adjustment of the premiums based upon
35       the experience at the end of the first year or of any subsequent year of
36       insurance, and such readjustment may be made retroactive in the form
37       of a rate credit or a cash refund.
38           (e) (1) Any group subscription agreement issued pursuant to subsec-
39       tion (d) shall provide that an employee or member or such employee's or
40       member's covered dependents whose insurance under the group sub-
41       scription agreement has been terminated for any reason, including dis-
42       continuance of the group in its entirety or with respect to an insured class,
43       and who has been continuously insured under the group subscription

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  1       agreement or under any group policy or subscription agreement providing
  2       similar benefits which it replaces for at least three months immediately
  3       prior to termination, shall be entitled to have such coverage nonetheless
  4       continued under the group policy for a period of six months and at the
  5       end of such six-month period of continuation, such employee or member
  6       or such employee's or member's covered dependents shall be entitled to
  7       obtain, at the employee's, member's or dependent's option either:
  8           (A) A converted subscription agreement providing coverage equal to
  9       80% of that afforded under the group subscription agreement for basic
10       hospital, surgical and medical benefits. Persons selecting this option shall
11       also be entitled to obtain major medical expense coverage which will
12       provide hospital, medical and surgical expense benefits to an aggregate
13       maximum of not less than $50,000. The major medical expense coverage
14       may be subject to a copayment by the covered person of not more than
15       20% of covered charges and a deductible stated on a per person, per
16       family, per illness, per benefit period, or per year basis or a combination
17       of such bases of not more than $500 per person subject to a maximum
18       annual deductible of $750 per family; or
19           (B) a subscription agreement which imposes a deductible of not less
20       than $1,000 per subscriber and not less than $2,000 per family and sub-
21       jects the covered person to a copayment of not more than 20% of covered
22       charges with a $1,000 maximum copayment per subscriber and $2,000
23       maximum copayment per family per contract year and providing a lifetime
24       maximum benefit of not less than $1,000,000.
25           (2) The requirements imposed by this subsection (e) shall not apply
26       to a group subscription agreement which provides benefits for specific
27       diseases or for accidental injuries only or any group subscription agree-
28       ment issued to an employer subject to the continuation and conversion
29       obligations set forth at title I, subtitle B, part 6 of the employee retirement
30       income security act of 1974 or at title XXII of the public health service
31       act, as each act was in effect on January 1, 1987, to the extent federal law
32       provides the employee or member or such employee's or member's cov-
33       ered dependents with equal or greater continuation or conversion rights,
34       or any employee or member or such employee's or member's covered
35       dependents whose termination of insurance under the group subscription
36       agreement occurred because:
37           (A) Such person failed to pay any required contribution after receiv-
38       ing reasonable notice of such required contribution from the insurer in
39       accordance with rules and regulations adopted by the commissioner of
40       insurance;
41           (B) any discontinued group coverage was replaced by similar group
42       coverage within 31 days; or the employee or member is or could be cov-
43       ered by medicare (title XVIII of the United States social security act as

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  1       added by the social security amendments of 1965 or as later amended or
  2       superseded); or
  3           (C) the employee or member is or could be covered to the same
  4       extent by any other insured or lawful self-insured arrangement which
  5       provides expense incurred hospital, surgical or medical coverage and ben-
  6       efits for individuals in a group under which the person was not covered
  7       prior to such termination. In the event the group policy is terminated and
  8       not replaced the insurer may issue an individual policy or certificate in
  9       lieu of a conversion policy or the continuation of group coverage required
10       herein if the individual policy or certificate provides substantially similar
11       coverage for the same or less premium as the group subscription agree-
12       ment. In any event, the employee or member shall have the option to be
13       issued a conversion policy which meets the requirements set forth in this
14       subsection (e) in lieu of the right to continue group coverage.
15           (3) Written application for the converted subscription agreement
16       shall be made and the first premium paid to the insurer not later than 31
17       days after termination of the group coverage and shall become effective
18       the day following the termination of insurance under the group subscrip-
19       tion agreement. In addition, the converted subscription agreement shall
20       be subject to the provisions contained in paragraphs (2), (3), (4), (5), (6),
21       (7), (8), (9), (10), (13), (14), (15), (16), (17), (18), (19), and (20) and (21)
22       of subsection (D) (j) of K.S.A. 40-2209, and amendments thereto.
23           Sec. 2. K.S.A. 1997 Supp. 40-2122 is hereby amended to read as
24       follows: 40-2122. (a) Except for those persons who meet the criteria set
25       forth in subsection (b), any person who has been a resident of this state
26       for at least six months prior to making application for coverage or any
27       federally defined eligible individual who is a legal domiciliary of this state,
28       shall be eligible for plan coverage if such person is able to The following
29       individuals shall be eligible for plan coverage provided they meet the
30       criteria set forth in subsection (b):
31           (1) Any person who has been a resident of this state for at least six
32       months;
33           (2) any person who is a legal domiciliary of this state who previously
34       was covered under the high risk pool of another state, provided they apply
35       for coverage under the plan within 63 days of losing such other coverage
36       for reasons other than fraud or nonpayment of premiums; or
37           (3) any federally defined eligible individual who is a legal domiciliary
38       of this state.
39           (b) Those individuals who are eligible for plan coverage under sub-
40       section (a) must provide evidence satisfactory to the administering carrier
41       that such person meets one of the following criteria:
42           (1) Such person has had health insurance coverage involuntarily ter-
43       minated for any reason other than nonpayment of premium;

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  1           (2) such person has applied for health insurance and been rejected
  2       by two carriers because of health conditions;
  3           (3) such person has applied for health insurance and has been quoted
  4       a premium rate which is in excess of the plan rate;
  5           (4) such person has been accepted for health insurance subject to a
  6       permanent exclusion of a preexisting disease or medical condition; or
  7           (5) such person is a federally defined eligible individual.
  8           (b) (c) Each resident dependent of a person who is eligible for plan
  9       coverage shall also be eligible for plan coverage.
10           (c) (d) The following persons shall not be eligible for coverage under
11       the plan:
12           (1) Any person who is eligible for medicare or a recipient of medicaid
13       benefits;
14           (2) any person who has had coverage under the plan terminated less
15       than 12 months prior to the date of the current application, except that
16       this provision shall not apply with respect to an applicant who is a federally
17       defined eligible individual;
18           (3) any person who has received accumulated benefits from the plan
19       equal to or in excess of the lifetime maximum benefits under the plan
20       prescribed by K.S.A. 40-2124 and amendments thereto;
21           (4) any person having access to accident and health insurance through
22       an employer-sponsored group or self-insured plan; or
23           (5) any person who is eligible for any other public or private program
24       that provides or indemnifies for health services.
25           (c) (e) Any person who ceases to meet the eligibility requirements of
26       this section may be terminated at the end of a policy period.
27           (d) (f) All plan members, insurers and insurance arrangements shall
28       notify in writing persons denied health insurance coverage, for any reason,
29       of the availability of coverage through the Kansas health insurance asso-
30       ciation.
31           Sec. 3. K.S.A. 1997 Supp. 40-2209 is hereby amended to read as
32       follows: 40-2209. (A) (a) (1) Group sickness and accident insurance is
33       declared to be that form of sickness and accident insurance covering
34       groups of persons, with or without one or more members of their families
35       or one or more dependents. Except at the option of the employee or
36       member and except employees or members enrolling in a group policy
37       after the close of an open enrollment opportunity, no individual employee
38       or member of an insured group and no individual dependent or family
39       member may be excluded from eligibility or coverage under a policy pro-
40       viding hospital, medical or surgical expense benefits both with respect to
41       policies issued or renewed within this state and with respect to policies
42       issued or renewed outside this state covering persons residing in this state.
43       For purposes of this section, an open enrollment opportunity shall be

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  1       deemed to be a period no less favorable than a period beginning on the
  2       employee's or member's date of initial eligibility and ending 31 days
  3       thereafter.
  4           (2) An eligible employee, member or dependent who requests en-
  5       rollment following the open enrollment opportunity or any special en-
  6       rollment period for dependents as specified in subsection (3) shall be
  7       considered a late enrollee. An accident and sickness insurer may exclude
  8       a late enrollee, except during an open enrollment period. However, an
  9       eligible employee, member or dependent shall not be considered a late
10       enrollee if:
11           (a) (A) The individual:
12           (i) Was covered under another group policy which provided hospital,
13       medical or surgical expense benefits or was covered under section 607(1)
14       of the employee retirement income security act of 1974 (ERISA) at the
15       time the individual was eligible to enroll;
16           (ii) states in writing, at the time of the open enrollment period, that
17       coverage under another group policy which provided hospital, medical or
18       surgical expense benefits was the reason for declining enrollment, but
19       only if the group policyholder or the accident and sickness insurer re-
20       quired such a written statement and provided the individual with notice
21       of the requirement for a written statement and the consequences of such
22       written statement;
23           (iii) has lost coverage under another group policy providing hospital,
24       medical or surgical expense benefits or under section 607(1) of the em-
25       ployee retirement income security act of 1974 (ERISA) as a result of the
26       termination of employment, reduction in the number of hours of em-
27       ployment, termination of employer contributions toward such coverage,
28       the termination of the other policy's coverage, death of a spouse or di-
29       vorce or legal separation or was under a COBRA continuation provision
30       and the coverage under such provision was exhausted; and
31           (iv) requests enrollment within 30 days after the termination of cov-
32       erage under the other policy; or
33           (b) (B) a court has ordered coverage to be provided for a spouse or
34       minor child under a covered employee's or member's policy.
35           (3) (a) (A) If an accident and sickness insurer issues a group policy
36       providing hospital, medical or surgical expenses and makes coverage avail-
37       able to a dependent of an eligible employee or member and such de-
38       pendent becomes a dependent of the employee or member through mar-
39       riage, birth, adoption or placement for adoption, then such group policy
40       shall provide for a dependent special enrollment period as described in
41       subsection (3)(b) (B) of this section during which the dependent may be
42       enrolled under the policy and in the case of the birth or adoption of a
43       child, the spouse of an eligible employee or member may be enrolled if

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  1       otherwise eligible for coverage.
  2           (b) (B) A dependent special enrollment period under this subsection
  3       shall be a period of not less than 30 days and shall begin on the later of
  4       (i) the date such dependent coverage is made available, or (ii) the date
  5       of the marriage, birth or adoption or placement for adoption.
  6           (c) (C) If an eligible employee or member seeks to enroll a dependent
  7       during the first 30 days of such a dependent special enrollment period,
  8       the coverage of the dependent shall become effective: (i) in the case of
  9       marriage, not later than the first day of the first month beginning after
10       the date the completed request for enrollment is received; (ii) in the case
11       of the birth of a dependent, as of the date of such birth; or (iii) in the
12       case of a dependent's adoption or placement for adoption, the date of
13       such adoption or placement for adoption.
14           (4) (a) (A) No group policy providing hospital, medical or surgical
15       expense benefits issued or renewed within this state or issued or renewed
16       outside this state covering residents within this state shall limit or exclude
17       benefits for specific conditions existing at or prior to the effective date of
18       coverage thereunder. Such policy may impose a preexisting conditions
19       exclusion, not to exceed 90 days following the date of enrollment for
20       benefits for conditions (whether mental or physical), regardless of the
21       cause of the condition for which medical advice, diagnosis, care or treat-
22       ment was recommended or received in the 90 days prior to the effective
23       date of ;c/overage enrollment. For the purposes of this section, the term
24       ``preexisting conditions exclusion'' shall mean, with respect to coverage,
25       a limitation or exclusion of benefits relating to a condition based on the
26       fact that the condition was present before the date of enrollment for such
27       coverage whether or not any medical advice, diagnosis, care or treatment
28       was recommended or received before such date. Any preexisting condi-
29       tions exclusion shall run concurrently with any waiting period.
30           (b) (B) Such policy may impose a waiting period after full-time em-
31       ployment starts before an employee is first eligible to enroll in any ap-
32       plicable group policy.
33           (c) (C) A health maintenance organization which offers such policy
34       which does not impose any preexisting conditions exclusion may impose
35       an affiliation period for such coverage, provided that: (i) such application
36       period is applied uniformly without regard to any health status related
37       factors and (ii) such affiliation period does not exceed two months. The
38       affiliation period shall run concurrently with any waiting period under the
39       plan.
40           (d) (D) A health maintenance organization may use alternative meth-
41       ods from those described in this subsection to address adverse selection
42       if approved by the commissioner.
43           (E) For the purposes of this section, the term ``preexisting conditions

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  1       exclusion'' shall mean, with respect to coverage, a limitation or exclusion
  2       of benefits relating to a condition based on the fact that the condition was
  3       present before the date of enrollment for such coverage whether or not
  4       any medical advice, diagnosis, care or treatment was recommended or
  5       received before such date.
  6           (F) For the purposes of this section, the term ``date of enrollment''
  7       means the date the individual is enrolled under the group policy or, if
  8       earlier, the first day of the waiting period for such enrollment.
  9           (G) For the purposes of this section, the term ``waiting period'' means
10       with respect to a group policy the period which must pass before the
11       individual is eligible to be covered for benefits under the terms of the
12       policy.
13           (5) Genetic information shall not be treated as a preexisting condition
14       in the absence of a diagnosis of the condition related to such information.
15           (6) A group policy providing hospital, medical or surgical expense
16       benefits may not impose any preexisting condition exclusion relating to
17       pregnancy as a preexisting condition.
18           (7) A group policy providing hospital, medical or surgical expense
19       benefits may not impose any preexisting condition waiting period in the
20       case of a child who is adopted or placed for adoption before attaining 18
21       years of age and who, as of the last day of a 30-day period beginning on
22       the date of the adoption or placement for adoption, is covered by a policy
23       specified in subsection (A) (a). This subsection shall not apply to coverage
24       before the date of such adoption or placement for adoption.
25           (8) Such policy shall waive such a preexisting conditions exclusion to
26       the extent the employee or member or individual dependent or family
27       member was covered by (a) (A) a group or individual sickness and acci-
28       dent policy, (b) (B) coverage under section 607(1) of the employees re-
29       tirement income security act of 1974 (ERISA), (c) (C) a group specified
30       in K.S.A. 40-2222 and amendments thereto, (d) (D) part A or part B of
31       title XVIII of the social security act, (e) (E) title XIX of the social security
32       act, other than coverage consisting solely of benefits under section 1928,
33       (f) (F) a state children's health insurance program established pursuant
34       to title XXI of the social security act, (G) chapter 55 of title 10 United
35       States code, (g) (H) a medical care program of the indian health service
36       or of a tribal organization, (h) (I) the Kansas uninsurable health plan act
37       pursuant to K.S.A. 40-2217 et seq. and amendments thereto or a similar
38       health benefits risk pool of another state, (i) (J) a health plan offered
39       under chapter 89 of title 5, United States code, (j) (K) a health benefit
40       plan under section 5(e) of the peace corps act (22 U.S.C. 2504(e), or (k)
41       (L) a group subject to K.S.A. 12-2616 et seq. and amendments thereto
42       which provided hospital, medical and surgical expense benefits within 63
43       days prior to the effective date of coverage with no gap in coverage. A

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  1       group policy shall credit the periods of prior coverage specified in sub-
  2       section (A) (a)(7) without regard to the specific benefits covered during
  3       the period of prior coverage. Any period that the employee or member
  4       is in a waiting period for any coverage under a group health plan or is in
  5       an affiliation period shall not be taken into account in determining the
  6       continuous period under this subsection.
  7           (B) (b) (1) An accident and sickness insurer which offers group pol-
  8       icies providing hospital, medical or surgical expense benefits shall provide
  9       a certification as described in subsection (B) (b)(2): (a) (A) At the time
10       an eligible employee, member or dependent ceases to be covered under
11       such policy or otherwise becomes covered under a COBRA continuation
12       provision; (b) (B) in the case of an eligible employee, member or de-
13       pendent being covered under a COBRA continuation provision, at the
14       time such eligible employee, member or dependent ceases to be covered
15       under a COBRA continuation provision; and (c) (C) on the request on
16       behalf of such eligible employee, member or dependent made not later
17       than 24 months after the date of the cessation of the coverage described
18       in subsection (B) (b)(1)(a) (A) or (B) (b)(1)(b) (B), whichever is later.
19           (2) The certification described in this subsection is a written certifi-
20       cation of (a) (A) the period of coverage under a policy specified in sub-
21       section (A) (a) and any coverage under such COBRA continuation pro-
22       vision, and (b) (B) any waiting period imposed with respect to the eligible
23       employee, member or dependent for any coverage under such policy.
24           (C) (c) Any group policy may impose participation requirements, de-
25       fine full-time employees or members and otherwise be designed for the
26       group as a whole through negotiations between the group sponsor and
27       the insurer to the extent such design is not contrary to or inconsistent
28       with this act.
29           (D) (d) (1) An accident and sickness insurer offering a group policy
30       providing hospital, medical or surgical expense benefits must renew or
31       continue in force such coverage at the option of the policyholder or cer-
32       tificateholder except as provided in subsection (2) paragraph (2) below.
33           (2) An accident and sickness insurer may nonrenew or discontinue
34       coverage under a group policy providing hospital, medical or surgical
35       expense benefits based only on one or more of the following circum-
36       stances:
37           (a) (A) If the policyholder or certificateholder has failed to pay any
38       premium or contributions in accordance with the terms of the group
39       policy providing hospital, medical or surgical expense benefits or the ac-
40       cident and sickness insurer has not received timely premium payments;
41           (b) (B) if the policyholder or certificateholder has performed an act
42       or practice that constitutes fraud or made an intentional misrepresenta-
43       tion of material fact under the terms of such coverage;

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  1           (c) (C) if the policyholder or certificateholder has failed to comply
  2       with a material plan provision relating to employer contribution or group
  3       participation rules;
  4           (d) (D) if the accident and sickness insurer is ceasing to offer coverage
  5       in such group market in accordance with subsections (D) (d)(3) or (D)
  6       (d)(4);
  7           (e) (E) in the case of accident and sickness insurer that offers cov-
  8       erage under a policy providing hospital, medical or surgical expense ben-
  9       efits through an enrollment area, there is no longer any eligible employee,
10       member or dependent in connection with such policy who lives, resides
11       or works in the medical service enrollment area of the accident and sick-
12       ness insurer ( or in the area for which the accident and sickness insurer
13       is authorized to do business); or
14           (f) (F) in the case of a group policy providing hospital, medical or
15       surgical expense benefits which is offered through an association or trust
16       pursuant to subsections (F) (f)(3) or (F) (f)(5), the membership of the
17       employer in such association or trust ceases but only if such coverage is
18       terminated uniformly without regard to any health status related factor
19       relating to any eligible employee, member or dependent.
20           (3) In any case in which an accident and sickness insurer which offers
21       a group policy providing hospital, medical or surgical expense benefits
22       decides to discontinue offering such type of group policy, such coverage
23       may be discontinued only if:
24           (a) (A) The accident and sickness insurer notifies all policyholders
25       and certificateholders and all eligible employees or members of such dis-
26       continuation at least 90 days prior to the date of the discontinuation of
27       such coverage;
28           (b) (B) the accident and sickness insurer offers to each policyholder
29       who is provided such group policy providing hospital, medical or surgical
30       expense benefits which is being discontinued the option to purchase any
31       other group policy providing hospital, medical or surgical expense bene-
32       fits currently being offered by such accident and sickness insurer; and
33           (c) (C) in exercising the option to discontinue coverage and in offer-
34       ing the option of coverage under paragraph (b) subparagraph (B), the
35       accident and sickness insurer acts uniformly without regard to the claims
36       experience of those policyholders or certificateholders or any health status
37       related factors relating to any eligible employee, member or dependent
38       covered by such group policy or new employees or members who may
39       become eligible for such coverage.
40           (4) If the accident and sickness insurer elects to discontinue offering
41       group policies providing hospital, medical or surgical expense benefits or
42       group coverage to a small employer pursuant to K.S.A. 40-2209f and
43       amendments thereto, such coverage may be discontinued only if:

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  1           (a) (A) The accident and sickness insurer provides notice to the in-
  2       surance commissioner, to all policyholders or certificateholders and to all
  3       eligible employees and members covered by such group policy providing
  4       hospital, medical or surgical expense benefits at least 180 days prior to
  5       the date of the discontinuation of such coverage;
  6           (b) (B) all group policies providing hospital, medical or surgical ex-
  7       pense benefits offered by such accident and sickness insurer are discon-
  8       tinued and coverage under such policies are not renewed; and
  9           (c) (C) the accident and sickness insurer may not provide for the
10       issuance of any group policies providing hospital, medical or surgical ex-
11       pense benefits in the discontinued market during a five year period be-
12       ginning on the date of the discontinuation of the last such group policy
13       which is nonrenewed.
14           (E) (e) (1) An accident and sickness insurer offering a group policy
15       providing hospital, medical or surgical expense benefits may not establish
16       rules for eligibility (including continued eligibility) of any employee,
17       member or dependent to enroll under the terms of the group policy based
18       on any of the following factors in relation to the eligible employee, mem-
19       ber or dependent: (a) (A) Health status, (b) (B) medical condition, (in-
20       cluding both physical and mental illness), (c) (C) claims experience, (d)
21       (D) receipt of health care, (e) (E) medical history, (f) (F) genetic infor-
22       mation, (g) (G) evidence of insurability, (including conditions arising out
23       of acts of domestic violence), or (h) (H) disability. This subsection shall
24       not be construed to require a policy providing hospital, medical or surgical
25       expense benefits to provide particular benefits other than those provided
26       under the terms of such group policy or to prevent a group policy pro-
27       viding hospital, medical or surgical expense benefits from establishing
28       limitations or restrictions on the amount, level, extent or nature of the
29       benefits or coverage for similarly situated individuals enrolled under the
30       group policy.
31           (F) (f) Group accident and health insurance may be offered to a
32       group under the following basis:
33           (1) Under a policy issued to an employer or trustees of a fund estab-
34       lished by an employer, who is the policyholder, insuring at least two em-
35       ployees of such employer, for the benefit of persons other than the em-
36       ployer. The term ``employees'' shall include the officers, managers,
37       employees and retired employees of the employer, the partners, if the
38       employer is a partnership, the proprietor, if the employer is an individual
39       proprietorship, the officers, managers and employees and retired em-
40       ployees of subsidiary or affiliated corporations of a corporation employer,
41       and the individual proprietors, partners, employees and retired employ-
42       ees of individuals and firms, the business of which and of the insured
43       employer is under common control through stock ownership contract, or

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  1       otherwise. The policy may provide that the term ``employees'' may include
  2       the trustees or their employees, or both, if their duties are principally
  3       connected with such trusteeship. A policy issued to insure the employees
  4       of a public body may provide that the term ``employees'' shall include
  5       elected or appointed officials.
  6           (2) Under a policy issued to a labor union which shall have a consti-
  7       tution and bylaws insuring at least 25 members of such union.
  8           (3) Under a policy issued to the trustees of a fund established by two
  9       or more employers or business associations or by one or more labor un-
10       ions or by one or more employers and one or more labor unions, which
11       trustees shall be the policyholder, to insure employees of the employers
12       or members of the union or members of the association for the benefit
13       of persons other than the employers or the unions or the associations.
14       The term ``employees'' shall include the officers, managers, employees
15       and retired employees of the employer and the individual proprietor or
16       partners if the employer is an individual proprietor or partnership. The
17       policy may provide that the term ``employees'' shall include the trustees
18       or their employees, or both, if their duties are principally connected with
19       such trusteeship.
20           (4) A policy issued to a creditor, who shall be deemed the policyhol-
21       der, to insure debtors of the creditor, subject to the following require-
22       ments: (a) The debtors eligible for insurance under the policy shall be all
23       of the debtors of the creditor whose indebtedness is repayable in install-
24       ments, or all of any class or classes determined by conditions pertaining
25       to the indebtedness or to the purchase giving rise to the indebtedness.
26       (b) The premium for the policy shall be paid by the policyholder, either
27       from the creditor's funds or from charges collected from the insured
28       debtors, or from both.
29           (5) A policy issued to an association which has been organized and is
30       maintained for the purposes other than that of obtaining insurance, in-
31       suring at least 25 members, employees, or employees of members of the
32       association for the benefit of persons other than the association or its
33       officers. The term ``employees'' shall include retired employees. The pre-
34       miums for the policies shall be paid by the policyholder, either wholly
35       from association funds, or funds contributed by the members of such
36       association or by employees of such members or any combination thereof.
37           (6) Under a policy issued to any other type of group which the com-
38       missioner of insurance may find is properly subject to the issuance of a
39       group sickness and accident policy or contract.
40           (G) (g) Each such policy shall contain in substance: (1) A provision
41       that a copy of the application, if any, of the policyholder shall be attached
42       to the policy when issued, that all statements made by the policyholder
43       or by the persons insured shall be deemed representations and not war-

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  1       ranties, and that no statement made by any person insured shall be used
  2       in any contest unless a copy of the instrument containing the statement
  3       is or has been furnished to such person or the insured's beneficiary.
  4           (2) A provision setting forth the conditions under which an individ-
  5       ual's coverage terminates under the policy, including the age, if any, to
  6       which an individual's coverage under the policy shall be limited, or, the
  7       age, if any, at which any additional limitations or restrictions are placed
  8       upon an individual's coverage under the policy.
  9           (3) Provisions setting forth the notice of claim, proofs of loss and
10       claim forms, physical examination and autopsy, time of payment of claims,
11       to whom benefits are payable, payment of claims, change of beneficiary,
12       and legal action requirements. Such provisions shall not be less favorable
13       to the individual insured or the insured's beneficiary than those corre-
14       sponding policy provisions required to be contained in individual accident
15       and sickness policies.
16           (4) A provision that the insurer will furnish to the policyholder, for
17       the delivery to each employee or member of the insured group, an in-
18       dividual certificate approved by the commissioner of insurance setting
19       forth in summary form a statement of the essential features of the insur-
20       ance coverage of such employee or member, the procedure to be followed
21       in making claim under the policy and to whom benefits are payable. Such
22       certificate shall also contain a summary of those provisions required under
23       paragraphs (2) and (3) of this subsection (g) in addition to the other
24       essential features of the insurance coverage. If dependents are included
25       in the coverage, only one certificate need be issued for each family unit.
26           (H) (h) No group disability income policy which integrates benefits
27       with social security benefits, shall provide that the amount of any disability
28       benefit actually being paid to the disabled person shall be reduced by
29       changes in the level of social security benefits resulting either from
30       changes in the social security law or due to cost of living adjustments
31       which become effective after the first day for which disability benefits
32       become payable.
33           (I) (i) A group policy of insurance delivered or issued for delivery or
34       renewed which provides hospital, surgical or major medical expense in-
35       surance, or any combination of these coverages, on an expense incurred
36       basis, shall provide that an employee or member or such employee's or
37       member's covered dependents whose insurance under the group policy
38       has been terminated for any reason, including discontinuance of the
39       group policy in its entirety or with respect to an insured class, and who
40       has been continuously insured under the group policy or under any group
41       policy providing similar benefits which it replaces for at least three
42       months immediately prior to termination, shall be entitled to have such
43       coverage nonetheless continued under the group policy for a period of

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  1       six months and have issued to the employee or member or such em-
  2       ployee's or member's covered dependents by the insurer, at the end of
  3       such six-month period of continuation, a policy of health insurance which
  4       conforms to the applicable requirements specified in this subsection. This
  5       requirement shall not apply to a group policy which provides benefits for
  6       specific diseases or for accidental injuries only or a group policy issued to
  7       an employer subject to the continuation and conversion obligations set
  8       forth at title I, subtitle B, part 6 of the employee retirement income
  9       security act of 1974 or at title XXII of the public health service act, as
10       each act was in effect on January 1, 1987 to the extent federal law provides
11       the employee or member or such employee's or member's covered de-
12       pendents with equal or greater continuation or conversion rights; or an
13       employee or member or such employee's or member's covered depend-
14       ents shall not be entitled to have such coverage continued or a converted
15       policy issued to the employee or member or such employee's or member's
16       covered dependents if termination of the insurance under the group pol-
17       icy occurred because:
18           (a) (1) The employee or member or such employee's or member's
19       covered dependents failed to pay any required contribution after receiv-
20       ing reasonable notice of such required contribution from the insurer in
21       accordance with rules and regulations adopted by the commissioner of
22       insurance; (b) (2) any discontinued group coverage was replaced by sim-
23       ilar group coverage within 31 days; (c) (3) the employee or member is or
24       could be covered by medicare (title XVIII of the United States social
25       security act as added by the social security amendments of 1965 or as
26       later amended or superseded); or (d) (4) the employee or member is or
27       could be covered to the same extent by any other insured or lawful self-
28       insured arrangement which provides expense incurred hospital, surgical
29       or medical coverage and benefits for individuals in a group under which
30       the person was not covered prior to such termination. In the event the
31       group policy is terminated and not replaced the insurer may issue an
32       individual policy or certificate in lieu of a conversion policy or the con-
33       tinuation of group coverage required herein if the individual policy or
34       certificate provides substantially similar coverage for the same or less
35       premium as the group policy. In any event, the employee or member
36       shall have the option to be issued a conversion policy which meets the
37       requirements set forth in this subsection (I) in lieu of the right to continue
38       group coverage.
39           (j) The continued coverage and the issuance of a converted policy
40       shall be subject to the following conditions:
41           (1) Written application for the converted policy shall be made and
42       the first premium paid to the insurer not later than 31 days after termi-
43       nation of coverage under the group policy or not later than 31 days after

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  1       notice is received pursuant to subsection (I)(21)(b)(ii) paragraph 20 of
  2       this subsection.
  3           (2) The converted policy shall be issued without evidence of insura-
  4       bility.
  5           (3) The terminated employee or member shall pay to the insurer the
  6       premium for the six-month continuation of coverage and such premium
  7       shall be the same as that applicable to members or employees remaining
  8       in the group. Failure to pay such premium shall terminate coverage under
  9       the group policy at the end of the period for which the premium has been
10       paid. The premium rate charged for converted policies issued subsequent
11       to the period of continued coverage shall be such that can be expected
12       to produce an anticipated loss ratio of not less than 80% based upon
13       conversion, morbidity and reasonable assumptions for expected trends in
14       medical care costs. In the event the group policy is terminated and is not
15       replaced, converted policies may be issued at self-sustaining rates that
16       are not unreasonable in relation to the coverage provided based on con-
17       version, morbidity and reasonable assumptions for expected trends in
18       medical care costs. The frequency of premium payment shall be the fre-
19       quency customarily required by the insurer for the policy form and plan
20       selected, provided that the insurer shall not require premium payments
21       less frequently than quarterly.
22           (4) The effective date of the converted policy shall be the day follow-
23       ing the termination of insurance under the group policy.
24           (5) The converted policy shall cover the employee or member and
25       the employee's or member's dependents who were covered by the group
26       policy on the date of termination of insurance. At the option of the in-
27       surer, a separate converted policy may be issued to cover any dependent.
28           (6) The insurer shall not be required to issue a converted policy cov-
29       ering any person if such person is or could be covered by medicare (title
30       XVIII of the United States social security act as added by the social se-
31       curity amendments of 1965 or as later amended or superseded). Fur-
32       thermore, the insurer shall not be required to issue a converted policy
33       covering any person if:
34           (a) (A) (i) Such person is covered for similar benefits by another hos-
35       pital, surgical, medical or major medical expense insurance policy or hos-
36       pital or medical service subscriber contract or medical practice or other
37       prepayment plan or by any other plan or program, or
38           (ii) such person is eligible for similar benefits (whether or not covered
39       therefor) under any arrangement of coverage for individuals in a group,
40       whether on an insured or uninsured basis, or
41           (iii) similar benefits are provided for or available to such person, pur-
42       suant to or in accordance with the requirements of any state or federal
43       law, and

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  1           (b) (B) the benefits provided under the sources referred to in para-
  2       graph clause (A) (i) above for such person or benefits provided or available
  3       under the sources referred to in paragraphs clauses (A) (ii) and (A) (iii)
  4       above for such person, together with the benefits provided by the con-
  5       verted policy, would result in over-insurance according to the insurer's
  6       standards. The insurer's standards must bear some reasonable relation-
  7       ship to actual health care costs in the area in which the insured lives at
  8       the time of conversion and must be filed with the commissioner of in-
  9       surance prior to their use in denying coverage.
10           (7) A converted policy may include a provision whereby the insurer
11       may request information in advance of any premium due date of such
12       policy of any person covered as to whether:
13           (a) (A) Such person is covered for similar benefits by another hospital,
14       surgical, medical or major medical expense insurance policy or hospital
15       or medical service subscriber contract or medical practice or other pre-
16       payment plan or by any other plan or program;
17           (b) (B) such person is covered for similar benefits under any arrange-
18       ment of coverage for individuals in a group, whether on an insured or
19       uninsured basis; or
20           (c) (C) similar benefits are provided for or available to such person,
21       pursuant to or in accordance with the requirements of any state or federal
22       law.
23           (8) The converted policy may provide that the insurer may refuse to
24       renew the policy and the coverage of any person insured for the following
25       reasons only:
26           (a) (A) Either the benefits provided under the sources referred to in
27       paragraphs clauses (A) (i) and (A) (ii) above of paragraph 6 for such
28       person or benefits provided or available under the sources referred to in
29       paragraph clause (A) (iii) above of paragraph 6 for such person, together
30       with the benefits provided by the converted policy, would result in
31       over-insurance according to the insurer's standards on file with the com-
32       missioner of insurance, or the converted policyholder fails to provide the
33       requested information;
34           (b) (B) fraud or material misrepresentation in applying for any ben-
35       efits under the converted policy;
36           (c) (C) eligibility of the insured person for coverage under medicare
37       (title XVIII of the United States social security act as added by the social
38       security amendments of 1965 or as later amended or superseded) or un-
39       der any other state or federal law (except title XIX of the social security
40       act of 1965) providing for benefits similar to those provided by the con-
41       verted policy; or
42           (d) (D) other reasons approved by the commissioner of insurance.
43           (8) (9) An insurer shall not be required to issue a converted policy

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  1       which provides coverage and benefits in excess of those provided under
  2       the group policy from which conversion is made.
  3           (9) (10) If the converted policy provides that any hospital, surgical or
  4       medical benefits payable may be reduced by the amount of any such
  5       benefits payable under the group policy after the termination of the in-
  6       dividual's insurance or the converted policy includes provisions so that
  7       during the first policy year the benefits payable under the converted pol-
  8       icy, together with the benefits payable under the group policy, shall not
  9       exceed those that would have been payable had the individual's insurance
10       under the group policy remained in force and effect, the converted policy
11       shall provide credit for deductibles, copayments and other conditions sat-
12       isfied under the group policy.
13           (10) (11) Subject to the provisions and conditions of this act, if the
14       group insurance policy from which conversion is made insures the em-
15       ployee or member for major medical expense insurance, the employee
16       or member shall be entitled to obtain a converted policy providing cata-
17       strophic or major medical coverage under a plan meeting the following
18       requirements:
19           (a) (A) A maximum benefit at least equal to either, at the option of
20       the insurer, paragraphs (i) or (ii) below:
21           (i) The smaller of the following amounts:
22           1. The maximum benefit provided under the group policy. or 2. a
23       maximum payment of $250,000 per covered person for all covered med-
24       ical expenses incurred during the covered person's lifetime.
25           (ii) The smaller of the following amounts:
26           1. The maximum benefit provided under the group policy. or 2. a
27       maximum payment of $250,000 for each unrelated injury or sickness.
28           (b) (B) Payment of benefits at the rate of 80% of covered medical
29       expenses which are in excess of the deductible, until 20% of such expenses
30       in a benefit period reaches $1,000, after which benefits will be paid at
31       the rate of 100% during the remainder of such benefit period. Payment
32       of benefits for outpatient treatment of mental illness, if provided in the
33       converted policy, may be at a lesser rate but not less than 50%.
34           (c) (C) A deductible for each benefit period which, at the option of
35       the insurer, shall be (a) (i) the sum of the benefits deductible and $100,
36       or (b) (ii) the corresponding deductible in the group policy. The term
37       ``benefits deductible,'' as used herein, means the value of any benefits
38       provided on an expense incurred basis which are provided with respect
39       to covered medical expenses by any other hospital, surgical, or medical
40       insurance policy or hospital or medical service subscriber contract or
41       medical practice or other prepayment plan, or any other plan or program
42       whether on an insured or uninsured basis, or in accordance with the
43       requirements of any state or federal law and, if pursuant to ;c/ondition (12)

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  1       the conditions of paragraph (13), the converted policy provides both basic
  2       hospital or surgical coverage and major medical coverage, the value of
  3       such basic benefits.
  4           If the maximum benefit is determined by paragraph clause (a)(ii) above
  5       of this paragraph, the insurer may require that the deductible be satisfied
  6       during a period of not less than three months if the deductible is $100 or
  7       less, and not less than six months if the deductible exceeds $100.
  8           (d) (D) The benefit period shall be each calendar year when the max-
  9       imum benefit is determined by paragraph (a) clause (A)(i) above of this
10       paragraph or 24 months when the maximum benefit is determined by
11       paragraph clause (a) (A)(ii) above of this paragraph.
12           (e) (E) The term ``covered medical expenses,'' as used above, shall
13       include at least, in the case of hospital room and board charges 80% of
14       the average semiprivate room and board rate for the hospital in which
15       the individual is confined and twice such amount for charges in an inten-
16       sive care unit. Any surgical schedule shall be consistent with those cus-
17       tomarily offered by the insurer under group or individual health insurance
18       policies and must provide at least a $1,200 maximum benefit.
19           (11) (12) The conversion privilege required by this act shall, if the
20       group insurance policy insures the employee or member for basic hospital
21       or surgical expense insurance as well as major medical expense insurance,
22       make available the plans of benefits set forth in ;c/ondition 10 paragraph
23       11. At the option of the insurer, such plans of benefits may be provided
24       under one policy.
25           The insurer may also, in lieu of the plans of benefits set forth in ;c/on-
26       dition 10 paragraph (11), provide a policy of comprehensive medical ex-
27       pense benefits without first dollar coverage. The policy shall conform to
28       the requirements of ;c/ondition (10) paragraph (11). An insurer electing
29       to provide such a policy shall make available a low deductible option, not
30       to exceed $100, a high deductible option between $500 and $1,000, and
31       a third deductible option midway between the high and low deductible
32       options.
33           (12) (13) The insurer, at its option, may also offer alternative plans
34       for group health conversion in addition to those required by this act.
35           (13) (14) In the event coverage would be continued under the group
36       policy on an employee following the employee's retirement prior to the
37       time the employee is or could be covered by medicare, the employee may
38       elect, in lieu of such continuation of group insurance, to have the same
39       conversion rights as would apply had such person's insurance terminated
40       at retirement by reason of termination of employment or membership.
41           (14) (15) The converted policy may provide for reduction of coverage
42       on any person upon such person's eligibility for coverage under medicare
43       (title XVIII of the United States social security act as added by the social

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  1       security amendments of 1965 or as later amended or superseded) or un-
  2       der any other state or federal law providing for benefits similar to those
  3       provided by the converted policy.
  4           (15) (16) Subject to the conditions set forth above, the continuation
  5       and conversion privileges shall also be available:
  6           (a) (A) To the surviving spouse, if any, at the death of the employee
  7       or member, with respect to the spouse and such children whose coverage
  8       under the group policy terminates by reason of such death, otherwise to
  9       each surviving child whose coverage under the group policy terminates
10       by reason of such death, or, if the group policy provides for continuation
11       of dependents' coverage following the employee's or member's death, at
12       the end of such continuation;
13           (b) (B) to the spouse of the employee or member upon termination
14       of coverage of the spouse, while the employee or member remains in-
15       sured under the group policy, by reason of ceasing to be a qualified family
16       member under the group policy, with respect to the spouse and such
17       children whose coverage under the group policy terminates at the same
18       time; or
19           (c) (C) to a child solely with respect to such child upon termination
20       of such coverage by reason of ceasing to be a qualified family member
21       under the group policy, if a conversion privilege is not otherwise provided
22       above with respect to such termination.
23           (16) (17) The insurer may elect to provide group insurance coverage
24       which complies with this act in lieu of the issuance of a converted indi-
25       vidual policy.
26           (17) (18) A notification of the conversion privilege shall be included
27       in each certificate of coverage.
28           (18) (19) A converted policy which is delivered outside this state must
29       be on a form which could be delivered in such other jurisdiction as a
30       converted policy had the group policy been issued in that jurisdiction.
31           (19) (20) The insurer shall give the employee or member and such
32       employee's or member's covered dependents: (a) (A) Reasonable notice
33       of the right to convert at least once during the six-month continuation
34       period; or (b) (B) for persons covered under 29 U.S.C. 1161 et seq., notice
35       of the right to a conversion policy required by this subsection (D) (d)
36       shall be given at least 30 days: (i) prior to the end of the continuation
37       period provided by 29 U.S.C. 1161 et seq., or (ii) from the date the
38       employer ceases to provide any similar group health plan to any employee.
39       Such notices shall be provided in accordance with rules and regulations
40       adopted by the commissioner of insurance.
41           (J) (k) (1) No policy issued by an insurer to which this section applies
42       shall contain a provision which excludes, limits or otherwise restricts cov-
43       erage because medicaid benefits as permitted by title XIX of the social

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  1       security act of 1965 are or may be available for the same accident or
  2       illness.
  3           (2) Violation of this subsection shall be subject to the penalties pre-
  4       scribed by K.S.A. 40-2407 and 40-2411, and amendments thereto.
  5           (K) (l) The commissioner is hereby authorized to adopt such rules
  6       and regulations as may be necessary to carry out the provisions of this
  7       section.
  8           Sec. 4. K.S.A. 1997 Supp. 40-2209d is hereby amended to read as
  9       follows: 40-2209d. As used in this act:
10           (a) ``Actuarial certification'' means a written statement by a member
11       of the American academy of actuaries or other individual acceptable to
12       the commissioner that a small employer carrier is in compliance with the
13       provisions of K.S.A. 40-2209h and amendments thereto, based upon the
14       person's examination, including a review of the appropriate records and
15       of the actuarial assumptions and methods used by the small employer
16       carrier in establishing premium rates for applicable health benefit plans.
17           (b) ``Approved service area'' means a geographical area, as approved
18       by the commissioner to transact insurance in this state, within which the
19       carrier is authorized to provide coverage.
20           (c) ``Base premium rate'' means, for each class of business as to a
21       rating period, the lowest premium rate charged or that could have been
22       charged under the rating system for that class of business, by the small
23       employer carrier to small employers with similar case characteristics for
24       health benefit plans with the same or similar coverage.
25           (d) ``Basic small employer health care plan'' means a health benefit
26       plan developed by the board pursuant to K.S.A. 40-2209k and amend-
27       ments thereto.
28           (e) ``Board'' means the board of directors of the program.
29           (f) (d) ``Carrier'' or ``small employer carrier'' means any insurance
30       company, nonprofit medical and hospital service corporation, nonprofit
31       optometric, dental, and pharmacy service corporations, municipal
32       group-funded pool, fraternal benefit society or health maintenance or-
33       ganization, as these terms are defined by the Kansas Statutes Annotated,
34       that offers health benefit plans covering eligible employees of one or more
35       small employers in this state.
36           (g) (e) ``Case characteristics'' means, with respect to a small employer,
37       the geographic area in which the employees reside; the age and sex of
38       the individual employees and their dependents; the appropriate industry
39       classification as determined by the carrier, and the number of employees
40       and dependents and such other objective criteria as may be approved
41       family composition by the commissioner. ``Case characteristics'' shall not
42       include claim experience, health status and duration of coverage since
43       issue.

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  1           (h) (f) ``Class of business'' means all or a separate grouping of small
  2       employers established pursuant to K.S.A. 40-2209g and amendments
  3       thereto.
  4           (i) (g) ``Commissioner'' means the commissioner of insurance.
  5           (j) (h) ``Department'' means the insurance department.
  6           (k) (i) ``Dependent'' means the spouse or child of an eligible em-
  7       ployee, subject to applicable terms of the health benefits plan covering
  8       such employee and the dependent eligibility standards established by the
  9       board.
10           (l) (j) ``Eligible employee'' means an employee who works on a full-
11       time basis, with a normal work week of 30 or more hours, and includes
12       a sole proprietor, a partner of a partnership or an independent contractor,
13       provided such sole proprietor, partner or independent contractor is in-
14       cluded as an employee under a health benefit plan of a small employer
15       but does not include an employee who works on a part-time, temporary
16       or substitute basis.
17           (m) (k) ``Financially impaired'' means a member which, after the ef-
18       fective date of this act, is not insolvent but is:
19           (1) Deemed by the commissioner to be in a hazardous financial con-
20       dition pursuant to K.S.A. 40-222d and amendments thereto; or
21           (2) placed under an order of rehabilitation or conservation by a court
22       of competent jurisdiction.
23           (n) (l) ``Health benefit plan'' means any hospital or medical expense
24       policy, health, hospital or medical service corporation contract, and a plan
25       provided by a municipal group-funded pool, or a health maintenance
26       organization contract offered by an employer or any certificate issued
27       under any such policies, contracts or plans. ``Health benefit plan'' does
28       not include policies or certificates covering only accident, credit, dental,
29       disability income, long-term care, hospital indemnity, medicare supple-
30       ment, specified disease, vision care, coverage issued as a supplement to
31       liability insurance, insurance arising out of a workers compensation or
32       similar law, automobile medical-payment insurance, or insurance under
33       which benefits are payable with or without regard to fault and which is
34       statutorily required to be contained in any liability insurance policy or
35       equivalent self-insurance.
36           (o) (m) ``Index rate'' means, for each class of business as to a rating
37       period for small employers with similar case characteristics, the arithmetic
38       average of the applicable base premium rate and the corresponding high-
39       est premium rate.
40           (p) (n) ``Initial enrollment period'' means the period of time specified
41       in the health benefit plan during which an individual is first eligible to
42       enroll in a small employer health benefit plan. Such period shall be no
43       less favorable than a period beginning on the employee's or member's

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  1       date of initial eligibility and ending 31 days thereafter.
  2           (q) (o) ``Late enrollee'' means an eligible employee or dependent who
  3       requests enrollment in a small employer's health benefit plan following
  4       the initial enrollment period provided under the terms of the first plan
  5       for which such employee or dependent was eligible through such small
  6       employer, however an eligible employee or dependent shall not be con-
  7       sidered a late enrollee if:
  8           (1) The individual:
  9           (A) Was covered under another employer-provided health benefit
10       plan or was covered under section 607(1) of the employee retirement
11       income security act of 1974 (ERISA) at the time the individual was eli-
12       gible to enroll;
13           (B) states in writing, at the time of the initial eligibility, that coverage
14       under another employer health benefit plan was the reason for declining
15       enrollment but only if the group policyholder or the accident and sickness
16       issuer required such a written statement and provided the individual with
17       notice of the requirement for a written statement and the consequences
18       of such written statement;
19           (C) has lost coverage under another employer health benefit plan or
20       under section 607(1) of the employee retirement income security act of
21       1974 (ERISA) as a result of the termination of employment, reduction in
22       the number of hours of employment, termination of employer contribu-
23       tions toward such coverage, the termination of the other plan's coverage,
24       death of a spouse, or divorce or legal separation; and
25           (D) requests enrollment within 63 days after the termination of cov-
26       erage under another employer health benefit plan; or
27           (2) the individual is employed by an employer who offers multiple
28       health benefit plans and the individual elects a different health benefit
29       plan during an open enrollment period; or
30           (3) a court has ordered coverage to be provided for a spouse or minor
31       child under a covered employee's plan.
32           (r) (p) ``New business premium rate'' means, for each class of busi-
33       ness as to a rating period, the lowest premium rate charged or offered,
34       or which could have been charged or offered, by the small employer
35       carrier to small employers with similar case characteristics for newly is-
36       sued health benefit plans with the same or similar coverage.
37           (s) ``Plan of operation'' means the articles, bylaws and operating rules
38       of the program adopted by the board pursuant to K.S.A. 40-2209l and
39       amendments thereto.
40           (t) (q) ``Preexisting conditions exclusion'' means a policy provision
41       which excludes or limits coverage for charges or expenses incurred during
42       a specified period not to exceed 90 days following the insured's effective
43       date of coverage as to a condition (, whether physical or mental), regard-

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  1       less of the cause of the condition for which medical advice, diagnosis, care
  2       or treatment was recommended or received in the six months immedi-
  3       ately preceding the effective date of ;c/overage enrollment.
  4           (u) (r) ``Premium'' means moneys paid by a small employer or eligible
  5       employees or both as a condition of receiving coverage from a small em-
  6       ployer carrier, including any fees or other contributions associated with
  7       the health benefit plan.
  8           (v) ``Program'' means the Kansas small employer health reinsurance
  9       program, established under K.S.A. 40-2209l and amendments thereto.
10           (w) (s) ``Rating period'' means the calendar period for which pre-
11       mium rates established by a small employer carrier are assumed to be in
12       effect but any period of less than one year shall be considered as a full
13       year.
14           (x) ``SEHC plan'' means the Kansas small employer health care plan
15       which shall be a health benefit plan for small employers established by
16       the board in accordance with K.S.A. 40-2209k and amendments thereto.
17           (y) (t) ``Waiting period'' means a period of time after full-time em-
18       ployment begins before an employee is first eligible to enroll in any ap-
19       plicable health benefit plan offered by the small employer.
20           (z) (u) ``Small employer'' means any person, firm, corporation, part-
21       nership or association eligible for group sickness and accident insurance
22       pursuant to subsection (A) (a) of K.S.A. 40-2209 and amendments thereto
23       actively engaged in business whose total employed work force consisted
24       of, on at least 50% of its working days during the preceding year, of at
25       least two and no more than 50 eligible employees, the majority of whom
26       were employed within the state. In determining the number of eligible
27       employees, companies which are affiliated companies or which are eli-
28       gible to file a combined tax return for purposes of state taxation, shall be
29       considered one employer. Except as otherwise specifically provided, pro-
30       visions of this act which apply to a small employer which has a health
31       benefit plan shall continue to apply until the plan anniversary following
32       the date the employer no longer meets the requirements of this defini-
33       tion.
34           (aa) ``Standard small employer health care plan'' means a basic SEHC
35       plan with specified benefit enhancements and such deductible and co-
36       insurance provisions as may be developed by the board pursuant to K.S.A.
37       40-2209k and amendments thereto.
38           (bb) (v) ``Affiliate'' or ``affiliated'' means an entity or person who di-
39       rectly or indirectly through one or more intermediaries, controls or is
40       controlled by, or is under common control with, a specified entity or
41       person.
42           Sec. 5. K.S.A. 1997 Supp. 40-2209e is hereby amended to read as
43       follows: 40-2209e. (a) Any individual or group health benefit plan issued

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  1       to a group authorized by subsection (A) (a) of K.S.A. 40-2209 and amend-
  2       ments thereto shall be subject to the provisions of this act if it provides
  3       health care benefits covering employees of a small employer and if it
  4       meets any one of the following conditions:
  5           (1) Any portion of the premium is paid by a small employer, or any
  6       covered individual, whether through wage adjustments, reimbursement,
  7       withholding or otherwise;
  8           (2) the health benefit plan is treated by the employer or any of the
  9       covered individuals as part of a plan or program for the purposes of sec-
10       tion 106 or section 162 of the United States internal revenue code; or
11           (3) with the permission of the board, the carrier elects to renew or
12       continue a health benefit plan covering employees of an employer who
13       no longer meets the definition of a ``small employer.''
14           (b) For purposes of this act an aggregation of two or more small
15       employers covered under a trust arrangement or a policy issued to an
16       association of small employers pursuant to subsection (A)(3) or (5) of
17       K.S.A. 40-2209 and amendments thereto shall permit employee or mem-
18       ber units of more than two but less than 51 employees or members and
19       their dependents to participate in any health benefit plan to which this
20       act applies. Any group which includes employee or member units of 50
21       or fewer employees shall be subject to the provisions of this act notwith-
22       standing its inclusion of employee or member units with more than 50
23       employees or members.
24           (c) Except as expressly provided for in this act, no law requiring the
25       coverage or the offer of coverage of a health care service or benefit shall
26       apply to any SEHC plan offered or delivered to a small employer.
27           (d) Except as expressly provided in this act, no health benefit plan
28       offered to a small employer shall be subject to:
29           (1) Any law that would inhibit any carrier from contracting with pro-
30       viders or groups of providers with respect to health care services or ben-
31       efits;
32           (2) any law that would impose any restriction on the ability to nego-
33       tiate with providers regarding the level or method of reimbursing care or
34       services provided under the health benefit plan.
35           (e) (d) Individual policies of accident and sickness insurance issued
36       to individuals and their dependents totally independent of any group,
37       association or trust arrangement permitted under K.S.A. 40-2209 and
38       amendments thereto shall not be subject to the provisions of this act.
39           Sec. 6. K.S.A. 1997 Supp. 40-2209f is hereby amended to read as
40       follows: 40-2209f. Health benefit plans covering small employers that are
41       issued or renewed within this state or outside this state covering persons
42       residing in this state shall be subject to the following provisions, as ap-
43       plicable:

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  1           (a) Provisions of preexisting conditions shall not exclude or limit cov-
  2       erage for a period beyond 90 days following the individual's effective date
  3       of coverage and may only relate to conditions (whether physical or men-
  4       tal) regardless of the cause of the condition for which medical advice,
  5       diagnosis, care or treatment was recommended or received, during the
  6       six months immediately preceding the effective date of coverage. Any
  7       preexisting conditions exclusion shall run concurrently with any waiting
  8       period.
  9           (b) Such policy may impose a preexisting conditions exclusion, not to
10       exceed 90 days following the date of enrollment, for conditions (whether
11       physical or mental), regardless of the cause of the condition for which
12       medical advice, diagnosis, care or treatment was recommended or re-
13       ceived in the six months prior to the effective date of coverage. Any
14       preexisting conditions exclusion shall run concurrently with any waiting
15       period.
16           (b) Such policy shall waive such a preexisting conditions exclusion to
17       the extent the employee or member or individual dependent or family
18       member was covered by (1) a group or individual sickness and accident
19       policy, (2) coverage under section 607(1) of the employees retirement
20       income security act of 1974 (ERISA), (3) a group specified in K.S.A.
21       40-2222 and amendments thereto (4) part A or part B of title XVIII of
22       the social security act, (5) title XIX of the social security act, other than
23       coverage consisting solely of benefits under section 1928, (6) chapter 55
24       of title 10 United States code, (7) a state children's health insurance pro-
25       gram established pursuant to title XXI of the social security act, (5) (8)
26       medical care program of the indian health service or of a tribal organi-
27       zation, (6) (9) the Kansas uninsurable health plan act pursuant to K.S.A.
28       40-2217 et seq. and amendments thereto or similar health benefits risk
29       pool of another state, (7) (10) a health plan offered under chapter 89 of
30       title 5, United States code, (8) (11) a health benefit plan under section
31       5(e) of the peace corps act (22 U.S.C. 2504 (e) or (9) (12) a group subject
32       to K.S.A. 12-2616 et seq. and amendments thereto which provided hos-
33       pital, medical and surgical expense benefits within 63 days prior to the
34       effective date of coverage under a health benefit plan with no gap in
35       coverage. A group policy shall credit the periods of prior coverage spec-
36       ified in this subsection without regard to the specific benefits covered
37       during the period of prior coverage. Any period that the employee or
38       member is in a waiting period for any coverage under a group health plan
39       or is in an affiliation period shall be taken into account in determining
40       the continuous period under this subsection.
41           (c) A carrier may exclude a late enrollee except during an open en-
42       rollment period.
43           (d) Except as expressly provided by this act, every carrier doing busi-

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  1       ness in the small employer market retains the authority to underwrite and
  2       rate individual accident and sickness insurance policies, and to rate small
  3       employer groups using generally accepted actuarial practices.
  4           (e) No health benefit plan issued by a carrier may limit or exclude,
  5       by use of a rider or amendment applicable to a specific individual, cov-
  6       erage by type of illness, treatment, medical condition or accident, except
  7       for preexisting conditions as permitted under subsection (a).
  8           (f) In the absence of the small employer's decision to the contrary,
  9       all health benefit plans shall make coverage available to all the eligible
10       employees of a small employer without a waiting period. The decision of
11       whether to impose a waiting period for eligible employees of a small
12       employer shall be made by the small employer, who may only choose
13       from the waiting periods offered by the carrier. No waiting period shall
14       be greater than 90 days and shall permit coverage to become effective no
15       later than the first day of the month immediately following completion
16       of the waiting period.
17           (g) The benefit structure of any health benefit plan subject to this act
18       may be changed by the carrier to make it consistent with the benefit
19       structure contained in health benefit plans developed by the board for
20       marketing to new groups but this shall not preclude the development and
21       marketing of other health benefit plans to small employers.
22           (h) (1) Except as provided in subsection (f), requirements used by a
23       small employer carrier in determining whether to provide coverage to a
24       small employer, including requirements for minimum participation of el-
25       igible employees and minimum employer contributions, shall be applied
26       uniformly among all small employers with the same number of eligible
27       employees applying for coverage or receiving coverage from the small
28       employer carrier.
29           (2) A small employer carrier may vary application of minimum par-
30       ticipation requirements and minimum employer contribution require-
31       ments only by the size of the small employer group.
32           (3) (A) Except as provided in provision (B), in applying minimum
33       participation requirements with respect to a small employer, a small em-
34       ployer carrier shall not consider employees or dependents who have qual-
35       ifying existing coverage in a health benefit plan sponsored by another
36       employer in determining whether the applicable percentage of partici-
37       pation is met.
38           (B) With respect to a small employer, a small employer carrier may
39       consider employees or dependents who have coverage under another
40       health benefit plan sponsored by such small employer in applying mini-
41       mum participation requirements.
42           (i) For the purposes of this section, the term ``preexisting conditions
43       exclusion'' shall mean, with respect to coverage, a limitation or exclusion

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27

  1       of benefits relating to a condition based on the fact that the condition was
  2       present before the date of enrollment for such coverage whether or not
  3       any medical advice, diagnosis, care or treatment was recommended or
  4       received before such date.
  5           (j) For the purposes of this section, the term ``date of enrollment''
  6       means the date the individual is enrolled under the group policy or, if
  7       earlier, the first day of the waiting period for such enrollment.
  8           (k) For the purposes of this section, the term ``waiting period'' means
  9       with respect to a group policy the period which must pass before the
10       individual is eligible to be covered for benefits under the terms of the
11       policy.
12           Sec. 7. K.S.A. 40-2209g is hereby amended to read as follows: 40-
13       2209g. From and after January 1, 1993: (a) A small employer carrier may
14       establish a class of business only to reflect substantial differences in ex-
15       pected claims experience or administrative costs related to the following
16       reasons:
17           (1) The small employer carrier uses more than one type of system
18       for the marketing and sale of health benefit plans to small employers;
19           (2) the small employer carrier has acquired a class of business from
20       another small employer carrier; or
21           (3) the small employer carrier provides coverage to one or more as-
22       sociation groups that meet the requirements of subsection (A) (f)(5) of
23       K.S.A. 40-2209 and amendments thereto.
24           (b) A small employer carrier may establish up to nine separate classes
25       of business under subsection (a).
26           (c) The commissioner may adopt rules and regulations to provide for
27       a period of transition in order for a small employer carrier to come into
28       compliance with subsection (b) in the instance of acquisition of an addi-
29       tional class of business from another small employer carrier.
30           (d) The commissioner may approve the establishment of additional
31       classes of business upon application to the commissioner and a finding
32       by the commissioner that such action would enhance the efficiency and
33       fairness of the small employer marketplace.
34           Sec. 8. K.S.A. 40-2209m is hereby amended to read as follows: 40-
35       2209m. (a) Each small employer carrier shall actively market health ben-
36       efit plan coverage, including the basic and standard health benefit plans,
37       to eligible small employers in the state. If a small employer carrier denies
38       coverage not subject to this act to a small employer on the basis of the
39       health status or claims experience of the small employer or its employees
40       or dependents, the small employer carrier shall offer the small employer
41       the opportunity to purchase a basic health benefit plan and a standard
42       health benefit plan.
43           (b) (1) Except as provided in paragraph (2), no small employer car-

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  1       rier, agent or broker shall, directly or indirectly, engage in the following
  2       activities:
  3           (A) Encouraging or directing small employers to refrain from filing
  4       an application for coverage with the small employer carrier because of
  5       the health status, claims experience, industry, occupation or geographic
  6       location of the small employer;
  7           (B) encouraging or directing small employers to seek coverage from
  8       another carrier because of the health status, claims experience, industry,
  9       occupation or geographic location of the small employer.
10           (2) The provisions of paragraph (1) shall not apply with respect to
11       information provided by a small employer carrier or producer to a small
12       employer regarding the established geographic service area or a restricted
13       network provision of a small employer carrier.
14           (c) (1) Except as provided in paragraph (2), no small employer car-
15       rier shall, directly or indirectly, enter into any contract, agreement or
16       arrangement with an agent or broker that provides for or results in the
17       compensation paid to such person for the sale of a health benefit plan to
18       be varied because of the health status, claims experience, industry, oc-
19       cupation or geographic location of the small employer.
20           (2) Paragraph (1) shall not apply with respect to a compensation ar-
21       rangement that provides compensation to an agent or broker on the basis
22       of percentage of premium, provided that the percentage shall not vary
23       because of the health status, claims experience, industry, occupation or
24       geographic area of the small employer.
25           (d) A small employer carrier shall provide reasonable compensation
26       to licensed agents and brokers, if any, as provided under the plan of
27       operation of the program for the sale of a basic or standard health benefit
28       plan.
29           (e) No small employer carrier shall terminate, fail to renew or limit
30       its contract or agreement of representation with an agent or broker for
31       any reason related to the health status, claims experience, occupation, or
32       geographic location of the small employers placed by the agent or broker
33       with the small employer carrier.
34           (f) (e) No small employer carrier, agent or broker shall induce or
35       otherwise encourage a small employer to separate or otherwise exclude
36       an employee from health coverage or benefits provided in connection
37       with the employee's employment.
38           (g) (f) Denial by a small employer carrier of an application for cov-
39       erage from a small employer shall be in writing and shall state the reason
40       or reasons for the denial.
41           (h) (g) The commissioner may adopt rules and regulations setting
42       forth additional standards to provide for the fair marketing and broad
43       availability of health benefit plans to small employers in this state.

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29

  1           (i) (h) If a small employer carrier enters into a contract, agreement
  2       or other arrangement with a third-party administrator to provide admin-
  3       istrative, marketing or other services related to the offering of health
  4       benefit plans to small employers in this state, the third-party administrator
  5       shall be subject to this section as if it were a small employer carrier.
  6           (j) (i) The board shall make available a broadly publicized toll free
  7       telephone number for access by small employers to information concern-
  8       ing this act and the health benefit plans developed pursuant to K.S.A. 40-
  9       2209k 40-2209.
10           (k) (j) Except as provided in paragraph (l), for the purposes of this
11       act, carriers that are affiliated companies or that are eligible to file a
12       consolidated tax return shall be treated as one carrier and any restrictions
13       or limitations imposed by this act shall apply as if all health benefit plans
14       issued to small employers in this state by such affiliated carriers were
15       issued by one carrier.
16           (l) (k) An affiliated carrier that is a health maintenance organization
17       having a certificate of authority under K.S.A. 40-3201 et seq. and amend-
18       ments thereto, may be considered to be a separate carrier for the purpose
19       of this act.
20           Sec. 9. K.S.A. 1997 Supp. 40-2228 is hereby amended to read as
21       follows: 40-2228. (a) The commissioner may adopt reasonable rules and
22       regulations:
23           (1) To establish specific standards for policy provisions of long-term
24       care insurance policies. Such standards shall be in addition to and in
25       accordance with applicable laws of this state, and shall address terms of
26       renewability, initial and subsequent conditions of eligibility, nonduplica-
27       tion of coverage provisions, coverage of dependents, preexisting condi-
28       tions, termination of insurance, probationary periods, limitations, excep-
29       tions, reductions, elimination periods, requirements for replacement,
30       recurrent conditions and definitions of terms; and
31           (2) to specify prohibited policy provisions not otherwise specifically
32       authorized by statute which, in the opinion of the commissioner, are un-
33       just, unfair or unfairly discriminatory to any person insured under a long-
34       term care insurance policy.
35           (b) Rules and regulations adopted by the commissioner shall:
36           (1) Recognize the unique, developing and experimental nature of
37       long-term care insurance; and
38           (2) recognize the appropriate distinctions necessary between group
39       and individual long-term care insurance policies.
40           (c) The commissioner may adopt rules and regulations establishing
41       loss-ratio standards for long-term care insurance policies if a specific ref-
42       erence to long-term care insurance policies is contained in the rules and
43       regulations.

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  1           (d) No long-term care insurance policy may:
  2           (1) Be canceled, nonrenewed, or otherwise terminated solely on the
  3       grounds of the age or the deterioration of the mental or physical health
  4       of the insured individual or certificateholder; or
  5           (2) contain a provision establishing any new waiting period in the
  6       event existing coverage is converted to or replaced by a new or other form
  7       within the same company, except with respect to an increase in benefits
  8       voluntarily selected by the insured individual or group policyholder.
  9           (e) (1) No long-term insurance policy or certificate shall use a defi-
10       nition of preexisting condition which is more restrictive than the follow-
11       ing: ``Preexisting condition'' means a condition for which medical advice
12       or treatment was recommended by, or received from a provider of health
13       care services, within six months preceding the effective date of coverage
14       of an insured person.
15           (2) No long-term care insurance policy shall exclude coverage for a
16       loss or confinement which is the result of a preexisting condition unless
17       such loss or confinement begins within six months following the effective
18       date of coverage of an insured person.
19           (3) The commissioner may extend the limitation periods set forth in
20       subsections (e)(1) and (e)(2) above as to specific age group categories or
21       specific policy forms upon finding that the extension is not contrary to
22       the best interest of the public.
23           (4) The definition of preexisting condition shall not prohibit an in-
24       surer from using an application form designed to elicit the complete
25       health history of an applicant, and, on the basis of the answers on that
26       application, from underwriting in accordance with that insurer's estab-
27       lished underwriting standards.
28           (f) No long-term care insurance policy shall require prior institution-
29       alization as a condition precedent to the payment of benefits.
30           (g) In order to provide for fair disclosure in the sale of long-term care
31       insurance policies:
32           (1) An outline of coverage shall be delivered to an applicant for a
33       long-term care insurance policy at the time of application. In the case of
34       direct response solicitations, the insurer shall deliver the outline of cov-
35       erage upon the applicant's request, but regardless of request, shall make
36       such delivery no later than at the time of policy delivery. Such outline of
37       coverage shall include:
38           (A) A description of the principal benefits and coverage provided in
39       the policy;
40           (B) a statement of the principal exclusions, reductions and limitations
41       contained in the policy;
42           (C) a statement of the renewal provisions, including any reservation
43       in the policy of a right to change premiums; and

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  1           (D) a statement that the outline of coverage is a summary of the
  2       policy issued or applied for, and that the policy should be consulted to
  3       determine governing contractual provisions.
  4           (2) A certificate issued pursuant to a group long-term care insurance
  5       policy which policy is delivered or issued for delivery in this state shall
  6       include the information required by subsection (B) (g)(4) of K.S.A. 40-
  7       2209, and amendments thereto.
  8           (h) No policy shall be advertised, marketed or offered as long-term
  9       care insurance unless it complies with the provisions of this act.
10           Sec. 10. K.S.A. 40-2241 is hereby amended to read as follows: 40-
11       2241. (a) Any small employer health benefit plan organized for the pur-
12       poses described in K.S.A. 40-2240 and amendments thereto shall be au-
13       thorized to enter into contracts with carriers for the health care insurance
14       described in K.S.A. 40-2244 and 40-2245, and amendments thereto, or
15       health care providers for services on behalf of its member employees. A
16       small employer health benefit plan may contract with more than one
17       carrier to provide insurance.
18           (b) Where appropriate, the small employer health benefit plan shall
19       provide options under which eligible employees may arrange coverage
20       for their family members. Options for additional coverage for employees
21       and their family members at an additional cost or premium may be pro-
22       vided.
23           (c) The small employer health benefit plan and any carrier may con-
24       tract for coverage within the scope of this act notwithstanding any man-
25       dated coverages otherwise required by state law. The provisions of K.S.A.
26       40-2,100 to 40-2,105, inclusive, 40-2,114 and subsection (D) (i) of 40-
27       2209 and K.S.A. 40-2229 and 40-2230, and amendments thereto, shall
28       not be mandatory with respect to any health benefit plan under this act.
29           (d) The small employer health benefit plan may impose a maximum
30       aggregate amount on the benefits available to any covered employee or
31       dependents from the health benefit plan provided under this act.
32           (e) The provisions of K.S.A. 40-2209 and 40-2215 and amendments
33       thereto shall apply to all contracts issued under this section or the act of
34       which this section is a part and to health benefit plans as defined in K.S.A.
35       40-2239 and amendments thereto, and the provisions of such sections
36       shall apply to small employer health benefit plans.
37           Sec. 11. K.S.A. 1997 Supp. 40-3209 is hereby amended to read as
38       follows: 40-3209. (a) All forms of group and individual certificates of cov-
39       erage and contracts issued by the organization to enrollees or other mar-
40       keting documents purporting to describe the organization's health care
41       services shall contain as a minimum:
42           (1) A complete description of the health care services and other ben-
43       efits to which the enrollee is entitled;

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  1           (2) the locations of all facilities, the hours of operation and the serv-
  2       ices which are provided in each facility in the case of individual practice
  3       associations or medical staff and group practices, and, in all other cases,
  4       a list of providers by specialty with a list of addresses and telephone
  5       numbers;
  6           (3) the financial responsibilities of the enrollee and the amount of
  7       any deductible, copayment or coinsurance required;
  8           (4) all exclusions and limitations on services or any other benefits to
  9       be provided including any deductible or copayment feature and all re-
10       strictions relating to pre-existing conditions;
11           (5) all criteria by which an enrollee may be disenrolled or denied
12       reenrollment;
13           (6) service priorities in case of epidemic, or other emergency condi-
14       tions affecting demand for medical services;
15           (7) a provision that an enrollee or a covered dependent of an enrollee
16       whose coverage under a health maintenance organization group contract
17       has been terminated for any reason but who remains in the service area
18       and who has been continuously covered by the health maintenance or-
19       ganization for at least three months shall be entitled to obtain a converted
20       contract or have such coverage continued under the group contract for a
21       period of six months following which such enrollee or dependent shall be
22       entitled to obtain a converted contract in accordance with the provisions
23       of this section. The converted contract shall provide coverage at least
24       equal to the conversion coverage options generally available from insurers
25       or mutual nonprofit hospital and medical service corporations in the serv-
26       ice area at the applicable premium cost. The group enrollee or enrollees
27       shall be solely responsible for paying the premiums for the alternative
28       coverage. The frequency of premium payment shall be the frequency
29       customarily required by the health maintenance organization, mutual
30       nonprofit hospital and medical service corporation or insurer for the pol-
31       icy form and plan selected, except that the insurer, mutual nonprofit
32       hospital and medical service corporation or health maintenance organi-
33       zation shall require premium payments at least quarterly. The coverage
34       shall be available to all enrollees of any group without medical under-
35       writing. The requirement imposed by this subsection shall not apply to a
36       contract which provides benefits for specific diseases or for accidental
37       injuries only, nor shall it apply to any employee or member or such em-
38       ployee's or member's covered dependents when:
39           (A) Such person was terminated for cause as permitted by the group
40       contract approved by the commissioner;
41           (B) any discontinued group coverage was replaced by similar group
42       coverage within 31 days; or
43           (C) the employee or member is or could be covered by any other

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  1       insured or noninsured arrangement which provides expense incurred hos-
  2       pital, surgical or medical coverage and benefits for individuals in a group
  3       under which the person was not covered prior to such termination. Writ-
  4       ten application for the converted contract shall be made and the first
  5       premium paid not later than 31 days after termination of the group cov-
  6       erage or receipt of notice of conversion rights from the health mainte-
  7       nance organization, whichever is later, and shall become effective the day
  8       following the termination of coverage under the group contract. The
  9       health maintenance organization shall give the employee or member and
10       such employee's or member's covered dependents reasonable notice of
11       the right to convert at least once within 30 days of termination of coverage
12       under the group contract. The group contract and certificates may include
13       provisions necessary to identify or obtain identification of persons and
14       notification of events that would activate the notice requirements and
15       conversion rights created by this section but such requirements and rights
16       shall not be invalidated by failure of persons other than the employee or
17       member entitled to conversion to comply with any such provisions. In
18       addition, the converted contract shall be subject to the provisions con-
19       tained in paragraphs (2), (4), (5), (6), (7), (8), (9), (12), (13), (14), (15),
20       (16) and, (17) (18) and (19) of subsection (I) (j) of K.S.A. 40-2209, and
21       amendments thereto;
22           (8) (A) group contracts shall contain a provision extending payment
23       of such benefits until discharged or for a period not less than 31 days
24       following the expiration date of the contract, whichever is earlier, for
25       covered enrollees and dependents confined in a hospital on the date of
26       termination;
27           (B) a provision that coverage under any subsequent replacement con-
28       tract that is intended to afford continuous coverage will commence im-
29       mediately following expiration of any prior contract with respect to cov-
30       ered services not provided pursuant to subparagraph (8)(A); and
31           (9) an individual contract shall provide for a 10-day period for the
32       enrollee to examine and return the contract and have the premium re-
33       funded, but if services were received by the enrollee during the 10-day
34       period, and the enrollee returns the contract to receive a refund of the
35       premium paid, the enrollee must pay for such services.
36           (b) No health maintenance organization authorized under this act
37       shall contract with any provider under provisions which require enrollees
38       to guarantee payment, other than copayments and deductibles, to such
39       provider in the event of nonpayment by the health maintenance organi-
40       zation for any services which have been performed under contracts be-
41       tween such enrollees and the health maintenance organization. Further,
42       any contract between a health maintenance organization and a provider
43       shall provide that if the health maintenance organization fails to pay for

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  1       covered health care services as set forth in the contract between the
  2       health maintenance organization and its enrollee, the enrollee or covered
  3       dependents shall not be liable to any provider for any amounts owed by
  4       the health maintenance organization. If there is no written contract be-
  5       tween the health maintenance organization and the provider or if the
  6       written contract fails to include the above provision, the enrollee and
  7       dependents are not liable to any provider for any amounts owed by the
  8       health maintenance organization.
  9           (c) No group or individual certificate of coverage or contract form or
10       amendment to an approved certificate of coverage or contract form shall
11       be issued unless it is filed with the commissioner. Such contract form or
12       amendment shall become effective within 30 days of such filing unless
13       the commissioner finds that such contract form or amendment does not
14       comply with the requirements of this section.
15           (d) Every contract shall include a clear and understandable descrip-
16       tion of the health maintenance organization's method for resolving en-
17       rollee grievances.
18           (e) The provisions of subsections (A), (B), (C), (D) and (E) of K.S.A.
19       40-2209 and 40-2215 and amendments thereto shall apply to all contracts
20       issued under this section, and the provisions of such sections shall apply
21       to health maintenance organizations.
22           Sec. 12. K.S.A. 40-19c06, 40-2209g, 40-2209k, 40-22091, 40-2209m,
23       and 40-2241 and K.S.A. 1997 Supp. 40-2122, 40-2209, 40-2209d, 40-
24       2209e, 40-2209f, 40-2228 and 40-3209 are hereby repealed.
25           Sec. 13. This act shall take effect and be in force from and after its
26       publication in the statute book.
27