SENATE BILL No. 423

      An Act concerning the health care provider insurance availability act; relating to certain
      employees of the health care stabilization fund; amending K.S.A. 1997 Supp. 40-3403
      and repealing the existing section.

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

    Section 1. K.S.A. 1997 Supp. 40-3403 is hereby amended to read as
follows: 40-3403. (a) For the purpose of paying damages for personal
injury or death arising out of the rendering of or the failure to render
professional services by a health care provider, self-insurer or inactive
health care provider subsequent to the time that such health care provider
or self-insurer has qualified for coverage under the provisions of this act,
there is hereby established the health care stabilization fund. The fund
shall be held in trust in the state treasury and accounted for separately
from other state funds. The board of governors shall administer the fund
or contract for the administration of the fund with an insurance company
authorized to do business in this state.

    (b) (1) There is hereby created a board of governors which shall be
composed of such members and shall have such powers, duties and func-
tions as are prescribed by this act. The board of governors shall:

    (A) Administer the fund and exercise and perform other powers, du-
ties and functions required of the board under the health care provider
insurance availability act;

    (B) provide advice, information and testimony to the appropriate li-
censing or disciplinary authority regarding the qualifications of a health
care provider;

    (C) prepare and publish, on or before October 1 of each year, a sum-
mary of the fund's activity during the preceding fiscal year, including but
not limited to the amount collected from surcharges, the highest and
lowest surcharges assessed, the amount paid from the fund, the number
of judgments paid from the fund, the number of settlements paid from
the fund and the amount in the fund at the end of the fiscal year; and

    (D) have the authority to grant exemptions from the provisions of
subsection (m) of this section when a health care provider temporarily
leaves the state for the purpose of obtaining additional education or train-
ing or to participate in religious, humanitarian or government service
programs. Whenever a health care provider has previously left the state
for one of the reasons specified in this paragraph and returns to the state
and recommences practice, the board of governors may refund any
amount paid by the health care provider pursuant to subsection (m) of
this section if no claims have been filed against such health care provider
during the provider's temporary absence from the state.

    (2) The board shall consist of 10 persons appointed by the commis-
sioner of insurance, as provided by this subsection (b) and as follows:

    (A) Three members who are licensed to practice medicine and sur-
gery in Kansas who are doctors of medicine and who are on a list of
nominees submitted to the commissioner by the Kansas medical society;

    (B) three members who are representatives of Kansas hospitals and
who are on a list of nominees submitted to the commissioner by the
Kansas hospital association;

    (C) two members who are licensed to practice medicine and surgery
in Kansas who are doctors of osteopathic medicine and who are on a list
of nominees submitted to the commissioner by the Kansas association of
osteopathic medicine;

    (D) one member who is licensed to practice chiropractic in Kansas
and who is on a list of nominees submitted to the commissioner by the
Kansas chiropractic association;

    (E) one member who is a licensed professional nurse authorized to
practice as a registered nurse anesthetist who is on a list of nominees
submitted to the commissioner by the Kansas association of nurse anes-
thetists.

    (3) When a vacancy occurs in the membership of the board of gov-
ernors created by this act, the commissioner shall appoint a successor of
like qualifications from a list of three nominees submitted to the com-
missioner by the professional society or association prescribed by this
section for the category of health care provider required for the vacant
position on the board of governors. All appointments made shall be for a
term of office of four years, but no member shall be appointed for more
than two successive four-year terms. Each member shall serve until a
successor is appointed and qualified. Whenever a vacancy occurs in the
membership of the board of governors created by this act for any reason
other than the expiration of a member's term of office, the commissioner
shall appoint a successor of like qualifications to fill the unexpired term.
In each case of a vacancy occurring in the membership of the board of
governors, the commissioner shall notify the professional society or as-
sociation which represents the category of health care provider required
for the vacant position and request a list of three nominations of health
care providers from which to make the appointment.

    (4) The board of governors shall organize on July 1 of each year and
shall elect a chairperson and vice-chairperson from among its member-
ship. Meetings shall be called by the chairperson or by a written notice
signed by three members of the board.

    (5) The board of governors, in addition to other duties imposed by
this act, shall study and evaluate the operation of the fund and make such
recommendations to the legislature as may be appropriate to ensure the
viability of the fund.

    (6) (A) The board shall appoint an executive director who shall be in
the unclassified service under the Kansas civil service act and may appoint
such attorneys, legal assistants, claims managers and compliance auditors
who shall also be in the unclassified service under the Kansas civil service
act. Such executive director, attorneys, legal assistants, claims managers
and compliance auditors shall receive compensation fixed by the board,
in accordance with appropriation acts of the legislature, not subject to
approval of the governor.

    (b)(B) The board may appoint such additional employees, and pro-
vide all office space, services, equipment, materials and supplies, and all
budgeting, personnel, purchasing and related management functions re-
quired by the board in the exercise of the powers, duties and functions
imposed or authorized by the health care provider insurance availability
act or may enter into a contract with the commissioner of insurance for
the provision, by the commissioner, of all or any part thereof.

    (7) The commissioner shall:

    (A) Provide technical and administrative assistance to the board of
governors with respect to administration of the fund upon request of the
board;

    (B) provide such expertise as the board may reasonably request with
respect to evaluation of claims or potential claims.

    (c) Subject to subsections (d), (e), (f), (i), (k), (m), (n), (o), (p) and
(q), the fund shall be liable to pay: (1) Any amount due from a judgment
or settlement which is in excess of the basic coverage liability of all liable
resident health care providers or resident self-insurers for any personal
injury or death arising out of the rendering of or the failure to render
professional services within or without this state;

    (2) subject to the provisions of subsection (m), any amount due from
a judgment or settlement which is in excess of the basic coverage liability
of all liable nonresident health care providers or nonresident self-insurers
for any such injury or death arising out of the rendering or the failure to
render professional services within this state but in no event shall the
fund be obligated for claims against nonresident health care providers or
nonresident self-insurers who have not complied with this act or for
claims against nonresident health care providers or nonresident self-in-
surers that arose outside of this state;

    (3) subject to the provisions of subsection (m), any amount due from
a judgment or settlement against a resident inactive health care provider,
an optometrist or pharmacist who purchased coverage pursuant to sub-
section (n) or a physical therapist who purchased coverage pursuant to
subsection (o), for any such injury or death arising out of the rendering
of or failure to render professional services;

    (4) subject to the provisions of subsection (m), any amount due from
a judgment or settlement against a nonresident inactive health care pro-
vider, an optometrist or pharmacist who purchased coverage pursuant to
subsection (n) or a physical therapist who purchased coverage pursuant
to subsection (o), for any injury or death arising out of the rendering or
failure to render professional services within this state, but in no event
shall the fund be obligated for claims against: (A) Nonresident inactive
health care providers who have not complied with this act; or (B) non-
resident inactive health care providers for claims that arose outside of this
state, unless such health care provider was a resident health care provider
or resident self-insurer at the time such act occurred;

    (5) subject to subsection (b) of K.S.A. 40-3411, and amendments
thereto, reasonable and necessary expenses for attorney fees incurred in
defending the fund against claims;

    (6) any amounts expended for reinsurance obtained to protect the
best interests of the fund purchased by the board of governors, which
purchase shall be subject to the provisions of K.S.A. 75-3738 through 75-
3744, and amendments thereto, but shall not be subject to the provisions
of K.S.A. 75-4101 and amendments thereto;

    (7) reasonable and necessary actuarial expenses incurred in admin-
istering the act, including expenses for any actuarial studies contracted
for by the legislative coordinating council, which expenditures shall not
be subject to the provisions of K.S.A. 75-3738 through 75-3744, and
amendments thereto;

    (8) periodically to the plan or plans, any amount due pursuant to
subsection (a)(3) of K.S.A. 40-3413 and amendments thereto;

    (9) reasonable and necessary expenses incurred by the board of gov-
ernors in the administration of the fund or in the performance of other
powers, duties or functions of the board under the health care provider
insurance availability act;

    (10) return of any unearned surcharge;

    (11) subject to subsection (b) of K.S.A. 40-3411, and amendments
thereto, reasonable and necessary expenses for attorney fees and other
costs incurred in defending a person engaged or who was engaged in
residency training or the private practice corporations or foundations and
their full-time physician faculty employed by the university of Kansas
medical center from claims for personal injury or death arising out of the
rendering of or the failure to render professional services by such health
care provider;

    (12) notwithstanding the provisions of subsection (m), any amount
due from a judgment or settlement for an injury or death arising out of
the rendering of or failure to render professional services by a person
engaged or who was engaged in residency training or the private practice
corporations or foundations and their full-time physician faculty em-
ployed by the university of Kansas medical center;

    (13) subject to the provisions of K.S.A. 65-429 and amendments
thereto, reasonable and necessary expenses for the development and pro-
motion of risk management education programs and for the medical care
facility licensure and risk management survey functions carried out under
K.S.A. 65-429 and amendments thereto;

    (14) notwithstanding the provisions of subsection (m), any amount,
but not less than the required basic coverage limits, owed pursuant to a
judgment or settlement for any injury or death arising out of the rendering
of or failure to render professional services by a person, other than a
person described in clause (12) of this subsection (c), who was engaged
in a postgraduate program of residency training approved by the state
board of healing arts but who, at the time the claim was made, was no
longer engaged in such residency program;

    (15) subject to subsection (b) of K.S.A. 40-3411, and amendments
thereto, reasonable and necessary expenses for attorney fees and other
costs incurred in defending a person described in clause (14) of this sub-
section (c);

    (16) expenses incurred by the commissioner in the performance of
duties and functions imposed upon the commissioner by the health care
provider insurance availability act, and expenses incurred by the com-
missioner in the performance of duties and functions under contracts
entered into between the board and the commissioner as authorized by
this section; and

    (17) periodically to the state general fund reimbursements of
amounts paid to members of the health care stabilization fund oversight
committee for compensation, travel expenses and subsistence expenses
pursuant to subsection (e) of K.S.A. 40-3403b, and amendments thereto.

    (d) All amounts for which the fund is liable pursuant to subsection
(c) shall be paid promptly and in full except that, if the amount for which
the fund is liable is $300,000 or more, it shall be paid, by installment
payments of $300,000 or 10% of the amount of the judgment including
interest thereon, whichever is greater, per fiscal year, the first installment
to be paid within 60 days after the fund becomes liable and each subse-
quent installment to be paid annually on the same date of the year the
first installment was paid, until the claim has been paid in full. Any at-
torney fees payable from such installment shall be similarly prorated.

    (e) In no event shall the fund be liable to pay in excess of $3,000,000
pursuant to any one judgment or settlement against any one health care
provider relating to any injury or death arising out of the rendering of or
the failure to render professional services on and after July 1, 1984, and
before July 1, 1989, subject to an aggregate limitation for all judgments
or settlements arising from all claims made in any one fiscal year in the
amount of $6,000,000 for each health care provider.

    (f) The fund shall not be liable to pay in excess of the amounts spec-
ified in the option selected by the health care provider pursuant to sub-
section (l) for judgments or settlements relating to injury or death arising
out of the rendering of or failure to render professional services by such
health care provider on or after July 1, 1989.

    (g) A health care provider shall be deemed to have qualified for cov-
erage under the fund:

    (1) On and after July 1, 1976, if basic coverage is then in effect;

    (2) subsequent to July 1, 1976, at such time as basic coverage be-
comes effective; or

    (3) upon qualifying as a self-insurer pursuant to K.S.A. 40-3414 and
amendments thereto.

    (h) A health care provider who is qualified for coverage under the
fund shall have no vicarious liability or responsibility for any injury or
death arising out of the rendering of or the failure to render professional
services inside or outside this state by any other health care provider who
is also qualified for coverage under the fund. The provisions of this sub-
section shall apply to all claims filed on or after July 1, 1986.

    (i) Notwithstanding the provisions of K.S.A. 40-3402 and amend-
ments thereto, if the board of governors determines due to the number
of claims filed against a health care provider or the outcome of those
claims that an individual health care provider presents a material risk of
significant future liability to the fund, the board of governors is authorized
by a vote of a majority of the members thereof, after notice and an op-
portunity for hearing in accordance with the provisions of the Kansas
administrative procedure act, to terminate the liability of the fund for all
claims against the health care provider for damages for death or personal
injury arising out of the rendering of or the failure to render professional
services after the date of termination. The date of termination shall be
30 days after the date of the determination by the board of governors.
The board of governors, upon termination of the liability of the fund
under this subsection, shall notify the licensing or other disciplinary board
having jurisdiction over the health care provider involved of the name of
the health care provider and the reasons for the termination.

    (j) (1) Upon the payment of moneys from the health care stabiliza-
tion fund pursuant to subsection (c)(11), the board of governors shall
certify to the director of accounts and reports the amount of such pay-
ment, and the director of accounts and reports shall transfer an amount
equal to the amount certified, reduced by any amount transferred pur-
suant to paragraph (3) of this subsection (j), from the state general fund
to the health care stabilization fund.

    (2) Upon the payment of moneys from the health care stabilization
fund pursuant to subsection (c)(12), the board of governors shall certify
to the director of accounts and reports the amount of such payment which
is equal to the basic coverage liability of self-insurers, and the director of
accounts and reports shall transfer an amount equal to the amount cer-
tified, reduced by any amount transferred pursuant to paragraph (3) of
this subsection (j), from the state general fund to the health care stabili-
zation fund.

    (3) The university of Kansas medical center private practice foun-
dation reserve fund is hereby established in the state treasury. If the
balance in such reserve fund is less than $500,000 on July 1 of any year,
the private practice corporations or foundations referred to in subsection
(c) of K.S.A. 40-3402, and amendments thereto, shall remit the amount
necessary to increase such balance to $500,000 to the state treasurer for
credit to such reserve fund as soon after such July 1 date as is practicable.
Upon receipt of each such remittance, the state treasurer shall credit the
same to such reserve fund. When compliance with the foregoing provi-
sions of this paragraph have been achieved on or after July 1 of any year
in which the same are applicable, the state treasurer shall certify to the
board of governors that such reserve fund has been funded for the year
in the manner required by law. Moneys in such reserve fund may be
invested or reinvested in accordance with the provisions of K.S.A. 40-
3406, and amendments thereto, and any income or interest earned by
such investments shall be credited to such reserve fund. Upon payment
of moneys from the health care stabilization fund pursuant to subsection
(c)(11) or (c)(12) with respect to any private practice corporation or foun-
dation or any of its full-time physician faculty employed by the university
of Kansas, the director of accounts and reports shall transfer an amount
equal to the amount paid from the university of Kansas medical center
private practice foundation reserve fund to the health care stabilization
fund or, if the balance in such reserve fund is less than the amount so
paid, an amount equal to the balance in such reserve fund.

    (4) Upon payment of moneys from the health care stabilization fund
pursuant to subsection (c)(14) or (c)(15), the board of governors shall
certify to the director of accounts and reports the amount of such pay-
ment, and the director of accounts and reports shall transfer an amount
equal to the amount certified from the state general fund to the health
care stabilization fund.

    (k) Notwithstanding any other provision of the health care provider
insurance availability act, no psychiatric hospital licensed under K.S.A.
75-3307b and amendments thereto shall be assessed a premium sur-
charge or be entitled to coverage under the fund if such hospital has not
paid any premium surcharge pursuant to K.S.A. 40-3404 and amend-
ments thereto prior to January 1, 1988.

    (l) On or after July 1, 1989, every health care provider shall make an
election to be covered by one of the following options provided in this
subsection (l) which shall limit the liability of the fund with respect to
judgments or settlements relating to injury or death arising out of the
rendering of or failure to render professional services on or after July 1,
1989. Such election shall be made at the time the health care provider
renews the basic coverage in effect on July 1, 1989, or, if basic coverage
is not in effect, such election shall be made at the time such coverage is
acquired pursuant to K.S.A. 40-3402, and amendments thereto. Notice
of the election shall be provided by the insurer providing the basic cov-
erage in the manner and form prescribed by the board of governors and
shall continue to be effective from year to year unless modified by a
subsequent election made prior to the anniversary date of the policy. The
health care provider may at any subsequent election reduce the dollar
amount of the coverage for the next and subsequent fiscal years, but may
not increase the same, unless specifically authorized by the board of gov-
ernors. Any election of fund coverage limits, whenever made, shall be
with respect to judgments or settlements relating to injury or death arising
out of the rendering of or failure to render professional services on or
after the effective date of such election of fund coverage limits. Such
election shall be made for persons engaged in residency training and
persons engaged in other postgraduate training programs approved by
the state board of healing arts at medical care facilities or mental health
centers in this state by the agency or institution paying the surcharge
levied under K.S.A. 40-3404, and amendments thereto, for such persons.
Such options shall be as follows:

    (1) OPTION 1. The fund shall not be liable to pay in excess of
$100,000 pursuant to any one judgment or settlement for any party
against such health care provider, subject to an aggregate limitation for
all judgments or settlements arising from all claims made in the fiscal year
in an amount of $300,000 for such provider.

    (2) OPTION 2. The fund shall not be liable to pay in excess of
$300,000 pursuant to any one judgment or settlement for any party
against such health care provider, subject to an aggregate limitation for
all judgments or settlements arising from all claims made in the fiscal year
in an amount of $900,000 for such provider.

    (3) OPTION 3. The fund shall not be liable to pay in excess of
$800,000 pursuant to any one judgment or settlement for any party
against such health care provider, subject to an aggregate limitation for
all judgments or settlements arising from all claims made in the fiscal year
in an amount of $2,400,000 for such health care provider.

    (m) The fund shall not be liable for any amounts due from a judgment
or settlement against resident or nonresident inactive health care provid-
ers who first qualify as an inactive health care provider on or after July 1,
1989, unless such health care provider has been in compliance with K.S.A.
40-3402, and amendments thereto, for a period of not less than five years.
If a health care provider has not been in compliance for five years, such
health care provider may make application and payment for the coverage
for the period while they are nonresident health care providers, nonres-
ident self-insurers or resident or nonresident inactive health care provid-
ers to the fund. Such payment shall be made within 30 days after the
health care provider ceases being an active health care provider and shall
be made in an amount determined by the board of governors to be suf-
ficient to fund anticipated claims based upon reasonably prudent actuarial
principles. The provisions of this subsection shall not be applicable to any
health care provider which becomes inactive through death or retirement,
or through disability or circumstances beyond such health care provider's
control, if such health care provider notifies the board of governors and
receives approval for an exemption from the provisions of this subsection.
Any period spent in a postgraduate program of residency training ap-
proved by the state board of healing arts shall not be included in com-
putation of time spent in compliance with the provisions of K.S.A. 40-
3402, and amendments thereto.

    (n) Notwithstanding the provisions of subsection (m) or any other
provision in article 34 of chapter 40 of the Kansas Statutes Annotated to
the contrary, the fund shall not be liable for any claim made on or after
July 1, 1991, against a licensed optometrist or pharmacist relating to any
injury or death arising out of the rendering of or failure to render pro-
fessional services by such optometrist or pharmacist prior to July 1, 1991,
unless such optometrist or pharmacist qualified as an inactive health care
provider prior to July 1, 1991.

    (o) Notwithstanding the provisions of subsection (m) or any other
provision in article 34 of chapter 40 of the Kansas Statutes Annotated to
the contrary, the fund shall not be liable for any claim made on or after
July 1, 1995, against a physical therapist registered by the state board of
healing arts relating to any injury or death arising out of the rendering of
or failure to render professional services by such physical therapist prior
to July 1, 1995, unless such physical therapist qualified as an inactive
health care provider prior to July 1, 1995.

    (p) Notwithstanding the provisions of subsection (m) or any other
provision in article 34 of chapter 40 of the Kansas Statutes Annotated to
the contrary, the fund shall not be liable for any claim made on or after
July 1, 1997, against a health maintenance organization relating to any
injury or death arising out of the rendering of or failure to render pro-
fessional services by such health maintenance organization prior to July
1, 1997, unless such health maintenance organization qualified as an in-
active health care provider prior to July 1, 1997, and obtained coverage
pursuant to subsection (m). Health maintenance organizations not qual-
ified as inactive health care providers prior to July 1, 1997, may purchase
coverage from the fund for periods of prior compliance by making ap-
plication prior to August 1, 1997, and payment within 30 days from notice
of the calculated amount as determined by the board of governors to be
sufficient to fund anticipated claims based on reasonably prudent actu-
arial principles.

    (q) Notwithstanding anything in article 34 of chapter 40 of the Kansas
Statutes Annotated to the contrary, the fund shall in no event be liable
for any claims against any health care provider based upon or relating to
the health care provider's sexual acts or activity, but in such cases the
fund may pay reasonable and necessary expenses for attorney fees in-
curred in defending the fund against such claim. The fund may recover
all or a portion of such expenses for attorney fees if an adverse judgment
is returned against the health care provider for damages resulting from
the health care provider's sexual acts or activity.

    Sec. 2. K.S.A. 1997 Supp. 40-3403 is hereby repealed.

    Sec. 3. This act shall take effect and be in force from and after its
publication in the Kansas register.

I hereby certifiy that the above Bill originated in the
Senate, and passed that body

__________________________________

__________________________________

President of the Senate.

__________________________________

Secretary of the Senate.

Passed the House __________________________

__________________________________

Speaker of the House.

__________________________________

Chief Clerk of the House.

Approved__________________________________

__________________________________

Governor.