Session of 1999
         
HOUSE BILL No. 2125
         
By Representative Edmonds
          
1-26
          
  9             AN  ACT concerning the health care provider insurance availability act;
10             relating to the payment of certain judgments; amending K.S.A. 1998
11             Supp. 40-3403 and repealing the existing section.
12      
13       Be it enacted by the Legislature of the State of Kansas:
14             Section  1. K.S.A. 1998 Supp. 40-3403 is hereby amended to read as
15       follows: 40-3403. (a) For the purpose of paying damages for personal
16       injury or death arising out of the rendering of or the failure to render
17       professional services by a health care provider, self-insurer or inactive
18       health care provider subsequent to the time that such health care provider
19       or self-insurer has qualified for coverage under the provisions of this act,
20       there is hereby established the health care stabilization fund. The fund
21       shall be held in trust in the state treasury and accounted for separately
22       from other state funds. The board of governors shall administer the fund
23       or contract for the administration of the fund with an insurance company
24       authorized to do business in this state.
25             (b)  (1) There is hereby created a board of governors which shall be
26       composed of such members and shall have such powers, duties and func-
27       tions as are prescribed by this act. The board of governors shall:
28             (A) Administer the fund and exercise and perform other powers, du-
29       ties and functions required of the board under the health care provider
30       insurance availability act;
31             (B) provide advice, information and testimony to the appropriate li-
32       censing or disciplinary authority regarding the qualifications of a health
33       care provider;
34             (C) prepare and publish, on or before October 1 of each year, a sum-
35       mary of the fund's activity during the preceding fiscal year, including but
36       not limited to the amount collected from surcharges, the highest and
37       lowest surcharges assessed, the amount paid from the fund, the number
38       of judgments paid from the fund, the number of settlements paid from
39       the fund and the amount in the fund at the end of the fiscal year; and
40             (D) have the authority to grant exemptions from the provisions of
41       subsection (m) of this section when a health care provider temporarily
42       leaves the state for the purpose of obtaining additional education or train-
43       ing or to participate in religious, humanitarian or government service

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  1       programs. Whenever a health care provider has previously left the state
  2       for one of the reasons specified in this paragraph and returns to the state
  3       and recommences practice, the board of governors may refund any
  4       amount paid by the health care provider pursuant to subsection (m) of
  5       this section if no claims have been filed against such health care provider
  6       during the provider's temporary absence from the state.
  7             (2) The board shall consist of 10 persons appointed by the commis-
  8       sioner of insurance, as provided by this subsection (b) and as follows:
  9             (A) Three members who are licensed to practice medicine and sur-
10       gery in Kansas who are doctors of medicine and who are on a list of
11       nominees submitted to the commissioner by the Kansas medical society;
12             (B) three members who are representatives of Kansas hospitals and
13       who are on a list of nominees submitted to the commissioner by the
14       Kansas hospital association;
15             (C) two members who are licensed to practice medicine and surgery
16       in Kansas who are doctors of osteopathic medicine and who are on a list
17       of nominees submitted to the commissioner by the Kansas association of
18       osteopathic medicine;
19             (D) one member who is licensed to practice chiropractic in Kansas
20       and who is on a list of nominees submitted to the commissioner by the
21       Kansas chiropractic association;
22             (E) one member who is a licensed professional nurse authorized to
23       practice as a registered nurse anesthetist who is on a list of nominees
24       submitted to the commissioner by the Kansas association of nurse
25       anesthetists.
26             (3) When a vacancy occurs in the membership of the board of gov-
27       ernors created by this act, the commissioner shall appoint a successor of
28       like qualifications from a list of three nominees submitted to the com-
29       missioner by the professional society or association prescribed by this
30       section for the category of health care provider required for the vacant
31       position on the board of governors. All appointments made shall be for a
32       term of office of four years, but no member shall be appointed for more
33       than two successive four-year terms. Each member shall serve until a
34       successor is appointed and qualified. Whenever a vacancy occurs in the
35       membership of the board of governors created by this act for any reason
36       other than the expiration of a member's term of office, the commissioner
37       shall appoint a successor of like qualifications to fill the unexpired term.
38       In each case of a vacancy occurring in the membership of the board of
39       governors, the commissioner shall notify the professional society or as-
40       sociation which represents the category of health care provider required
41       for the vacant position and request a list of three nominations of health
42       care providers from which to make the appointment.
43             (4) The board of governors shall organize on July 1 of each year and

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  1       shall elect a chairperson and vice-chairperson from among its member-
  2       ship. Meetings shall be called by the chairperson or by a written notice
  3       signed by three members of the board.
  4             (5) The board of governors, in addition to other duties imposed by
  5       this act, shall study and evaluate the operation of the fund and make such
  6       recommendations to the legislature as may be appropriate to ensure the
  7       viability of the fund.
  8             (6)  (A) The board shall appoint an executive director who shall be in
  9       the unclassified service under the Kansas civil service act and may appoint
10       such attorneys, legal assistants, claims managers and compliance auditors
11       who shall also be in the unclassified service under the Kansas civil service
12       act. Such executive director, attorneys, legal assistants, claims managers
13       and compliance auditors shall receive compensation fixed by the board,
14       in accordance with appropriation acts of the legislature, not subject to
15       approval of the governor.
16             (B) The board may appoint such additional employees, and provide
17       all office space, services, equipment, materials and supplies, and all budg-
18       eting, personnel, purchasing and related management functions required
19       by the board in the exercise of the powers, duties and functions imposed
20       or authorized by the health care provider insurance availability act or may
21       enter into a contract with the commissioner of insurance for the provision,
22       by the commissioner, of all or any part thereof.
23             (7) The commissioner shall:
24             (A) Provide technical and administrative assistance to the board of
25       governors with respect to administration of the fund upon request of the
26       board;
27             (B) provide such expertise as the board may reasonably request with
28       respect to evaluation of claims or potential claims.
29             (c) Subject to subsections (d), (e), (f), (i), (k), (m), (n), (o), (p) and
30       (q), the fund shall be liable to pay: (1) Any amount due from a judgment
31       or settlement which is in excess of the basic coverage liability of all liable
32       resident health care providers or resident self-insurers for any personal
33       injury or death arising out of the rendering of or the failure to render
34       professional services within or without this state;
35             (2) subject to the provisions of subsection (m), any amount due from
36       a judgment or settlement which is in excess of the basic coverage liability
37       of all liable nonresident health care providers or nonresident self-insurers
38       for any such injury or death arising out of the rendering or the failure to
39       render professional services within this state but in no event shall the
40       fund be obligated for claims against nonresident health care providers or
41       nonresident self-insurers who have not complied with this act or for
42       claims against nonresident health care providers or nonresident self-in-
43       surers that arose outside of this state;

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  1             (3) subject to the provisions of subsection (m), any amount due from
  2       a judgment or settlement against a resident inactive health care provider,
  3       an optometrist or pharmacist who purchased coverage pursuant to sub-
  4       section (n) or a physical therapist who purchased coverage pursuant to
  5       subsection (o), for any such injury or death arising out of the rendering
  6       of or failure to render professional services;
  7             (4) subject to the provisions of subsection (m), any amount due from
  8       a judgment or settlement against a nonresident inactive health care pro-
  9       vider, an optometrist or pharmacist who purchased coverage pursuant to
10       subsection (n) or a physical therapist who purchased coverage pursuant
11       to subsection (o), for any injury or death arising out of the rendering or
12       failure to render professional services within this state, but in no event
13       shall the fund be obligated for claims against: (A) Nonresident inactive
14       health care providers who have not complied with this act; or (B) non-
15       resident inactive health care providers for claims that arose outside of this
16       state, unless such health care provider was a resident health care provider
17       or resident self-insurer at the time such act occurred;
18             (5) subject to subsection (b) of K.S.A. 40-3411, and amendments
19       thereto, reasonable and necessary expenses for attorney fees incurred in
20       defending the fund against claims;
21             (6) any amounts expended for reinsurance obtained to protect the
22       best interests of the fund purchased by the board of governors, which
23       purchase shall be subject to the provisions of K.S.A. 75-3738 through 75-
24       3744, and amendments thereto, but shall not be subject to the provisions
25       of K.S.A. 75-4101 and amendments thereto;
26             (7) reasonable and necessary actuarial expenses incurred in admin-
27       istering the act, including expenses for any actuarial studies contracted
28       for by the legislative coordinating council, which expenditures shall not
29       be subject to the provisions of K.S.A. 75-3738 through 75-3744, and
30       amendments thereto;
31             (8) periodically to the plan or plans, any amount due pursuant to
32       subsection (a)(3) of K.S.A. 40-3413 and amendments thereto;
33             (9) reasonable and necessary expenses incurred by the board of gov-
34       ernors in the administration of the fund or in the performance of other
35       powers, duties or functions of the board under the health care provider
36       insurance availability act;
37             (10) return of any unearned surcharge;
38             (11) subject to subsection (b) of K.S.A. 40-3411, and amendments
39       thereto, reasonable and necessary expenses for attorney fees and other
40       costs incurred in defending a person engaged or who was engaged in
41       residency training or the private practice corporations or foundations and
42       their full-time physician faculty employed by the university of Kansas
43       medical center from claims for personal injury or death arising out of the

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  1       rendering of or the failure to render professional services by such health
  2       care provider;
  3             (12) notwithstanding the provisions of subsection (m), any amount
  4       due from a judgment or settlement for an injury or death arising out of
  5       the rendering of or failure to render professional services by a person
  6       engaged or who was engaged in residency training or the private practice
  7       corporations or foundations and their full-time physician faculty em-
  8       ployed by the university of Kansas medical center;
  9             (13) subject to the provisions of K.S.A. 65-429 and amendments
10       thereto, reasonable and necessary expenses for the development and pro-
11       motion of risk management education programs and for the medical care
12       facility licensure and risk management survey functions carried out under
13       K.S.A. 65-429 and amendments thereto;
14             (14) notwithstanding the provisions of subsection (m), any amount,
15       but not less than the required basic coverage limits, owed pursuant to a
16       judgment or settlement for any injury or death arising out of the rendering
17       of or failure to render professional services by a person, other than a
18       person described in clause (12) of this subsection (c), who was engaged
19       in a postgraduate program of residency training approved by the state
20       board of healing arts but who, at the time the claim was made, was no
21       longer engaged in such residency program;
22             (15) subject to subsection (b) of K.S.A. 40-3411, and amendments
23       thereto, reasonable and necessary expenses for attorney fees and other
24       costs incurred in defending a person described in clause (14) of this sub-
25       section (c);
26             (16) expenses incurred by the commissioner in the performance of
27       duties and functions imposed upon the commissioner by the health care
28       provider insurance availability act, and expenses incurred by the com-
29       missioner in the performance of duties and functions under contracts
30       entered into between the board and the commissioner as authorized by
31       this section; and
32             (17) periodically to the state general fund reimbursements of
33       amounts paid to members of the health care stabilization fund oversight
34       committee for compensation, travel expenses and subsistence expenses
35       pursuant to subsection (e) of K.S.A. 40-3403b, and amendments thereto.
36             (d)  (1) Except as provided in paragraph (2), all amounts for which
37       the fund is liable pursuant to subsection (c) shall be paid promptly and
38       in full except that, if the amount for which the fund is liable is $300,000
39       or more, it shall be paid, by installment payments of $300,000 or 10% of
40       the amount of the judgment including interest thereon, whichever is
41       greater, per fiscal year, the first installment to be paid within 60 days after
42       the fund becomes liable and each subsequent installment to be paid an-
43       nually on the same date of the year the first installment was paid, until

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  1       the claim has been paid in full. Any attorney fees payable from such
  2       installment shall be similarly prorated.
  3             (2) All amounts for which the fund is liable pursuant to subsection
  4       (c) for a judgment or settlement on and after July 1, 1999, shall be paid
  5       promptly and in full. The amount shall be paid within 60 days after the
  6       fund becomes liable.
  7             (e) In no event shall the fund be liable to pay in excess of $3,000,000
  8       pursuant to any one judgment or settlement against any one health care
  9       provider relating to any injury or death arising out of the rendering of or
10       the failure to render professional services on and after July 1, 1984, and
11       before July 1, 1989, subject to an aggregate limitation for all judgments
12       or settlements arising from all claims made in any one fiscal year in the
13       amount of $6,000,000 for each health care provider.
14             (f) The fund shall not be liable to pay in excess of the amounts spec-
15       ified in the option selected by the health care provider pursuant to sub-
16       section (l) for judgments or settlements relating to injury or death arising
17       out of the rendering of or failure to render professional services by such
18       health care provider on or after July 1, 1989.
19             (g) A health care provider shall be deemed to have qualified for cov-
20       erage under the fund:
21             (1) On and after July 1, 1976, if basic coverage is then in effect;
22             (2) subsequent to July 1, 1976, at such time as basic coverage be-
23       comes effective; or
24             (3) upon qualifying as a self-insurer pursuant to K.S.A. 40-3414 and
25       amendments thereto.
26             (h) A health care provider who is qualified for coverage under the
27       fund shall have no vicarious liability or responsibility for any injury or
28       death arising out of the rendering of or the failure to render professional
29       services inside or outside this state by any other health care provider who
30       is also qualified for coverage under the fund. The provisions of this sub-
31       section shall apply to all claims filed on or after July 1, 1986.
32             (i) Notwithstanding the provisions of K.S.A. 40-3402 and amend-
33       ments thereto, if the board of governors determines due to the number
34       of claims filed against a health care provider or the outcome of those
35       claims that an individual health care provider presents a material risk of
36       significant future liability to the fund, the board of governors is authorized
37       by a vote of a majority of the members thereof, after notice and an op-
38       portunity for hearing in accordance with the provisions of the Kansas
39       administrative procedure act, to terminate the liability of the fund for all
40       claims against the health care provider for damages for death or personal
41       injury arising out of the rendering of or the failure to render professional
42       services after the date of termination. The date of termination shall be
43       30 days after the date of the determination by the board of governors.

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  1       The board of governors, upon termination of the liability of the fund
  2       under this subsection, shall notify the licensing or other disciplinary board
  3       having jurisdiction over the health care provider involved of the name of
  4       the health care provider and the reasons for the termination.
  5             (j)  (1) Upon the payment of moneys from the health care stabiliza-
  6       tion fund pursuant to subsection (c)(11), the board of governors shall
  7       certify to the director of accounts and reports the amount of such pay-
  8       ment, and the director of accounts and reports shall transfer an amount
  9       equal to the amount certified, reduced by any amount transferred pur-
10       suant to paragraph (3) of this subsection (j), from the state general fund
11       to the health care stabilization fund.
12             (2) Upon the payment of moneys from the health care stabilization
13       fund pursuant to subsection (c)(12), the board of governors shall certify
14       to the director of accounts and reports the amount of such payment which
15       is equal to the basic coverage liability of self-insurers, and the director of
16       accounts and reports shall transfer an amount equal to the amount cer-
17       tified, reduced by any amount transferred pursuant to paragraph (3) of
18       this subsection (j), from the state general fund to the health care stabili-
19       zation fund.
20             (3) The university of Kansas medical center private practice foun-
21       dation reserve fund is hereby established in the state treasury. If the
22       balance in such reserve fund is less than $500,000 on July 1 of any year,
23       the private practice corporations or foundations referred to in subsection
24       (c) of K.S.A. 40-3402, and amendments thereto, shall remit the amount
25       necessary to increase such balance to $500,000 to the state treasurer for
26       credit to such reserve fund as soon after such July 1 date as is practicable.
27       Upon receipt of each such remittance, the state treasurer shall credit the
28       same to such reserve fund. When compliance with the foregoing provi-
29       sions of this paragraph have been achieved on or after July 1 of any year
30       in which the same are applicable, the state treasurer shall certify to the
31       board of governors that such reserve fund has been funded for the year
32       in the manner required by law. Moneys in such reserve fund may be
33       invested or reinvested in accordance with the provisions of K.S.A. 40-
34       3406, and amendments thereto, and any income or interest earned by
35       such investments shall be credited to such reserve fund. Upon payment
36       of moneys from the health care stabilization fund pursuant to subsection
37       (c)(11) or (c)(12) with respect to any private practice corporation or foun-
38       dation or any of its full-time physician faculty employed by the university
39       of Kansas, the director of accounts and reports shall transfer an amount
40       equal to the amount paid from the university of Kansas medical center
41       private practice foundation reserve fund to the health care stabilization
42       fund or, if the balance in such reserve fund is less than the amount so
43       paid, an amount equal to the balance in such reserve fund.

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  1             (4) Upon payment of moneys from the health care stabilization fund
  2       pursuant to subsection (c)(14) or (c)(15), the board of governors shall
  3       certify to the director of accounts and reports the amount of such pay-
  4       ment, and the director of accounts and reports shall transfer an amount
  5       equal to the amount certified from the state general fund to the health
  6       care stabilization fund.
  7             (k) Notwithstanding any other provision of the health care provider
  8       insurance availability act, no psychiatric hospital licensed under K.S.A.
  9       75-3307b and amendments thereto shall be assessed a premium sur-
10       charge or be entitled to coverage under the fund if such hospital has not
11       paid any premium surcharge pursuant to K.S.A. 40-3404 and amend-
12       ments thereto prior to January 1, 1988.
13             (l) On or after July 1, 1989, every health care provider shall make an
14       election to be covered by one of the following options provided in this
15       subsection (l) which shall limit the liability of the fund with respect to
16       judgments or settlements relating to injury or death arising out of the
17       rendering of or failure to render professional services on or after July 1,
18       1989. Such election shall be made at the time the health care provider
19       renews the basic coverage in effect on July 1, 1989, or, if basic coverage
20       is not in effect, such election shall be made at the time such coverage is
21       acquired pursuant to K.S.A. 40-3402, and amendments thereto. Notice
22       of the election shall be provided by the insurer providing the basic cov-
23       erage in the manner and form prescribed by the board of governors and
24       shall continue to be effective from year to year unless modified by a
25       subsequent election made prior to the anniversary date of the policy. The
26       health care provider may at any subsequent election reduce the dollar
27       amount of the coverage for the next and subsequent fiscal years, but may
28       not increase the same, unless specifically authorized by the board of gov-
29       ernors. Any election of fund coverage limits, whenever made, shall be
30       with respect to judgments or settlements relating to injury or death arising
31       out of the rendering of or failure to render professional services on or
32       after the effective date of such election of fund coverage limits. Such
33       election shall be made for persons engaged in residency training and
34       persons engaged in other postgraduate training programs approved by
35       the state board of healing arts at medical care facilities or mental health
36       centers in this state by the agency or institution paying the surcharge
37       levied under K.S.A. 40-3404, and amendments thereto, for such persons.
38       Such options shall be as follows:
39             (1) OPTION 1. The fund shall not be liable to pay in excess of
40       $100,000 pursuant to any one judgment or settlement for any party
41       against such health care provider, subject to an aggregate limitation for
42       all judgments or settlements arising from all claims made in the fiscal year
43       in an amount of $300,000 for such provider.

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  1             (2) OPTION 2. The fund shall not be liable to pay in excess of
  2       $300,000 pursuant to any one judgment or settlement for any party
  3       against such health care provider, subject to an aggregate limitation for
  4       all judgments or settlements arising from all claims made in the fiscal year
  5       in an amount of $900,000 for such provider.
  6             (3) OPTION 3. The fund shall not be liable to pay in excess of
  7       $800,000 pursuant to any one judgment or settlement for any party
  8       against such health care provider, subject to an aggregate limitation for
  9       all judgments or settlements arising from all claims made in the fiscal year
10       in an amount of $2,400,000 for such health care provider.
11             (m) The fund shall not be liable for any amounts due from a judgment
12       or settlement against resident or nonresident inactive health care provid-
13       ers who first qualify as an inactive health care provider on or after July 1,
14       1989, unless such health care provider has been in compliance with K.S.A.
15       40-3402, and amendments thereto, for a period of not less than five years.
16       If a health care provider has not been in compliance for five years, such
17       health care provider may make application and payment for the coverage
18       for the period while they are nonresident health care providers, nonres-
19       ident self-insurers or resident or nonresident inactive health care provid-
20       ers to the fund. Such payment shall be made within 30 days after the
21       health care provider ceases being an active health care provider and shall
22       be made in an amount determined by the board of governors to be suf-
23       ficient to fund anticipated claims based upon reasonably prudent actuarial
24       principles. The provisions of this subsection shall not be applicable to any
25       health care provider which becomes inactive through death or retirement,
26       or through disability or circumstances beyond such health care provider's
27       control, if such health care provider notifies the board of governors and
28       receives approval for an exemption from the provisions of this subsection.
29       Any period spent in a postgraduate program of residency training ap-
30       proved by the state board of healing arts shall not be included in com-
31       putation of time spent in compliance with the provisions of K.S.A. 40-
32       3402, and amendments thereto.
33             (n) Notwithstanding the provisions of subsection (m) or any other
34       provision in article 34 of chapter 40 of the Kansas Statutes Annotated to
35       the contrary, the fund shall not be liable for any claim made on or after
36       July 1, 1991, against a licensed optometrist or pharmacist relating to any
37       injury or death arising out of the rendering of or failure to render pro-
38       fessional services by such optometrist or pharmacist prior to July 1, 1991,
39       unless such optometrist or pharmacist qualified as an inactive health care
40       provider prior to July 1, 1991.
41             (o) Notwithstanding the provisions of subsection (m) or any other
42       provision in article 34 of chapter 40 of the Kansas Statutes Annotated to
43       the contrary, the fund shall not be liable for any claim made on or after

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  1       July 1, 1995, against a physical therapist registered by the state board of
  2       healing arts relating to any injury or death arising out of the rendering of
  3       or failure to render professional services by such physical therapist prior
  4       to July 1, 1995, unless such physical therapist qualified as an inactive
  5       health care provider prior to July 1, 1995.
  6             (p) Notwithstanding the provisions of subsection (m) or any other
  7       provision in article 34 of chapter 40 of the Kansas Statutes Annotated to
  8       the contrary, the fund shall not be liable for any claim made on or after
  9       July 1, 1997, against a health maintenance organization relating to any
10       injury or death arising out of the rendering of or failure to render pro-
11       fessional services by such health maintenance organization prior to July
12       1, 1997, unless such health maintenance organization qualified as an in-
13       active health care provider prior to July 1, 1997, and obtained coverage
14       pursuant to subsection (m). Health maintenance organizations not qual-
15       ified as inactive health care providers prior to July 1, 1997, may purchase
16       coverage from the fund for periods of prior compliance by making ap-
17       plication prior to August 1, 1997, and payment within 30 days from notice
18       of the calculated amount as determined by the board of governors to be
19       sufficient to fund anticipated claims based on reasonably prudent actu-
20       arial principles.
21             (q) Notwithstanding anything in article 34 of chapter 40 of the Kansas
22       Statutes Annotated to the contrary, the fund shall in no event be liable
23       for any claims against any health care provider based upon or relating to
24       the health care provider's sexual acts or activity, but in such cases the
25       fund may pay reasonable and necessary expenses for attorney fees in-
26       curred in defending the fund against such claim. The fund may recover
27       all or a portion of such expenses for attorney fees if an adverse judgment
28       is returned against the health care provider for damages resulting from
29       the health care provider's sexual acts or activity. 
30       Sec.  2. K.S.A. 1998 Supp. 40-3403 is hereby repealed.
31        Sec.  3. This act shall take effect and be in force from and after its
32       publication in the statute book.