Session of 1999
         
HOUSE BILL No. 2100
         
By Committee on Insurance
          
1-25
          
  9             AN  ACT concerning insurance; terms and conditions of certain sickness
10             and accident policies; amending K.S.A. 1998 Supp. 40-2209 and re-
11             pealing the existing section.
12      
13       Be it enacted by the Legislature of the State of Kansas:
14             Section  1. K.S.A. 1998 Supp. 40-2209 is hereby amended to read as
15       follows: 40-2209. (A) (1) Group sickness and accident insurance is de-
16       clared to be that form of sickness and accident insurance covering groups
17       of persons, with or without one or more members of their families or one
18       or more dependents. Except at the option of the employee or member
19       and except employees or members enrolling in a group policy after the
20       close of an open enrollment opportunity, no individual employee or mem-
21       ber of an insured group and no individual dependent or family member
22       may be excluded from eligibility or coverage under a policy providing
23       hospital, medical or surgical expense benefits both with respect to policies
24       issued or renewed within this state and with respect to policies issued or
25       renewed outside this state covering persons residing in this state. For
26       purposes of this section, an open enrollment opportunity shall be deemed
27       to be a period no less favorable than a period beginning on the employee's
28       or member's date of initial eligibility and ending 31 days thereafter.
29             (2) An eligible employee, member or dependent who requests en-
30       rollment following the open enrollment opportunity or any special en-
31       rollment period for dependents as specified in subsection (3) shall be
32       considered a late enrollee. An accident and sickness insurer may exclude
33       a late enrollee, except during an open enrollment period. However, an
34       eligible employee, member or dependent shall not be considered a late
35       enrollee if:
36             (a) The individual:
37             (i) Was covered under another group policy which provided hospital,
38       medical or surgical expense benefits or was covered under section 607(1)
39       of the employee retirement income security act of 1974 (ERISA) at the
40       time the individual was eligible to enroll;
41             (ii) states in writing, at the time of the open enrollment period, that
42       coverage under another group policy which provided hospital, medical or
43       surgical expense benefits was the reason for declining enrollment, but

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  1       only if the group policyholder or the accident and sickness insurer re-
  2       quired such a written statement and provided the individual with notice
  3       of the requirement for a written statement and the consequences of such
  4       written statement;
  5             (iii) has lost coverage under another group policy providing hospital,
  6       medical or surgical expense benefits or under section 607(1) of the em-
  7       ployee retirement income security act of 1974 (ERISA) as a result of the
  8       termination of employment, reduction in the number of hours of em-
  9       ployment, termination of employer contributions toward such coverage,
10       the termination of the other policy's coverage, death of a spouse or di-
11       vorce or legal separation or was under a COBRA continuation provision
12       and the coverage under such provision was exhausted; and
13             iv (iv) requests enrollment within 30 days after the termination of
14       coverage under the other policy; or
15             (b) a court has ordered coverage to be provided for a spouse or minor
16       child under a covered employee's or member's policy.
17             (3)  (a) If an accident and sickness insurer issues a group policy pro-
18       viding hospital, medical or surgical expenses and makes coverage available
19       to a dependent of an eligible employee or member and such dependent
20       becomes a dependent of the employee or member through marriage,
21       birth, adoption or placement for adoption, then such group policy shall
22       provide for a dependent special enrollment period as described in sub-
23       section (3)(b) of this section during which the dependent may be enrolled
24       under the policy and in the case of the birth or adoption of a child, the
25       spouse of an eligible employee or member may be enrolled if otherwise
26       eligible for coverage.
27             (b) A dependent special enrollment period under this subsection shall
28       be a period of not less than 30 days and shall begin on the later of (i) the
29       date such dependent coverage is made available, or (ii) the date of the
30       marriage, birth or adoption or placement for adoption.
31             (c) If an eligible employee or member seeks to enroll a dependent
32       during the first 30 days of such a dependent special enrollment period,
33       the coverage of the dependent shall become effective: (i) in the case of
34       marriage, not later than the first day of the first month beginning after
35       the date the completed request for enrollment is received; (ii) in the case
36       of the birth of a dependent, as of the date of such birth; or (iii) in the
37       case of a dependent's adoption or placement for adoption, the date of
38       such adoption or placement for adoption.
39             (4)  (a) No group policy providing hospital, medical or surgical ex-
40       pense benefits issued or renewed within this state or issued or renewed
41       outside this state covering residents within this state shall limit or exclude
42       benefits for specific conditions existing at or prior to the effective date of
43       coverage thereunder. Such policy may impose a preexisting conditions

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  1       exclusion, not to exceed 90 days following enrollment for benefits for
  2       conditions (whether mental or physical), regardless of the cause of the
  3       condition for which medical advice, diagnosis, care or treatment was rec-
  4       ommended or received in the 90 days prior to the effective date of cov-
  5       erage. For the purposes of this section, the term "preexisting conditions
  6       exclusion" shall mean, with respect to coverage, a limitation or exclusion
  7       of benefits relating to a condition based on the fact that the condition
  8       was present before the date of enrollment for such coverage whether or
  9       not any medical advice, diagnosis, care or treatment was recommended
10       or received before such date. Any preexisting conditions exclusion shall
11       run concurrently with any waiting period.
12             (b) Such policy may impose a waiting period after full-time employ-
13       ment starts before an employee is first eligible to enroll in any applicable
14       group policy.
15             (c) A health maintenance organization which offers such policy which
16       does not impose any preexisting conditions exclusion may impose an af-
17       filiation period for such coverage, provided that: (i) such application pe-
18       riod is applied uniformly without regard to any health status related fac-
19       tors and (ii) such affiliation period does not exceed two months. The
20       affiliation period shall run concurrently with any waiting period under the
21       plan.
22             (d) A health maintenance organization may use alternative methods
23       from those described in this subsection to address adverse selection if
24       approved by the commissioner.
25             (5) Genetic information shall not be treated as a preexisting condition
26       in the absence of a diagnosis of the condition related to such information.
27             (6) A group policy providing hospital, medical or surgical expense
28       benefits may not impose any preexisting condition exclusion relating to
29       pregnancy as a preexisting condition.
30             (7) A group policy providing hospital, medical or surgical expense
31       benefits may not impose any preexisting condition waiting period in the
32       case of a child who is adopted or placed for adoption before attaining 18
33       years of age and who, as of the last day of a 30-day period beginning on
34       the date of the adoption or placement for adoption, is covered by a policy
35       specified in subsection (A). This subsection shall not apply to coverage
36       before the date of such adoption or placement for adoption.
37             (8) Such policy shall waive such a preexisting conditions exclusion to
38       the extent the employee or member or individual dependent or family
39       member was covered by (a) a group or individual sickness and accident
40       policy, (b) coverage under section 607(1) of the employees retirement
41       income security act of 1974 (ERISA), (c) a group specified in K.S.A. 40-
42       2222 and amendments thereto, (d) part A or part B of title XVIII of the
43       social security act, (e) title XIX of the social security act, other than cov-

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  1       erage consisting solely of benefits under section 1928, (f) chapter 55 of
  2       title 10 United States code, (g) a medical care program of the indian
  3       health service or of a tribal organization, (h) the Kansas uninsurable health
  4       plan act pursuant to K.S.A. 40-2217 et seq. and amendments thereto or
  5       a similar health benefits risk pool of another state, (i) a health plan offered
  6       under chapter 89 of title 5, United States code, (j) a health benefit plan
  7       under section 5(e) of the peace corps act (22 U.S.C. 2504(e), or (k) a
  8       group subject to K.S.A. 12-2616 et seq. and amendments thereto which
  9       provided hospital, medical and surgical expense benefits within 63 days
10       prior to the effective date of coverage with no gap in coverage. A group
11       policy shall credit the periods of prior coverage specified in subsection
12       (A)(7) without regard to the specific benefits covered during the period
13       of prior coverage. Any period that the employee or member is in a waiting
14       period for any coverage under a group health plan or is in an affiliation
15       period shall not be taken into account in determining the continuous
16       period under this subsection.
17             (B)  (1) An accident and sickness insurer which offers group policies
18       providing hospital, medical or surgical expense benefits shall provide a
19       certification as described in subsection (B)(2): (a) At the time an eligible
20       employee, member or dependent ceases to be covered under such policy
21       or otherwise becomes covered under a COBRA continuation provision;
22       (b) in the case of an eligible employee, member or dependent being
23       covered under a COBRA continuation provision, at the time such eligible
24       employee, member or dependent ceases to be covered under a COBRA
25       continuation provision; and (c) on the request on behalf of such eligible
26       employee, member or dependent made not later than 24 months after
27       the date of the cessation of the coverage described in subsection (B)(1)(a)
28       or (B)(1)(b), whichever is later.
29             (2) The certification described in this subsection is a written certifi-
30       cation of (a) the period of coverage under a policy specified in subsection
31       (A) and any coverage under such COBRA continuation provision, and (b)
32       any waiting period imposed with respect to the eligible employee, mem-
33       ber or dependent for any coverage under such policy.
34             (C) Any group policy may impose participation requirements, define
35       full-time employees or members and otherwise be designed for the group
36       as a whole through negotiations between the group sponsor and the in-
37       surer to the extent such design is not contrary to or inconsistent with this
38       act.
39             (D)  (1) An accident and sickness insurer offering a group policy pro-
40       viding hospital, medical or surgical expense benefits must renew or con-
41       tinue in force such coverage at the option of the policyholder or certifi-
42       cateholder except as provided in subsection (2).
43             (2) An accident and sickness insurer may nonrenew or discontinue

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  1       coverage under a group policy providing hospital, medical or surgical
  2       expense benefits based only on one or more of the following
  3       circumstances:
  4             (a) If the policyholder or certificateholder has failed to pay any pre-
  5       mium or contributions in accordance with the terms of the group policy
  6       providing hospital, medical or surgical expense benefits or the accident
  7       and sickness insurer has not received timely premium payments;
  8             (b) if the policyholder or certificateholder has performed an act or
  9       practice that constitutes fraud or made an intentional misrepresentation
10       of material fact under the terms of such coverage;
11             (c) if the policyholder or certificateholder has failed to comply with
12       a material plan provision relating to employer contribution or group par-
13       ticipation rules;
14             (d) if the accident and sickness insurer is ceasing to offer coverage in
15       such group market in accordance with subsections (D)(3) or (D)(4);
16             (e) in the case of accident and sickness insurer that offers coverage
17       under a policy providing hospital, medical or surgical expense benefits
18       through an enrollment area, there is no longer any eligible employee,
19       member or dependent in connection with such policy who lives, resides
20       or works in the medical service enrollment area of the accident and sick-
21       ness insurer (or in the area for which the accident and sickness insurer is
22       authorized to do business); or
23             (f) in the case of a group policy providing hospital, medical or surgical
24       expense benefits which is offered through an association or trust pursuant
25       to subsections (F)(3) or (F)(5), the membership of the employer in such
26       association or trust ceases but only if such coverage is terminated uni-
27       formly without regard to any health status related factor relating to any
28       eligible employee, member or dependent.
29             (3) In any case in which an accident and sickness insurer which offers
30       a group policy providing hospital, medical or surgical expense benefits
31       decides to discontinue offering such type of group policy, such coverage
32       may be discontinued only if:
33             (a) The accident and sickness insurer notifies all policyholders and
34       certificateholders and all eligible employees or members of such discon-
35       tinuation at least 90 days prior to the date of the discontinuation of such
36       coverage;
37             (b) the accident and sickness insurer offers to each policyholder who
38       is provided such group policy providing hospital, medical or surgical ex-
39       pense benefits which is being discontinued the option to purchase any
40       other group policy providing hospital, medical or surgical expense bene-
41       fits currently being offered by such accident and sickness insurer; and
42             (c) in exercising the option to discontinue coverage and in offering
43       the option of coverage under paragraph (b), the accident and sickness

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  1       insurer acts uniformly without regard to the claims experience of those
  2       policyholders or certificateholders or any health status related factors re-
  3       lating to any eligible employee, member or dependent covered by such
  4       group policy or new employees or members who may become eligible
  5       for such coverage.
  6             (4) If the accident and sickness insurer elects to discontinue offering
  7       group policies providing hospital, medical or surgical expense benefits or
  8       group coverage to a small employer pursuant to K.S.A. 40-2209f and
  9       amendments thereto, such coverage may be discontinued only if:
10             (a) The accident and sickness insurer provides notice to the insurance
11       commissioner, to all policyholders or certificateholders and to all eligible
12       employees and members covered by such group policy providing hospital,
13       medical or surgical expense benefits at least 180 days prior to the date of
14       the discontinuation of such coverage;
15             (b) all group policies providing hospital, medical or surgical expense
16       benefits offered by such accident and sickness insurer are discontinued
17       and coverage under such policies are not renewed; and
18             (c) the accident and sickness insurer may not provide for the issuance
19       of any group policies providing hospital, medical or surgical expense ben-
20       efits in the discontinued market during a five year period beginning on
21       the date of the discontinuation of the last such group policy which is
22       nonrenewed.
23             (E)  (1) An accident and sickness insurer offering a group policy pro-
24       viding hospital, medical or surgical expense benefits may not establish
25       rules for eligibility (including continued eligibility) of any employee,
26       member or dependent to enroll under the terms of the group policy based
27       on any of the following factors in relation to the eligible employee, mem-
28       ber or dependent: (a) Health status, (b) medical condition (including both
29       physical and mental illness), (c) claims experience, (d) receipt of health
30       care, (e) medical history, (f) genetic information, (g) evidence of insura-
31       bility (including conditions arising out of acts of domestic violence), or
32       (h) disability. This subsection shall not be construed to require a policy
33       providing hospital, medical or surgical expense benefits to provide par-
34       ticular benefits other than those provided under the terms of such group
35       policy or to prevent a group policy providing hospital, medical or surgical
36       expense benefits from establishing limitations or restrictions on the
37       amount, level, extent or nature of the benefits or coverage for similarly
38       situated individuals enrolled under the group policy.
39             (F) Group accident and health insurance may be offered to a group
40       under the following basis:
41             (1) Under a policy issued to an employer or trustees of a fund estab-
42       lished by an employer, who is the policyholder, insuring at least two em-
43       ployees of such employer, for the benefit of persons other than the em-

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  1       ployer. The term "employees" shall include the officers, managers,
  2       employees and retired employees of the employer, the partners, if the
  3       employer is a partnership, the proprietor, if the employer is an individual
  4       proprietorship, the officers, managers and employees and retired em-
  5       ployees of subsidiary or affiliated corporations of a corporation employer,
  6       and the individual proprietors, partners, employees and retired employ-
  7       ees of individuals and firms, the business of which and of the insured
  8       employer is under common control through stock ownership contract, or
  9       otherwise. The policy may provide that the term "employees" may include
10       the trustees or their employees, or both, if their duties are principally
11       connected with such trusteeship. A policy issued to insure the employees
12       of a public body may provide that the term "employees" shall include
13       elected or appointed officials.
14             (2) Under a policy issued to a labor union which shall have a consti-
15       tution and bylaws insuring at least 25 members of such union.
16             (3) Under a policy issued to the trustees of a fund established by two
17       or more employers or business associations or by one or more labor un-
18       ions or by one or more employers and one or more labor unions, which
19       trustees shall be the policyholder, to insure employees of the employers
20       or members of the union or members of the association for the benefit
21       of persons other than the employers or the unions or the associations.
22       The term "employees" shall include the officers, managers, employees
23       and retired employees of the employer and the individual proprietor or
24       partners if the employer is an individual proprietor or partnership. The
25       policy may provide that the term "employees" shall include the trustees
26       or their employees, or both, if their duties are principally connected with
27       such trusteeship.
28             (4) A policy issued to a creditor, who shall be deemed the policyhol-
29       der, to insure debtors of the creditor, subject to the following require-
30       ments: (a) The debtors eligible for insurance under the policy shall be all
31       of the debtors of the creditor whose indebtedness is repayable in install-
32       ments, or all of any class or classes determined by conditions pertaining
33       to the indebtedness or to the purchase giving rise to the indebtedness.
34       (b) The premium for the policy shall be paid by the policyholder, either
35       from the creditor's funds or from charges collected from the insured
36       debtors, or from both.
37             (5) A policy issued to an association which has been organized and is
38       maintained for the purposes other than that of obtaining insurance, in-
39       suring at least 25 members, employees, or employees of members of the
40       association for the benefit of persons other than the association or its
41       officers. The term "employees" shall include retired employees. The pre-
42       miums for the policies shall be paid by the policyholder, either wholly
43       from association funds, or funds contributed by the members of such

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  1       association or by employees of such members or any combination thereof.
  2             (a) The open enrollment provisions of K.S.A. 40-2209(A)(1), 40-
  3       2209(A)(4), 40-2209(A)(6) and 40-2209(E) shall not apply to transactions
  4       in this state involving group sickness and accident insurance policies
  5       which were lawfully issued and delivered to a valid association located in
  6       the state of issue, if the policy is not designed, administered or marketed
  7       as a plan for employers to provide coverage to two or more employees
  8       and does not provide coverage for employees of members of the
  9       association.
10             (b) For purposes of this subsection, "valid association" means an as-
11       sociation which:
12             (i) Has been in active existence for at least five years;
13             (ii) has been organized and maintained in good faith for purposes
14       other than that of obtaining insurance;
15             (iii) has a minimum of 100 members;
16             (iv) does not condition membership on the condition of health status;
17             (v) has a constitution, charter or bylaws which provide for regular
18       meetings, at least annually, to further the purposes of the members;
19             (vi) collects dues or solicits contributions from members; and
20             (vii) provides members with voting privileges and representation on
21       the governing board and committees.
22             (6) Under a policy issued to any other type of group which the com-
23       missioner of insurance may find is properly subject to the issuance of a
24       group sickness and accident policy or contract.
25             (G) Each such policy shall contain in substance: (1) A provision that
26       a copy of the application, if any, of the policyholder shall be attached to
27       the policy when issued, that all statements made by the policyholder or
28       by the persons insured shall be deemed representations and not warran-
29       ties, and that no statement made by any person insured shall be used in
30       any contest unless a copy of the instrument containing the statement is
31       or has been furnished to such person or the insured's beneficiary.
32             (2) A provision setting forth the conditions under which an individ-
33       ual's coverage terminates under the policy, including the age, if any, to
34       which an individual's coverage under the policy shall be limited, or, the
35       age, if any, at which any additional limitations or restrictions are placed
36       upon an individual's coverage under the policy.
37             (3) Provisions setting forth the notice of claim, proofs of loss and
38       claim forms, physical examination and autopsy, time of payment of claims,
39       to whom benefits are payable, payment of claims, change of beneficiary,
40       and legal action requirements. Such provisions shall not be less favorable
41       to the individual insured or the insured's beneficiary than those corre-
42       sponding policy provisions required to be contained in individual accident
43       and sickness policies.

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  1             (4) A provision that the insurer will furnish to the policyholder, for
  2       the delivery to each employee or member of the insured group, an in-
  3       dividual certificate approved by the commissioner of insurance setting
  4       forth in summary form a statement of the essential features of the insur-
  5       ance coverage of such employee or member, the procedure to be followed
  6       in making claim under the policy and to whom benefits are payable. Such
  7       certificate shall also contain a summary of those provisions required under
  8       paragraphs (2) and (3) of this subsection in addition to the other essential
  9       features of the insurance coverage. If dependents are included in the
10       coverage, only one certificate need be issued for each family unit.
11             (H) No group disability income policy which integrates benefits with
12       social security benefits, shall provide that the amount of any disability
13       benefit actually being paid to the disabled person shall be reduced by
14       changes in the level of social security benefits resulting either from
15       changes in the social security law or due to cost of living adjustments
16       which become effective after the first day for which disability benefits
17       become payable.
18             (I) A group policy of insurance delivered or issued for delivery or
19       renewed which provides hospital, surgical or major medical expense in-
20       surance, or any combination of these coverages, on an expense incurred
21       basis, shall provide that an employee or member or such employee's or
22       member's covered dependents whose insurance under the group policy
23       has been terminated for any reason, including discontinuance of the
24       group policy in its entirety or with respect to an insured class, and who
25       has been continuously insured under the group policy or under any group
26       policy providing similar benefits which it replaces for at least three
27       months immediately prior to termination, shall be entitled to have such
28       coverage nonetheless continued under the group policy for a period of
29       six months and have issued to the employee or member or such em-
30       ployee's or member's covered dependents by the insurer, at the end of
31       such six-month period of continuation, a policy of health insurance which
32       conforms to the applicable requirements specified in this subsection. This
33       requirement shall not apply to a group policy which provides benefits for
34       specific diseases or for accidental injuries only or a group policy issued to
35       an employer subject to the continuation and conversion obligations set
36       forth at title I, subtitle B, part 6 of the employee retirement income
37       security act of 1974 or at title XXII of the public health service act, as
38       each act was in effect on January 1, 1987 to the extent federal law provides
39       the employee or member or such employee's or member's covered de-
40       pendents with equal or greater continuation or conversion rights; or an
41       employee or member or such employee's or member's covered depend-
42       ents shall not be entitled to have such coverage continued or a converted
43       policy issued to the employee or member or such employee's or member's

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  1       covered dependents if termination of the insurance under the group pol-
  2       icy occurred because: (a) The employee or member or such employee's
  3       or member's covered dependents failed to pay any required contribution
  4       after receiving reasonable notice of such required contribution from the
  5       insurer in accordance with rules and regulations adopted by the commis-
  6       sioner of insurance; (b) any discontinued group coverage was replaced by
  7       similar group coverage within 31 days; (c) the employee or member is or
  8       could be covered by medicare (title XVIII of the United States social
  9       security act as added by the social security amendments of 1965 or as
10       later amended or superseded); or (d) the employee or member is or could
11       be covered to the same extent by any other insured or lawful self-insured
12       arrangement which provides expense incurred hospital, surgical or med-
13       ical coverage and benefits for individuals in a group under which the
14       person was not covered prior to such termination. In the event the group
15       policy is terminated and not replaced the insurer may issue an individual
16       policy or certificate in lieu of a conversion policy or the continuation of
17       group coverage required herein if the individual policy or certificate pro-
18       vides substantially similar coverage for the same or less premium as the
19       group policy. In any event, the employee or member shall have the option
20       to be issued a conversion policy which meets the requirements set forth
21       in this subsection (I) in lieu of the right to continue group coverage.
22             The continued coverage and the issuance of a converted policy shall
23       be subject to the following conditions:
24             (1) Written application for the converted policy shall be made and
25       the first premium paid to the insurer not later than 31 days after termi-
26       nation of coverage under the group policy or not later than 31 days after
27       notice is received pursuant to subsection (I)(21)(b)(ii).
28             (2) The converted policy shall be issued without evidence of
29       insurability.
30             (3) The terminated employee or member shall pay to the insurer the
31       premium for the six-month continuation of coverage and such premium
32       shall be the same as that applicable to members or employees remaining
33       in the group. Failure to pay such premium shall terminate coverage under
34       the group policy at the end of the period for which the premium has been
35       paid. The premium rate charged for converted policies issued subsequent
36       to the period of continued coverage shall be such that can be expected
37       to produce an anticipated loss ratio of not less than 80% based upon
38       conversion, morbidity and reasonable assumptions for expected trends in
39       medical care costs. In the event the group policy is terminated and is not
40       replaced, converted policies may be issued at self-sustaining rates that
41       are not unreasonable in relation to the coverage provided based on con-
42       version, morbidity and reasonable assumptions for expected trends in
43       medical care costs. The frequency of premium payment shall be the fre-

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  1       quency customarily required by the insurer for the policy form and plan
  2       selected, provided that the insurer shall not require premium payments
  3       less frequently than quarterly.
  4             (4) The effective date of the converted policy shall be the day follow-
  5       ing the termination of insurance under the group policy.
  6             (5) The converted policy shall cover the employee or member and
  7       the employee's or member's dependents who were covered by the group
  8       policy on the date of termination of insurance. At the option of the in-
  9       surer, a separate converted policy may be issued to cover any dependent.
10             (6) The insurer shall not be required to issue a converted policy cov-
11       ering any person if such person is or could be covered by medicare (title
12       XVIII of the United States social security act as added by the social se-
13       curity amendments of 1965 or as later amended or superseded). Fur-
14       thermore, the insurer shall not be required to issue a converted policy
15       covering any person if:
16             (a)  (i) Such person is covered for similar benefits by another hospital,
17       surgical, medical or major medical expense insurance policy or hospital
18       or medical service subscriber contract or medical practice or other pre-
19       payment plan or by any other plan or program, or
20             (ii) such person is eligible for similar benefits (whether or not covered
21       therefor) under any arrangement of coverage for individuals in a group,
22       whether on an insured or uninsured basis, or
23             (iii) similar benefits are provided for or available to such person, pur-
24       suant to or in accordance with the requirements of any state or federal
25       law, and
26             (b) the benefits provided under the sources referred to in paragraph
27       (i) above for such person or benefits provided or available under the
28       sources referred to in paragraphs (ii) and (iii) above for such person,
29       together with the benefits provided by the converted policy, would result
30       in over-insurance according to the insurer's standards. The insurer's stan-
31       dards must bear some reasonable relationship to actual health care costs
32       in the area in which the insured lives at the time of conversion and must
33       be filed with the commissioner of insurance prior to their use in denying
34       coverage.
35             (7) A converted policy may include a provision whereby the insurer
36       may request information in advance of any premium due date of such
37       policy of any person covered as to whether:
38             (a) Such person is covered for similar benefits by another hospital,
39       surgical, medical or major medical expense insurance policy or hospital
40       or medical service subscriber contract or medical practice or other pre-
41       payment plan or by any other plan or program;
42             (b) such person is covered for similar benefits under any arrangement
43       of coverage for individuals in a group, whether on an insured or uninsured

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  1       basis; or
  2             (c) similar benefits are provided for or available to such person, pur-
  3       suant to or in accordance with the requirements of any state or federal
  4       law.
  5             The converted policy may provide that the insurer may refuse to renew
  6       the policy and the coverage of any person insured for the following rea-
  7       sons only:
  8             (a) Either the benefits provided under the sources referred to in par-
  9       agraphs (i) and (ii) above for such person or benefits provided or available
10       under the sources referred to in paragraph (iii) above for such person,
11       together with the benefits provided by the converted policy, would result
12       in over-insurance according to the insurer's standards on file with the
13       commissioner of insurance, or the converted policyholder fails to provide
14       the requested information;
15             (b) fraud or material misrepresentation in applying for any benefits
16       under the converted policy;
17             (c) eligibility of the insured person for coverage under medicare (title
18       XVIII of the United States social security act as added by the social se-
19       curity amendments of 1965 or as later amended or superseded) or under
20       any other state or federal law (except title XIX of the social security act
21       of 1965) providing for benefits similar to those provided by the converted
22       policy; or
23             (d) other reasons approved by the commissioner of insurance.
24             (8) An insurer shall not be required to issue a converted policy which
25       provides coverage and benefits in excess of those provided under the
26       group policy from which conversion is made.
27             (9) If the converted policy provides that any hospital, surgical or med-
28       ical benefits payable may be reduced by the amount of any such benefits
29       payable under the group policy after the termination of the individual's
30       insurance or the converted policy includes provisions so that during the
31       first policy year the benefits payable under the converted policy, together
32       with the benefits payable under the group policy, shall not exceed those
33       that would have been payable had the individual's insurance under the
34       group policy remained in force and effect, the converted policy shall pro-
35       vide credit for deductibles, copayments and other conditions satisfied
36       under the group policy.
37             (10) Subject to the provisions and conditions of this act, if the group
38       insurance policy from which conversion is made insures the employee or
39       member for major medical expense insurance, the employee or member
40       shall be entitled to obtain a converted policy providing catastrophic or
41       major medical coverage under a plan meeting the following requirements:
42             (a) A maximum benefit at least equal to either, at the option of the
43       insurer, paragraphs (i) or (ii) below:

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  1             (i) The smaller of the following amounts:
  2             1. The maximum benefit provided under the group policy.
  3             2. A maximum payment of $250,000 per covered person for all cov-
  4       ered medical expenses incurred during the covered person's lifetime.
  5             (ii) The smaller of the following amounts:
  6             1. The maximum benefit provided under the group policy.
  7             2. A maximum payment of $250,000 for each unrelated injury or
  8       sickness.
  9             (b) Payment of benefits at the rate of 80% of covered medical ex-
10       penses which are in excess of the deductible, until 20% of such expenses
11       in a benefit period reaches $1,000, after which benefits will be paid at
12       the rate of 100% during the remainder of such benefit period. Payment
13       of benefits for outpatient treatment of mental illness, if provided in the
14       converted policy, may be at a lesser rate but not less than 50%.
15             (c) A deductible for each benefit period which, at the option of the
16       insurer, shall be (a) the sum of the benefits deductible and $100, or (b)
17       the corresponding deductible in the group policy. The term "benefits
18       deductible," as used herein, means the value of any benefits provided on
19       an expense incurred basis which are provided with respect to covered
20       medical expenses by any other hospital, surgical, or medical insurance
21       policy or hospital or medical service subscriber contract or medical prac-
22       tice or other prepayment plan, or any other plan or program whether on
23       an insured or uninsured basis, or in accordance with the requirements of
24       any state or federal law and, if pursuant to condition (12), the converted
25       policy provides both basic hospital or surgical coverage and major medical
26       coverage, the value of such basic benefits.
27             If the maximum benefit is determined by paragraph (a)(ii) above, the
28       insurer may require that the deductible be satisfied during a period of
29       not less than three months if the deductible is $100 or less, and not less
30       than six months if the deductible exceeds $100.
31             (d) The benefit period shall be each calendar year when the maxi-
32       mum benefit is determined by paragraph (a)(i) above or 24 months when
33       the maximum benefit is determined by paragraph (a)(ii) above.
34             (e) The term "covered medical expenses," as used above, shall in-
35       clude at least, in the case of hospital room and board charges 80% of the
36       average semiprivate room and board rate for the hospital in which the
37       individual is confined and twice such amount for charges in an intensive
38       care unit. Any surgical schedule shall be consistent with those customarily
39       offered by the insurer under group or individual health insurance policies
40       and must provide at least a $1,200 maximum benefit.
41             (11) The conversion privilege required by this act shall, if the group
42       insurance policy insures the employee or member for basic hospital or
43       surgical expense insurance as well as major medical expense insurance,

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  1       make available the plans of benefits set forth in condition 10. At the option
  2       of the insurer, such plans of benefits may be provided under one policy.
  3             The insurer may also, in lieu of the plans of benefits set forth in con-
  4       dition 10, provide a policy of comprehensive medical expense benefits
  5       without first dollar coverage. The policy shall conform to the require-
  6       ments of condition (10). An insurer electing to provide such a policy shall
  7       make available a low deductible option, not to exceed $100, a high de-
  8       ductible option between $500 and $1,000, and a third deductible option
  9       midway between the high and low deductible options.
10             (12) The insurer, at its option, may also offer alternative plans for
11       group health conversion in addition to those required by this act.
12             (13) In the event coverage would be continued under the group pol-
13       icy on an employee following the employee's retirement prior to the time
14       the employee is or could be covered by medicare, the employee may
15       elect, in lieu of such continuation of group insurance, to have the same
16       conversion rights as would apply had such person's insurance terminated
17       at retirement by reason of termination of employment or membership.
18             (14) The converted policy may provide for reduction of coverage on
19       any person upon such person's eligibility for coverage under medicare
20       (title XVIII of the United States social security act as added by the social
21       security amendments of 1965 or as later amended or superseded) or un-
22       der any other state or federal law providing for benefits similar to those
23       provided by the converted policy.
24             (15) Subject to the conditions set forth above, the continuation and
25       conversion privileges shall also be available:
26             (a) To the surviving spouse, if any, at the death of the employee or
27       member, with respect to the spouse and such children whose coverage
28       under the group policy terminates by reason of such death, otherwise to
29       each surviving child whose coverage under the group policy terminates
30       by reason of such death, or, if the group policy provides for continuation
31       of dependents' coverage following the employee's or member's death, at
32       the end of such continuation;
33             (b) to the spouse of the employee or member upon termination of
34       coverage of the spouse, while the employee or member remains insured
35       under the group policy, by reason of ceasing to be a qualified family
36       member under the group policy, with respect to the spouse and such
37       children whose coverage under the group policy terminates at the same
38       time; or
39             (c) to a child solely with respect to such child upon termination of
40       such coverage by reason of ceasing to be a qualified family member under
41       the group policy, if a conversion privilege is not otherwise provided above
42       with respect to such termination.
43             (16) The insurer may elect to provide group insurance coverage

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  1       which complies with this act in lieu of the issuance of a converted indi-
  2       vidual policy.
  3             (17) A notification of the conversion privilege shall be included in
  4       each certificate of coverage.
  5             (18) A converted policy which is delivered outside this state must be
  6       on a form which could be delivered in such other jurisdiction as a con-
  7       verted policy had the group policy been issued in that jurisdiction.
  8             (19) The insurer shall give the employee or member and such em-
  9       ployee's or member's covered dependents: (a) Reasonable notice of the
10       right to convert at least once during the six-month continuation period;
11       or (b) for persons covered under 29 U.S.C. 1161 et seq., notice of the
12       right to a conversion policy required by this subsection (D) shall be given
13       at least 30 days: (i) Prior to the end of the continuation period provided
14       by 29 U.S.C. 1161 et seq., or (ii) from the date the employer ceases to
15       provide any similar group health plan to any employee. Such notices shall
16       be provided in accordance with rules and regulations adopted by the
17       commissioner of insurance.
18             (J)  (1) No policy issued by an insurer to which this section applies
19       shall contain a provision which excludes, limits or otherwise restricts cov-
20       erage because medicaid benefits as permitted by title XIX of the social
21       security act of 1965 are or may be available for the same accident or
22       illness.
23             (2) Violation of this subsection shall be subject to the penalties pre-
24       scribed by K.S.A. 40-2407 and 40-2411, and amendments thereto.
25             (K) The commissioner is hereby authorized to adopt such rules and
26       regulations as may be necessary to carry out the provisions of this section. 
27       Sec.  2. K.S.A. 1998 Supp. 40-2209 is hereby repealed.
28        Sec.  3. This act shall take effect and be in force from and after its
29       publication in the statute book.