HOUSE BILL No. 2799

      An Act concerning workers compensation; relating to optional deductible; amending K.S.A.
      44-513a and K.S.A. 1997 Supp. 44-510, 44-534, 44-556, 44-559, 44-5,117, 44-5,120 and
      44-5,125 and repealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

    Section 1. K.S.A. 1997 Supp. 44-510 is hereby amended to read as
follows: 44-510. Except as otherwise provided therein, medical compen-
sation under the workers compensation act shall be as follows:

    (a) It shall be the duty of the employer to provide the services of a
health care provider, and such medical, surgical and hospital treatment,
including nursing, medicines, medical and surgical supplies, ambulance,
crutches, and apparatus, and transportation to and from the home of the
injured employee to a place outside the community in which such em-
ployee resides, and within such community if the director in the director's
discretion so orders, including transportation expenses computed in ac-
cordance with subsection (a) of K.S.A. 44-515 and amendments thereto,
as may be reasonably necessary to cure and relieve the employee from
the effects of the injury.

    (1) The director shall appoint, subject to the approval of the secretary,
a specialist in health services delivery, who shall be referred to as the
medical administrator. The medical administrator shall be a person li-
censed to practice medicine and surgery in this state and shall be in the
unclassified service under the Kansas civil service act. The medical ad-
ministrator, subject to the direction of the director, shall have the duty
of overseeing the providing of health care services to employees in ac-
cordance with the provisions of the workers compensation act, including
but not limited to:

    (A) Preparing, with the assistance of the advisory panel, the fee
schedule for health care services as set forth in this section;

    (B) developing, with the assistance of the advisory panel, the utili-
zation review program for health care services as set forth in this section;

    (C) developing procedures for appeals and review of disputed
charges or services rendered by health care providers under this section;

    (D) developing a system for collecting and analyzing data on expend-
itures for health care services by each type of provider under the workers
compensation act; and

    (E) carrying out such other duties as may be delegated or directed
by the director or secretary.

    (2) The director shall prepare and adopt rules and regulations, which
establish a schedule of maximum fees for medical, surgical, hospital, den-
tal, nursing, vocational rehabilitation or any other treatment or services
provided or ordered by health care providers and rendered to employees
under the workers compensation act. The schedule shall include provi-
sions and review procedures for exceptional cases involving extraordinary
medical procedures or circumstances and shall include costs and charges
for medical records and testimony.

    (3) The schedule of maximum fees shall be reasonable, shall promote
health care cost containment and efficiency with respect to the workers
compensation health care delivery system, and shall be sufficient to en-
sure availability of such reasonably necessary treatment, care and attend-
ance to each injured employee to cure and relieve the employee from
the effects of the injury.

    (4) (A) In every case, all fees, transportation costs, charges under this
section and all costs and charges for medical records and testimony shall
be subject to approval by the director and shall be limited to such as are
fair, reasonable and necessary. The schedule of maximum fees shall be
revised as necessary at least every two years by the director to assure that
the schedule is current, reasonable and fair.

    (B) There is hereby created an advisory panel to assist the director
in establishing a schedule of maximum fees as required by this section.
The panel shall consist of the commissioner of insurance and seven mem-
bers appointed as follows: (i) One person shall be appointed by the Kansas
medical society, (ii) one member shall be appointed by the Kansas asso-
ciation of osteopathic medicine, (iii) one member shall be appointed by
the Kansas hospital association, (iv) one member shall be appointed by
the Kansas chiropractic association, and (v) three members appointed by
the secretary. One member appointed by the secretary shall be a repre-
sentative of employers recommended to the secretary by the Kansas
chamber of commerce and industry. One member appointed by the sec-
retary shall be a representative of employees recommended to the sec-
retary by the Kansas AFL-CIO. One member appointed by the secretary
shall be a representative of entities providing vocational rehabilitation
services pursuant to K.S.A. 44-510g and amendments thereto. Each ap-
pointed member shall be appointed for a term of office of two years which
shall commence on July 1 of the year of appointment.

    (C) All fees and other charges paid for such treatment, care and at-
tendance, including treatment, care and attendance provided by any
health care provider, hospital or other entity providing health care serv-
ices, shall not exceed the amounts prescribed by the schedule of maxi-
mum fees established under this section or the amounts authorized pur-
suant to the provisions and review procedures prescribed by the schedule
for exceptional cases. A health care provider, hospital or other entity pro-
viding health care services shall be paid either such health care provider,
hospital or other entity's usual charge for the treatment, care and attend-
ance or the maximum fees as set forth in the schedule, whichever is less.
In reviewing and approving the schedule of maximum fees, the director
shall consider the following:

    (i) The levels of fees for similar treatment, care and attendance im-
posed by other health care programs or third-party payors in the locality
in which such treatment or services are rendered;

    (ii) the impact upon cost to employers for providing a level of fees
for treatment, care and attendance which will ensure the availability of
treatment, care and attendance required for injured employees;

    (iii) the potential change in workers compensation insurance premi-
ums or costs attributable to the level of treatment, care and attendance
provided; and

    (iv) the financial impact of the schedule of maximum fees upon health
care providers and health care facilities and its effect upon their ability
to make available to employees such reasonably necessary treatment, care
and attendance to each injured employee to cure and relieve the em-
ployee from the effects of the injury.

    (D) Members of the advisory panel attending meetings of the advi-
sory panel, or attending a subcommittee of the advisory panel authorized
by the advisory panel, shall be paid subsistence allowances, mileage and
other expenses as provided in K.S.A. 75-3223 and amendments thereto.

    (5) Any contract or any billing or charge which any health care pro-
vider, vocational rehabilitation service provider, hospital, person, or in-
stitution enters into with or makes to any patient for services rendered in
connection with injuries covered by the workers compensation act or the
fee schedule adopted under this section, which is or may be in excess of
or not in accordance with such act or fee schedule, is unlawful, void and
unenforceable as a debt.

    (6) The director shall have jurisdiction to hear and determine all dis-
putes as to such charges and interest due thereon and shall prescribe
procedural rules to be followed by the parties to such disputes. In the
event of any controversy arising under this section, payments shall not be
delayed for any amounts not in dispute or controversy. Acceptance by
any provider of services of a payment amount under this section which is
less than the full amount charged for the services, shall not affect the
right to have a review of the claim for the outstanding or remaining
amounts. In the event of a dispute as to such charges, the health care
provider, hospital, institution, person or other provider under this section
may appear and be represented in the action under the workers com-
pensation act.

    (7) If the director finds, after utilization review and peer review, that
a provider or facility has made excessive charges or provided or ordered
unjustified treatment, services, hospitalization or visits, the provider or
facility shall not receive payment pursuant to this section from an insur-
ance carrier, employer or employee for the excessive fees or unjustified
treatment, services, hospitalization or visits and such provider or facility
shall repay any fees or charges collected therefor.

    (8) Not later than December 31, 1993, the director shall develop and
implement, or contract with a qualified entity to develop and implement,
utilization review and peer review procedures relating to the services
rendered by providers and facilities, which services are paid for in whole
or in part pursuant to the workers compensation act. The director may
contract with one or more private foundations or organizations to provide
utilization review, as appropriate, of entities providing health care services
or vocational rehabilitation services, or both, pursuant to the workers
compensation act.

    (9) By accepting payment pursuant to this section for treatment or
services rendered to an injured employee, a health care provider or health
care facility shall be deemed to consent to submitting all necessary records
to substantiate the nature and necessity of the service or charge and other
information concerning such treatment to utilization review and peer re-
view under this section. Such health care provider shall comply with any
decision of the director pursuant to subsection (a)(10).

    (10) If it is determined by a peer utilization review committee that a
provider improperly overutilized or otherwise rendered or ordered un-
justified treatment or services or that the fees for such treatment or serv-
ices were excessive, the director may order the provider to show cause
why the provider should not be required to repay the amount which was
paid for rendering or ordering such treatment or services and shall pro-
vide the provider a hearing thereon if requested. If a hearing is not re-
quested within 30 days of receipt of the order and the director decides
to proceed with the matter, a hearing shall be conducted and if a prima
facie case is established a final order shall be issued by the director. If
the final order is adverse to a health care provider, the director shall
provide a report to the licensing board of the health care provider with
full documentation of any such determination, except that no such report
shall be provided until after judicial review if the order is appealed. Any
order of the director under this section shall be subject to review by the
board.

    (11) Except as provided by K.S.A. 60-437 and amendments thereto
or this section, all reports, information, statements, memoranda, pro-
ceedings, findings and records which relate to utilization review or peer
review conducted pursuant to this section, including any records of peer
review committees, shall be privileged and shall not be subject to discov-
ery, subpoena, or other means of legal compulsion for release to any
person or entity and shall not be admissible in evidence in any judicial or
administrative proceeding, except those proceedings authorized pursuant
to this section. In any proceedings where there is an application by an
employee, employer, insurance carrier or workers compensation fund for
a hearing pursuant to K.S.A. 44-534a, and amendments thereto, for a
change of medical benefits which has been filed after a health care pro-
vider, employer, insurance carrier or the workers compensation fund has
made application to the medical services section of the division for the
resolution of a dispute or matter pursuant to the provisions of K.S.A.
44-510, and amendments thereto, all reports, information, statements,
memoranda, proceedings, findings and records which relate to utilization
review including the records of contract reviewers, records of utilization
review committees and findings and records of the medical services section
of the division shall be admissible at the hearing before the administrative
law judge on the issue of the medical benefits to which an employee is
entitled.

    (12) A provider or facility may not improperly charge or overcharge
a workers compensation insurer or charge for services which were not
provided, for the purpose of obtaining additional payment.

    (13) Any violation of the provisions of this section which is willful or
which demonstrates a pattern of improperly charging or overcharging
workers compensation insurers constitutes grounds for the director to
impose a civil fine not to exceed $5,000. Any civil fine imposed under
this section shall be subject to review in accordance with the act for
judicial review and civil enforcement of agency actions in the district court
for Shawnee county. All moneys received for civil fines imposed under
this section shall be deposited in the state treasury to the credit of the
workers compensation fund.

    (14) As used in this subsection (a), unless the context or the specific
provisions require otherwise, ``provider'' means any health care provider
or vocational rehabilitation service provider, and ``facility'' means any fa-
cility providing health care services or vocational rehabilitation services,
or both, including any hospital.

    (b) Any health care provider, nurse, physical therapist, any entity pro-
viding medical, physical or vocational rehabilitation services or providing
reeducation or training pursuant to K.S.A. 44-510g and amendments
thereto, medical supply establishment, surgical supply establishment, am-
bulance service or hospital who accept the terms of the workers compen-
sation act by providing services or material thereunder shall be bound by
the fees approved by the director and no injured employee or dependent
of a deceased employee shall be liable for any charges above the amounts
approved by the director. If the employer has knowledge of the injury
and refuses or neglects to reasonably provide the services of a health care
provider required by this section, the employee may provide the same
for such employee, and the employer shall be liable for such expenses
subject to the regulations adopted by the director. No action shall be filed
in any court by a health care provider or other provider of services under
this section for the payment of an amount for medical services or materials
provided under the workers compensation act and no other action to
obtain or attempt to obtain or collect such payment shall be taken by a
health care provider or other provider of services under this section, in-
cluding employing any collection service, until after final adjudication of
any claim for compensation for which an application for hearing is filed
with the director under K.S.A. 44-534 and amendments thereto. In the
case of any such action filed in a court prior to the date an application is
filed under K.S.A. 44-534 and amendments thereto, no judgment may be
entered in any such cause and the action shall be stayed until after the
final adjudication of the claim. In the case of an action stayed hereunder,
any award of compensation shall require any amounts payable for medical
services or materials to be paid directly to the provider thereof plus an
amount of interest at the rate provided by statute for judgments. No
period of time under any statute of limitation, which applies to a cause
of action barred under this subsection, shall commence or continue to
run until final adjudication of the claim under the workers compensation
act.

    (c) (1) If the director finds, upon application of an injured employee,
that the services of the health care provider furnished as provided in
subsection (a) and rendered on behalf of the injured employee are not
satisfactory, the director may authorize the appointment of some other
health care provider. In any such case, the employer shall submit the
names of three health care providers that are not associated in practice
together. The injured employee may select one from the list who shall
be the authorized treating health care provider. If the injured employee
is unable to obtain satisfactory services from any of the health care pro-
viders submitted by the employer under this subsection (c)(1), either
party or both parties may request the director to select a treating health
care provider.

    (2) Without application or approval, an employee may consult a
health care provider of the employee's choice for the purpose of exami-
nation, diagnosis or treatment, but the employer shall only be liable for
the fees and charges of such health care provider up to a total amount of
$500. The amount allowed for such examination, diagnosis or treatment
shall not be used to obtain a functional impairment rating. Any medical
opinion obtained in violation of this prohibition shall not be admissible
in any claim proceedings under the workers compensation act.

    (d) An injured employee whose injury or disability has been estab-
lished under the workers compensation act may rely, if done in good faith,
solely or partially on treatment by prayer or spiritual means in accordance
with the tenets of practice of a church or religious denomination without
suffering a loss of benefits subject to the following conditions:

    (1) The employer or the employer's insurance carrier agrees thereto
in writing either before or after the injury;

    (2) the employee submits to all physical examinations required by the
workers compensation act;

    (3) the cost of such treatment shall be paid by the employee unless
the employer or insurance carrier agrees to make such payment;

    (4) the injured employee shall be entitled only to benefits that would
reasonably have been expected had such employee undergone medical
or surgical treatment; and

    (5) the employer or insurance carrier that made an agreement under
paragraph (1) or (3) of this subsection may withdraw from the agreement
on 10 days' written notice.

    (e) In any employment to which the workers compensation act ap-
plies, the employer shall be liable to each employee who is employed as
a duly authorized law enforcement officer, ambulance attendant, mobile
intensive care technician or firefighter, including any person who is serv-
ing on a volunteer basis in such capacity, for all reasonable and necessary
preventive medical care and treatment for hepatitis to which such em-
ployee is exposed under circumstances arising out of and in the course
of employment.

    (f) No person shall be subject to civil liability for libel, slander or any
other relevant tort cause of action by virtue of performing utilization
review or peer review under contract with the director pursuant to sub-
section (a)(7).

    Sec. 2. K.S.A. 44-513a is hereby amended to read as follows: 44-
513a. (a) Whenever a minor person shall be entitled to compensation
under the provisions of the workmen's workers compensation act, in an
amount not to exceed two thousand dollars ($2,000), the director admin-
istrative law judge is authorized to direct such compensation to be paid
to the natural guardian of such minor person, or to the minor himself,
provided that if a conservator shall have been appointed for such minor
person the payment shall be directed to such conservator. Before ordering
such a payment, the director shall inquire into the advisability thereof,
and if he finds that there is no manifest disadvantage to the minor person
therefrom, he shall order such payment to be made to the natural guard-
ian, or to the minor himself in accordance with K.S.A. 59-3001 et seq.,
and amendments thereto.

    (b) In the event the director is of the opinion that payment of such
compensation should not be made to the natural guardian, or to such
minor, he shall direct to whom payment shall be made. The payment of
compensation pursuant to an order or directive made by the director
under authority of the workmen's compensation act shall exclude and
satisfy all other claims and causes of action of such minor person for the
injury or death for which the compensation award is made.

    Sec. 3. K.S.A. 1997 Supp. 44-534 is hereby amended to read as fol-
lows: 44-534. (a) Whenever the employer, worker, Kansas workers com-
pensation fund or insurance carrier cannot agree upon the worker's right
to compensation under the workers compensation act or upon any issue
in regard to workers compensation benefits due the injured worker there-
under, the employer, worker, Kansas worker's compensation fund or in-
surance carrier may apply in writing to the director for a determination
of the benefits or compensation due or claimed to be due. The application
shall be in the form prescribed by the rules and regulations of the director
and shall set forth the substantial and material facts in relation to the
claim. Whenever an application is filed under this section, the matter
shall be assigned to an administrative law judge. The director shall forth-
with mail a certified copy of the application to the adverse party. The
administrative law judge shall proceed, upon due and reasonable notice
to the parties, which shall not be less than 20 days, to hear all evidence
in relation thereto and to make findings concerning the amount of com-
pensation, if any due to the worker.

    (b) No proceeding for compensation shall be maintained under the
workers compensation act unless an application for a hearing is on file in
the office of the director within three years of the date of the accident or
within two years of the date of the last payment of compensation, which-
ever is later.

    Sec. 4. K.S.A. 1997 Supp. 44-556 is hereby amended to read as fol-
lows: 44-556. (a) Any action of the board pursuant to the workers com-
pensation act, other than the disposition of appeals of preliminary orders
or awards under K.S.A. 44-534a and amendments thereto, shall be subject
to review in accordance with the act for judicial review and civil enforce-
ment of agency actions by appeal directly to the court of appeals. Any
party may appeal from a final order of the board by filing an appeal with
the court of appeals within 30 days of the date of the final order. Such
review shall be upon questions of law.

    (b) Commencement of an action for review by the court of appeals
shall not stay the payment of compensation due for the ten-week period
next preceding the board's decision and for the period of time after the
board's decision and prior to the decision of the court of appeals on
review.

    (c) If review is sought on any order entered under the workers com-
pensation act prior to October 1, 1993, such review shall be in accordance
with the provisions of K.S.A. 44-551 and this section, and any other ap-
plicable procedural provisions of the workers compensation act, as all such
provisions existed prior to amendment by this act on July 1, 1993.

    (d) (1) If compensation, including medical benefits, temporary total
disability benefits or vocational rehabilitation benefits, has been paid to
the worker by the employer or the employer's insurance carrier during
the pendency of review under this section and the amount of compen-
sation awarded by the board is reduced or totally disallowed by the de-
cision on the appeal or review, the employer and the employer's insurance
carrier, except as otherwise provided in this section, shall be reimbursed
from the workers compensation fund established in K.S.A. 44-566a and
amendments thereto for all amounts of compensation so paid which are
in excess of the amount of compensation that the worker is entitled to as
determined by the final decision on review. The director shall determine
the amount of compensation paid by the employer or insurance carrier
which is to be reimbursed under this subsection (d)(1), and the director
shall certify to the commissioner of insurance the amount so determined.
Upon receipt of such certification, the commissioner of insurance shall
cause payment to be made to the employer or the employer's insurance
carrier in accordance therewith.

    (2) If any temporary or permanent partial disability or temporary or
permanent total disability benefits have been paid to the worker by the
employer or the employer's insurance carrier during the pendency of
review under this section and the amount of compensation awarded for
such benefits by the board is reduced by the decision on the appeal or
review and the balance of compensation due the worker exceeds the
amount of such reduction, the employer and the employer's insurance
carrier shall receive a credit which shall be applied as provided in this
subsection (d)(2) for all amounts of such benefits which are in excess of
the amount of such benefits that the worker is entitled to as determined
by the final decision on review or appeal. If a lump-sum amount of com-
pensation is due and owing as a result of the decision of the court of
appeals, the credit under this subsection (d)(2) shall be applied first
against such lump-sum amount. If there is no such lump-sum amount or
if there is any remaining credit after a credit has been applied to a lump-
sum amount due and owing, such credit shall be applied against the last
compensation payments which are payable for a period of time after the
final decision on review or appeal so that the worker continues to receive
compensation payments after such final decision until no further com-
pensation is payable after the credit has been satisfied. The credit allowed
under this subsection (d)(2) shall not be applied so as to stop or reduce
benefit payments after such final decision, but shall be used to reduce
the period of time over which benefit payments are payable after such
final decision. The provisions of this subsection (d)(2) shall be applicable
in all cases under the workers compensation act in which a final award is
issued by an administrative law judge on or after July 1, 1990.

    (e) If compensation, including medical benefits, temporary total dis-
ability benefits or vocational rehabilitation benefits, has been paid to the
worker by the employer, the employer's insurance carrier or the workers
compensation fund during the pendency of review under this section,
and pursuant to K.S.A. 44-534a or K.S.A. 44-551, and amendments
thereto, and the employer, the employer's insurance carrier or the work-
ers compensation fund, which was held liable for and ordered to pay all
or part of the amount of compensation awarded by the administrative
law judge or board, is held not liable by the final decision on the appeal
or review by either the board or an appellate court for the compensation
paid or is held liable on such appeal or review to pay an amount of com-
pensation which is less than the amount paid pursuant to the award, then
the employer, employer's insurance carrier or workers compensation fund
shall be reimbursed by the party or parties which were held liable on such
appeal or review to pay the amount of compensation to the worker that
was erroneously ordered paid. The director shall determine the amount
of compensation which is to be reimbursed to each party under this sub-
section, if any, in accordance with the final decision on the appeal or
review and shall certify each such amount to be reimbursed to the party
required to pay the amount or amounts of such reimbursement. Upon
receipt of such certification, the party required to make the reimburse-
ment shall pay the amount or amounts required to be paid in accordance
with such certification. No worker shall be required to make reimburse-
ment under this subsection or subsection (d).

    (f) As used in subsections (d) and (e), ``employers' insurance carrier''
includes any qualified group-funded workers compensation pool under
K.S.A. 44-581 through 44-591 and amendments thereto or a group-
funded pool under the Kansas municipal group-funded pool act which
includes workers compensation and employers' liability under the workers
compensation act.

    (g) In any case in which any review is sought under this section and
in which the compensability is not an issue to be decided on review,
medical compensation shall be payable and shall not be stayed pending
such review. The worker may proceed under K.S.A. 44-534a and amend-
ments thereto and may have a hearing in accordance with that statute to
enforce the provisions of this subsection.

    Sec. 5. K.S.A. 1997 Supp. 44-559a is hereby amended to read as
follows: 44-559a. (a) Each insurer issuing a policy to assure the payment
of compensation under the workers compensation act may offer, as a part
of the policy or as an optional endorsement to the policy, deductibles
optional to the policyholder for benefits, which may include allocated loss
adjustment expenses, payable under the workers compensation act.

    (b) The insurer shall pay all or part of the deductible amount, which-
ever is applicable to a compensable claim, to the person or medical pro-
vider entitled to the benefits conferred by the workers compensation act
and seek reimbursement from the insured employer for the applicable
deductible amount. The payment or nonpayment of deductible amounts
by the insured employer to the insurer shall be treated under the policy
insuring the liability for workers compensation in the same manner as
payment or nonpayment of premiums. The insurer may require adequate
security to provide for reimbursement of the paid deductible from the
insured. An employer's failure to reimburse deductible amounts to the
insurer shall not cause the deductible amount to be paid from the workers
compensation fund under K.S.A. 44-532a and amendments thereto or
any other statute. The insurer shall have the right to offset unpaid de-
ductible amounts against unearned premium, if any, in the event of can-
cellation.

    (c) Such deductible shall provide premium credits as approved by the
commissioner of insurance, and losses paid by the employer under the
deductible shall not apply in calculating the employer's experience mod-
ification.

    (d) The commissioner of insurance shall not approve any policy form
that permits, directly or indirectly, any part of the deductible to be
charged to or be passed on to the worker.

    (e) The deductible amounts paid by an employer shall be subject to
reimbursement as provided for under K.S.A. 44-567 and amendments
thereto when applicable. All compensation benefits paid by the insurer
including the deductible amounts shall be subject to assessments under
K.S.A. 44-566a and 74-713 and amendments thereto. The Kansas workers
compensation plan under K.S.A. 40-2109 and amendments thereto shall
not require deductibles under policies issued by the plan.

    (f) Group-funded worker compensation pools as defined in K.S.A.
44-581, and amendments thereto, and municipal group-funded pools as
defined in K.S.A. 12-2616, and amendments thereto, may offer deduc-
tibles as defined herein using deductible rules and premium credits as
promulgated by the national council on compensation insurance and ap-
proved by the commissioner.

    (g) The provisions of this section shall be effective on or after July 1,
1991.

    Sec. 6. K.S.A. 1997 Supp. 44-5,117 is hereby amended to read as
follows: 44-5,117. (a) Upon the request of any party to a workers com-
pensation claim and the acceptance of the other party, the director of
workers compensation shall schedule the parties for a mediation confer-
ence. The purpose of the mediation shall be to assist the parties in reach-
ing agreement on any disputed issues in a workers compensation claim.
If the director is advised that one party does not wish to participate in
the mediation, the director is authorized to encourage that party to par-
ticipate.

    (b) Mediation conferences shall be conducted by mediators ap-
pointed by the director. Such mediators shall be qualified as mediators
pursuant to the dispute resolution act, K.S.A. 5-501 et seq., and amend-
ments thereto, and any relevant rules of the Kansas supreme court as
authorized pursuant to K.S.A. 5-510, and amendments thereto.

    (c) Persons with final settlement authority for each party shall be
present, in person or by video conference, at the mediation conference.

    (d) All mediation conferences shall be conducted by a mediator in
accordance with the dispute resolution act, K.S.A. 5-501, and amend-
ments thereto.

    (e) The director shall widely disseminate information about the me-
diation conference procedure.

    Sec. 7. K.S.A. 1997 Supp. 44-5,120 is hereby amended to read as
follows: 44-5,120. (a) The director of workers compensation is hereby
authorized and directed to establish a system for monitoring, reporting
and investigating suspected fraud or abuse by any persons who are not
licensed or regulated by the commissioner of insurance in connection
with securing the liability of an employer under the workers compensa-
tion act or in connection with claims or benefits thereunder. The com-
missioner of insurance is hereby authorized and directed to establish a
system for monitoring, reporting and investigating suspected fraud or
abuse by any persons who are licensed or regulated by the commissioner
of insurance in connection with securing the liability of an employer un-
der the workers compensation act or in connection with claims there-
under.

    (b) This section applies to:

    (1) Persons claiming benefits under the workers compensation act;

    (2) employers subject to the requirements of the workers compen-
sation act;

    (3) insurance companies including group-funded self-insurance plans
covering Kansas employers and employees;

    (4) any person, corporation, business, health care facility that is or-
ganized either for profit or not-for-profit and that renders medical care,
treatment or services in accordance with the provisions of the workers
compensation act to an injured employee who is covered thereunder; and

    (5) attorneys and other representatives of employers, employees, in-
surers or other entities that are subject to the workers compensation act.

    (c) The commissioner of insurance may examine the workers com-
pensation records of insurance companies or self-insurers as necessary to
ensure compliance with the workers compensation act. Each insurance
company providing workers compensation insurance in Kansas, the com-
pany's agents, and those entities that the company has contracted to pro-
vide review services or to monitor services and practices under the work-
ers compensation act shall cooperate with the commissioner of insurance,
and shall make available to the commissioner any records or other nec-
essary information requested by the commissioner. The commissioner of
insurance shall conduct an examination authorized by this subsection in
accordance with the provisions of K.S.A. 40-222 and 40-223 and amend-
ments thereto.

    (d) Fraudulent or abusive acts or practices for purposes of the work-
ers compensation act include, but are not limited to, willfully, knowingly
or intentionally:

    (1) Collecting from an employee, through a deduction from wages or
a subsequent fee, any premium or other fee paid by the employer to
obtain workers compensation insurance coverage;

    (2) misrepresenting to an insurance company or the insurance de-
partment, the classification of employees of an employer, or the location,
number of employees, or true identity of the employer with the intent to
lessen or reduce the premium otherwise chargeable for workers com-
pensation insurance coverage;

    (3) lending money to the claimant during the pendency of the work-
ers compensation claim by an attorney representing the claimant, but this
provision shall not prohibit the attorney from assisting the claimant in
obtaining financial assistance from another source, except that (A) the
attorney shall not have a financial interest, directly or indirectly, in the
source from which the loan or other financial assistance is secured and
(B) the attorney shall not be personally liable in any way for the credit
extended to the claimant;

    (4) obtaining, denying or attempting to obtain or deny payments of
workers compensation benefits for any person by:

    (A) Making a false or misleading statement;

    (B) misrepresenting or concealing a material fact;

    (C) fabricating, altering, concealing or destroying a document; or

    (D) conspiring to commit an act specified by clauses (A), (B) or (C)
of this subsection (d)(4);

    (5) bringing, prosecuting or defending an action for compensation
under the workers compensation act or requesting initiation of an ad-
ministrative violation proceeding that, in either case, has no basis in fact
or is not warranted by existing law or a good faith argument for the ex-
tension, modification or reversal of existing law;

    (6) breaching a provision of an agreement approved by the director;

    (7) withholding amounts not authorized by the director from the em-
ployee's or legal beneficiary's weekly compensation payment or from ad-
vances from any such payment;

    (8) entering into a settlement or agreement without the knowledge
and consent of the employee or legal beneficiary;

    (9) taking a fee or withholding expenses in excess of the amounts
authorized by the director;

    (10) refusing or failing to make prompt delivery to the employee or
legal beneficiary of funds belonging to the employee or legal beneficiary
as a result of a settlement, agreement, order or award;

    (11) misrepresenting the provisions of the workers compensation act
to an employee, an employer, a health care provider or a legal beneficiary;

    (12) instructing employers not to file required documents with the
director;

    (13) instructing or encouraging employers to violate the employee's
right to medical benefits under the workers compensation act;

    (14) failing to tender promptly full death benefits if a clear and le-
gitimate dispute does not exist as to the liability of the insurance company,
self-insured employer or group-funded self-insurance plan;

    (15) failing to confirm medical compensation benefits coverage to any
person or facility providing medical treatment to a claimant if a clear and
legitimate dispute does not exist as to the liability of the insurance carrier,
self-insured employer or group-funded self-insurance plan;

    (16) failing to initiate or reinstate compensation when due if a clear
and legitimate dispute does not exist as to the liability of the insurance
company, self-insured employer or group-funded self-insurance plan;

    (17) misrepresenting the reason for not paying compensation or ter-
minating or reducing the payment of compensation;

    (18) refusing to pay compensation as and when the compensation is
due;

    (19) refusing to pay any order awarding compensation; and

    (20) refusing to timely file required reports or records under the
workers compensation act; and

    (21) for a health care provider to submit a charge for health care that
was not furnished.

    (e) Whenever the director or the commissioner of insurance has rea-
son to believe that any person has engaged or is engaging in any fraud-
ulent or abusive act or practice in connection with the conduct of Kansas
workers compensation insurance, claims, benefits or services in this state,
that such fraudulent or abusive act or practice is not subject to possible
proceedings under K.S.A. 40-2401 through 40-2421 and amendments
thereto by the commissioner of insurance, and that a proceeding by the
director or the commissioner of insurance, in the case of any person
licensed or regulated by the commissioner, with respect thereto would
be in the interest of the public, the director or the commissioner of in-
surance, in the case of any person licensed or regulated by the commis-
sioner, shall issue and serve upon such person a summary order or state-
ment of the charges with respect thereto and shall conduct a hearing
thereon in accordance with the provisions of the Kansas administrative
procedure act. Complaints filed with the director or the commissioner of
insurance may be dismissed by the director or the commissioner of in-
surance on their own initiative, and shall be dismissed upon the written
request of the complainant, if the director or commissioner of insurance
has not conducted a hearing or taken other administrative action dis-
missing the complaint within 180 days of the filing of the complaint. Any
such dismissal of a complaint in accordance with this section shall con-
stitute final action by the director or commissioner of insurance which
shall be deemed to exhaust all administrative remedies under K.S.A.
44-5,120 and amendments thereto for the purpose of allowing subsequent
filing of the matter in court by the complainant. Dismissal of a complaint
in accordance with this section shall not be subject to appeal or judicial
review.

    (f) If, after such hearing, the director or the commissioner of insur-
ance, in the case of any person licensed or regulated by the commissioner,
determines that the person charged has engaged in any fraudulent or
abusive act or practice, any costs incurred as a result of conducting any
administrative hearing authorized under the provisions of this section may
be assessed against the person or persons found to have engaged in such
acts. In an appropriate case to reimburse costs incurred, such costs may
be awarded to a complainant. As used in this subsection, ``costs'' include
witness fees, mileage allowances, any costs associated with reproduction
of documents which become a part of the hearing record and the expense
of making a record of the hearing.

    (g) If, after such hearing, the director or the commissioner of insur-
ance, in the case of any person licensed or regulated by the commissioner,
determines that the person or persons charged have engaged in a fraud-
ulent or abusive act or practice the director or the commissioner of in-
surance, in the case of any person licensed or regulated by the commis-
sioner, shall issue an order or summary order requiring such person to
cease and desist from engaging in such act or practice and, in the exercise
of discretion, may order any one or more of the following:

    (1) Payment of a monetary penalty of not more than $1,000 $2,000
for each and every act constituting the fraudulent or abusive act or prac-
tice, but not exceeding an aggregate penalty of $2,500 for any six-month
$20,000 in a one-year period;

    (2) redress of the injury by requiring the refund of any premiums
paid by and requiring the payment of any moneys withheld from, any
employee, employer, insurance company or other person or entity ad-
versely affected by the act constituting a fraudulent or abusive act or
practice;

    (3) repayment of an amount equal to the total amount that the person
received as benefits or any other payment under the workers compen-
sation act and any amount that the person otherwise benefited as a result
of an act constituting a fraudulent or abusive act or practice, with interest
thereon determined so that such total amount, plus any accrued interest
thereon, bears interest, from the date of the payment of benefits or other
such payment or the date the person was benefited, at the current rate
of interest prescribed by law for judgments under subsection (e)(1) of
K.S.A. 16-204 and amendments thereto per month or fraction of a month
until repayment.

    (h) After the expiration of the time allowed for filing a petition for
review of an order issued under this section, if no such petition has been
duly filed within such time, the director at any time, after notice and
opportunity for hearing in accordance with the provisions of the Kansas
administrative procedure act, may reopen and alter, modify or set aside,
in whole or in part, any order issued under this section, whenever in the
director's opinion conditions of fact or of law have so changed as to re-
quire such action or if the public interest so requires.

    (i) Upon the order of the director or the commissioner of insurance,
in the case of any person licensed or regulated by the commissioner, after
notice and hearing in accordance with the provisions of the Kansas ad-
ministrative procedure act, any person who violates a cease and desist
order of the director or the commissioner of insurance, in the case of any
person licensed or regulated by the commissioner, issued under this sec-
tion may be subject, at the discretion of the director or the commissioner
of insurance, in the case of any person licensed or regulated by the com-
missioner, to a monetary penalty of not more than $10,000 for each and
every act or violation, but not exceeding an aggregate penalty of $50,000
for any six-month period in addition to any penalty imposed pursuant to
subsection (g).

    (j) Any civil fine imposed under this section shall be subject to review
in accordance with the act for judicial review and civil enforcement of
agency actions in the district court in Shawnee county.

    (k) All moneys received under this section for costs assessed, which
are not awarded to a complainant, or monetary penalties imposed shall
be deposited in the state treasury and credited to the workmen's workers
compensation fee fund.

    (l) Any person who refers a possibly fraudulent or abusive practice
to any state or governmental investigative agency, shall be immune from
civil or criminal liability arising from the supply or release of such referral
as long as such referral is made in good faith with the belief that a fraud-
ulent or abusive practice has, is or will occur and said referral is not made
by the person or persons who are in violation of the workers compensation
act in order to avoid criminal prosecution or administrative hearings.

    Sec. 8. K.S.A. 1997 Supp. 44-5,125 is hereby amended to read as
follows: 44-5,125. (a) (1) Any person who obtains or attempts to obtain
any payment of compensation under the workers compensation act ben-
efits for such person or another, or who denies or attempts to deny the
obligation to make any payment of workers compensation benefits; who
obtains or attempts to obtain a more favorable workers compensation
benefit rate or insurance premium rate than that to which such person is
otherwise entitled; who prevents, reduces, avoids or attempts to prevent,
reduce or avoid the payment of any compensation under the workers
compensation act; or who fails to communicate a settlement offer or sim-
ilar information to a claimant under the workers compensation act, by, in
any such case, knowingly or intentionally: (A) Making a false or misleading
statement, (B) misrepresenting or concealing a material fact, or (C) fab-
ricating, altering, concealing or destroying a document; (D) receiving tem-
porary total disability benefits or permanent total disability benefits to
which they are not entitled and

    (2) any person who conspires , while employed, or (E) conspiring with
another person to commit any act described by clause paragraph (1) of
this subsection (a), shall be guilty of:

    (A) (i) A class A nonperson misdemeanor, if the amount received as
a benefit or other payment under the workers compensation act as a result
of such act or the amount that the person otherwise benefited monetarily
as a result of a violation of this subsection (a) is $500 or less; or

    (B) (ii) a severity level 9, nonperson felony, if such amount is more
than $500. but less than $25,000;

    (iii) a severity level 7, nonperson felony, if the amount is more than
$25,000, but less than $50,000;

    (iv) a severity level 6, nonperson felony if the amount is more than
$50,000, but less than $100,000; or

    (v) a severity level 5, nonperson felony if the amount is more than
$100,000.

    (b) Any person who knowingly and intentionally presents a false cer-
tificate of insurance that purports that the presenter is insured under the
workers compensation act, shall be guilty of a level 8, nonperson felony.

    (c) A health care provider under the workers compensation act who
knowingly and intentionally submits a charge for health care that was not
furnished, shall be guilty of a level 9, nonperson felony.

    (d) Any person who obtains or attempts to obtain a more favorable
workers compensation insurance premium rate than that to which the
person is entitled, who prevents, reduces, avoids or attempts to prevent,
reduce or avoid the payment of any compensation under the workers
compensation act, or who fails to communicate a settlement offer or sim-
ilar information to a claimant under the workers compensation act, by,
in any such case knowingly or intentionally: (1) Making a false or mis-
leading statement; (2) misrepresenting or concealing a material fact; (3)
fabricating, concealing or destroying a document; or (4) conspiring with
another person or persons to commit the acts described in clause (1), (2)
or (3) of this subsection shall be guilty of a level 9, nonperson felony.

    (b) (e) Any person who has received any amount of money as a benefit
or other payment under the workers compensation act as a result of a
violation of subsection (a) or (c) and any person who has otherwise ben-
efited monetarily as a result of a violation of subsection (a) or (c) shall be
liable to repay an amount equal to the amount so received by such person
or the amount by which such person has benefited monetarily, with in-
terest thereon. Any such amount, plus any accrued interest thereon, shall
bear interest at the current rate of interest prescribed by law for judg-
ments under subsection (e)(1) of K.S.A. 16-204 and amendments thereto
per month or fraction of a month until repayment of such amount, plus
any accrued interest thereon. The interest shall accrue from the date of
overpayment or erroneous payment of any such amount or the date such
person benefited monetarily.

    (c) (f) Any person aggrieved by a violation of subsection (a), (b), (c)
or (d) shall have a cause of action against any other person to recover any
amounts of money erroneously paid as benefits or any other amounts of
money paid under the workers compensation act, and to seek relief for
other monetary damages, for which liability has accrued under this section
against such other person. Relief under this subsection is to be predicated
upon exhaustion of administrative remedies available in K.S.A. 44-5,120
and amendments thereto.

    (d) (g) Nothing in this section shall prohibit an employer from exer-
cising a right to reimbursement under K.S.A. 44-534a, 44-556 or 44-569a
and amendments thereto.

    Sec. 9. K.S.A. 44-513a and K.S.A. 1997 Supp. 44-510, 44-534, 44-
556, 44-559, 44-5,117, 44-5,120 and 44-5,125 are hereby repealed.

    Sec. 10. This act shall take effect and be in force from and after its
publication in the statute book.

I hereby certify that the above Bill originated in the House,
and passed that body

__________________________________

House concurred in
Senate amendments __________________________

__________________________________

Speaker of the House.

__________________________________

Chief Clerk of the House.

Passed the Senate
as amended __________________________

__________________________________

President of the Senate

__________________________________

Secretary of the Senate.

Aproved __________________________

__________________________________

Governor.