CHAPTER 147
SENATE Substitute for HOUSE BILL No. 2005
An Act relating to insurance; concerning accounting procedures and
investments by insur-
ance companies; concerning health maintenance organizations;
concerning standards for
prompt, fair and equitable settlement of health care claims and
payment for health care
services; establishing unfair trade practices act violations;
amending K.S.A. 40-12a09 and
K.S.A. 1999 Supp. 40-2404, 40-3202, 40-3209, 40-3220, 40-3227,
40-3606 and 45-221
and repealing the existing sections; also repealing K.S.A. 40-2a15,
40-2a23, 40-2b14 and
40-2b22.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 40-12a09 is
hereby amended to read as follows: 40-
12a09. Each company organized pursuant to this act shall file an
annual
statement each year in accordance with the requirements for
domestic
insurers writing the same kind of insurance. Any company
organized pur-
suant to this act may state its liabilities for losses and
loss adjustment
expenses on a present value basis in any statement or
report which the
company is required to file so long as the company's
surplus as reported
upon such basis remains above $1 million, unless the
commissioner de-
termines the method used by the company to arrive at the
present value
of its liabilities for losses and loss adjustment expense
is based upon un-
reasonable assumptions. Any company organized
pursuant to this section
which states its liabilities for losses and loss adjustment
expenses on a
present value basis on the effective date of this act shall be
allowed a
reasonable period of time to discontinue such practice in
accordance with
a plan approved by the commissioner.
New Sec. 2. As used in sections 2
through 31 and amendments
thereto:
(a) ``Adjusted RBC report'' means an RBC
report which has been
adjusted by the commissioner in accordance with section 5 and
amend-
ments thereto.
(b) ``Corrective order'' means an order
issued by the commissioner
specifying corrective actions which the commissioner has determined
are
required.
(c) ``Domestic health organization''
means any health organization
which is licensed and organized in this state.
(d) ``Foreign health organization'' means
any health organization not
domiciled in this state which is licensed to do business in this
state pur-
suant to articles 19a, 19c or 32 of chapter 40 of the Kansas
Statutes
Annotated, and amendments thereto.
(e) ``NAIC'' means the national
association of insurance commission-
ers.
(f) ``Health organization'' means a
health maintenance organization,
limited health service organization, dental or vision plan,
hospital, medical
and dental indemnity or service corporation or other managed care
or-
ganization licensed under articles 19a, 19c or 32 of chapter 40 of
the
Kansas Statutes Annotated, and amendments thereto. This
definition
shall not include an organization that is licensed as either a life
and health
insurer or a property and casualty insurer under articles 4, 5, 9,
10, 11,
12, 12a, 15 or 16 of chapter 40 of the Kansas Statutes Annotated,
and
amendments thereto, and that is otherwise subject to either the
life or
property and casualty RBC requirements in K.S.A. 1999 Supp.
40-2c01
et seq., and amendments thereto.
(g) ``RBC'' means risk-based capital.
(h) ``RBC instructions'' means the
risk-based capital instructions for
managed care organizations promulgated by the NAIC which are in
effect
on December 31, 1999, or any later version as adopted by the
commis-
sioner in rules and regulations.
(i) ``RBC level'' means a health
organization's company action level
RBC, regulatory action level RBC, authorized control level RBC, or
man-
datory control level RBC where:
(1) ``Company action level RBC'' means,
with respect to any health
organization, the product of 2.0 and its authorized control level
RBC;
(2) ``regulatory action level RBC'' means
the product of 1.5 and its
authorized control level RBC;
(3) ``authorized control level RBC''
means the number determined
under the risk-based capital formula in accordance with the RBC
instruc-
tions; and
(4) ``mandatory control level RBC'' means
the product of .70 and the
authorized control level RBC.
(j) ``RBC plan'' means a comprehensive
financial plan containing the
elements specified in section 6, and amendments thereto. If the
com-
missioner rejects the RBC plan, and it is revised by the health
organiza-
tion, with or without the commissioner's recommendation, the plan
shall
be called the ``revised RBC plan.''
(k) ``RBC report'' means the report
required by sections 3, 4 and 5
and amendments thereto.
(l) ``Total adjusted capital'' means the
sum of:
(1) A health organization's capital and
surplus as determined in ac-
cordance with the annual financial statements required to be filed
under
articles 19a, 19c or 32 of chapter 40 of the Kansas Statutes
Annotated
and amendments thereto; and
(2) such other items, if any, as the RBC
instructions may provide.
(m) ``Commissioner'' means the
commissioner of insurance.
New Sec. 3. (a) Except as provided
in paragraph (b), every domestic
health organization shall prepare and submit to the commissioner,
on or
before March 1, a report of its RBC levels as of the end of the
calendar
year just ended in a form and containing such information as is
required
by the RBC instructions. In addition, every domestic health
organization
shall file its RBC report:
(1) With the NAIC in accordance with the
RBC instructions; and
(2) with the insurance commissioner in
any state in which the health
organization is authorized to do business, if such insurance
commissioner
has notified the health organization of its request in writing, in
which
case, the health organization shall file its RBC report not later
than the
later of:
(A) 15 days from the receipt of notice to
file its RBC report with that
state; or
(B) the filing date otherwise specified
in this subsection.
(b) The risk-based capital requirements
of this section shall not apply
to any health organization contracting with the Kansas department
of
social and rehabilitation services to provide services provided
under title
XIX and title XXI of the social security act or any other public
benefits,
provided the public benefit contracts represent at least 90% of the
pre-
mium volume of the health organization.
New Sec. 4. (a) A health
organization's RBC shall be determined in
accordance with the formula set forth in the RBC instructions. The
for-
mula shall take into account and may adjust for the covariance
between:
(1) Asset risk;
(2) credit risk;
(3) underwriting risk; and
(4) all other business risks and such
other relevant risks as are set
forth in the RBC instructions; determined in each case by applying
the
factors in the manner set forth in the RBC instructions.
(b) An excess of capital over the amount
produced by the risk-based
capital requirements contained in this act and the formulas,
schedules
and instructions referenced in this act is desirable in the
business of in-
surance. Accordingly, each health organization should seek to
maintain
capital above the RBC levels required by this act. Additional
capital is
used and useful in the insurance business and helps to secure a
health
organization against various risks inherent in, or affecting, the
business of
insurance and not accounted for or only partially measured by the
risk-
based capital requirements contained in this act.
New Sec. 5. If a domestic health
organization files an RBC report
which in the judgment of the commissioner is inaccurate, the
commis-
sioner shall adjust the RBC report to correct the inaccuracy and
shall
notify such health organization of the adjustment. The notice shall
contain
a statement of the reason for the adjustment. A RBC report as so
adjusted
is referred to as an adjusted RBC report.
New Sec. 6. ``Company action level
event'' means any of the follow-
ing events:
(a) The filing of an RBC report by a
health organization which indi-
cates that a health organization's total adjusted capital is
greater than or
equal to its regulatory action level RBC but less than its company
action
level RBC.
(b) The notification by the commissioner
to the health organization
of an adjusted RBC report that indicates the event described in
subsec-
tion (a) if:
(1) The health organization does not
challenge the adjusted RBC re-
port pursuant to section 20, and amendments thereto; or
(2) the commissioner has rejected such
challenge after a hearing.
New Sec. 7. In the event of a
company action level event, the health
organization shall prepare and submit to the commissioner an RBC
plan
which shall:
(a) Identify the conditions in the health
organization's operation
which contribute to the company action level event;
(b) contain proposals of corrective
actions which the health organi-
zation intends to take that would be expected to result in the
elimination
of the company action level event;
(c) provide projections of the health
organization's financial results in
the current year and at least the two succeeding years, both in the
absence
of the proposed corrective actions and giving effect to the
proposed cor-
rective actions, including projections of statutory balance sheets,
operat-
ing income, net income, capital and surplus, and RBC levels. The
pro-
jections for both new and renewal business may include separate
projections for each major line of business and separately identify
each
significant income, expense and benefit component;
(d) identify the key assumptions
impacting the health organization's
projections and the sensitivity of the projections to the
assumptions; and
(e) identify the quality of, and problems
associated with, the health
organization's business, including, but not limited to, its assets,
antici-
pated business growth and associated surplus strain, extraordinary
expo-
sure to risk, mix of business and use of reinsurance in each case,
if any.
New Sec. 8. The RBC plan shall be
submitted:
(a) Within 45 days of the company action
level event; or
(b) within 45 days after notification to
the health organization that
the commissioner has rejected the health organization's challenge
to an
adjusted RBC report pursuant to section 20 and amendments
thereto.
New Sec. 9. Within 60 days after
the submission by a health organ-
ization of an RBC plan to the commissioner, the commissioner shall
notify
the health organization whether the RBC plan shall be implemented
or
is, in the judgment of the commissioner, unsatisfactory. If the
commis-
sioner determines the RBC plan is unsatisfactory, the notification
to the
health organization shall state the reasons for the determination,
and may
state proposed revisions which, in the judgments of the
commissioner,
will render the RBC plan satisfactory. Upon notification from the
com-
missioner, the health organization shall prepare a revised RBC plan
and
shall submit the revised RBC plan to the commissioner:
(a) Within 45 days after the notification
from the commissioner; or
(b) within 45 days after a notification
to the health organization that
the commissioner has, pursuant to section 20, and amendments
thereto,
rejected the health organization's challenge to the commissioner's
original
findings as authorized by this section.
New Sec. 10. In the event of a
notification by the commissioner to
a health organization that the health organization's RBC plan or
revised
RBC plan is unsatisfactory, the commissioner, subject to the health
or-
ganization's right to a hearing under section 20, and amendments
thereto,
may specify in the notification that the notification constitutes a
regulatory
action level event.
New Sec. 11. Every domestic health
organization that files an RBC
plan or revised RBC plan with the commissioner shall file a copy of
the
RBC plan or revised RBC plan with the insurance commissioner in
any
state in which the health organization is authorized to do business
if:
(a) Such state has an RBC provision
substantially similar to section
21, and amendments thereto; and
(b) the insurance commissioner of that
state has notified the health
organization of such insurance commissioner's request for the
filing in
writing, in which case the health organization shall file a copy of
the RBC
plan or revised RBC plan in that state no later than the later
of:
(1) 15 days after the receipt of notice
to file a copy of its RBC plan
or revised RBC plan with the state; or
(2) the date on which the final RBC plan
or revised RBC plan is filed
under section 8 or 9, and amendments thereto.
New Sec. 12. ``Regulatory action
level event'' means, with respect to
any health organization, any of the following events:
(a) The filing of an RBC report by the
health organization which
indicates that the health organization's total adjusted capital is
greater
than or equal to its authorized control level RBC but less than its
regu-
latory action level RBC;
(b) the notification by the commissioner
to the health organization of
an adjusted RBC report that indicates the event described in
subsection
(a) if:
(1) The health organization does not
challenge the adjusted RBC re-
port pursuant to section 20, and amendments thereto; or
(2) the commissioner has rejected such
challenge after a hearing; and
(c) the failure of the health
organization to file an RBC report by the
filing date, unless the health organization has provided an
explanation for
such failure which is satisfactory to the commissioner and has
cured the
failure within 10 days after the filing date;
(d) the failure of the health
organization to submit an RBC plan to
the commissioner within the time period set forth in section 8,
and
amendments thereto;
(e) notification by the commissioner to
the health organization that:
(1) The RBC plan or revised RBC plan
submitted by the health or-
ganization is, in the judgment of the commissioner, unsatisfactory;
and
(2) (A) the health organization has not
challenged the determination
pursuant to section 20, and amendments thereto; or
(B) the commissioner has rejected such
challenge.
(f) Notification by the commissioner to
the health organization that
the health organization has failed to adhere to its RBC plan or
revised
RBC plan, but only if such failure has a substantial adverse effect
on the
ability of the health organization to eliminate the company action
level
event in accordance with its RBC plan or revised RBC plan and
the
commissioner has so stated in the notification, if:
(1) The health organization has not
challenged such determination
pursuant to section 20, and amendments thereto; or
(2) the commissioner has rejected such
challenge after a hearing.
New Sec. 13. In the event of a
regulatory action level event, the
commissioner shall:
(a) Require the health organization to
prepare and submit an RBC
plan or, if applicable, a revised RBC plan;
(b) perform such examination or analysis
as the commissioner deems
necessary of the assets, liabilities and operations of the health
organization
including a review of its RBC plan or revised RBC plan; and
(c) subsequent to the examination or
analysis, issue a corrective order
specifying such actions as the commissioner determines are
required.
New Sec. 14. In determining
corrective actions, the commissioner
may take into account such factors as are deemed relevant with
respect
to the health organization based upon the commissioner's
examination or
analysis of the assets, liabilities and operations of the health
organization,
including, but not limited to, the results of any sensitivity tests
undertaken
pursuant to the RBC instructions. The RBC plan or revised RBC
plan
shall be submitted:
(a) Within 45 days after the occurrence
of the regulatory action level
event;
(b) within 45 days after the notification
to the health organization
that the commissioner has rejected the health organization's
challenge to
an adjusted RBC report pursuant to section 20, and amendments
thereto;
or
(c) within 45 days after notification to
the health organization that
the commissioner has rejected the health organization's challenge
to a
revised RBC plan pursuant to section 20, and amendments
thereto.
New Sec. 15. The commissioner may
retain actuaries and investment
experts and other consultants as may be necessary in the judgment
of the
commissioner to review the health organization's RBC plan or
revised
RBC plan, examine or analyze the assets, liabilities and operations
of the
health organization and formulate the corrective order with respect
to
the health organization. The reasonable fees, costs and expenses
relating
to consultants shall be borne by the affected health organization
or other
party as directed by the commissioner.
New Sec. 16. ``Authorized control
level event'' means any of the fol-
lowing events:
(a) The filing of an RBC report by the
health organization which
indicates that the health organization's total adjusted capital is
greater
than or equal to its mandatory control level RBC but less than its
au-
thorized control level RBC;
(b) the notification by the commissioner
to the health organization of
an adjusted RBC report that indicates the event described in
subsection
(a) if:
(1) The health organization does not
challenge the adjusted RBC re-
port pursuant to section 20, and amendments thereto; or
(2) the commissioner has rejected such
challenge after a hearing;
(c) the failure of the health
organization to respond, in a manner
satisfactory to the commissioner, to a corrective order if the
health or-
ganization has not challenged the corrective order under section
20, and
amendments thereto; or
(d) if the commissioner has rejected the
challenge to the corrective
order or modified the corrective order pursuant to section 20, and
amend-
ments thereto, the failure of the health organization to respond,
in a
manner satisfactory to the commissioner, to the corrective order
subse-
quent to rejection or modification by the commissioner.
New Sec. 17. In the event of an
authorized control level event with
respect to a health organization, the commissioner:
(a) Shall take such actions as are
required under sections 12 through
15, and amendments thereto, regarding a health organization with
respect
to which a regulatory action level event has occurred; or
(b) if the commissioner deems it to be in
the best interests of the
policyholders and creditors of the health organization and of the
public,
shall take such actions as are necessary to cause the health
organization
to be placed under regulatory control pursuant to K.S.A. 40-3605
et seq.,
and amendments thereto. In the event the commissioner takes such
ac-
tions, the authorized control level event shall be deemed
sufficient
grounds for the commissioner to take action under K.S.A. 40-3605
et seq.,
and amendments thereto, and the commissioner shall have the
rights,
powers and duties with respect to the health organization as are
set forth
in K.S.A. 40-3605 et seq., and amendments thereto. In the
event the
commissioner takes actions under this subsection pursuant to an
adjusted
RBC report, the health organization shall be entitled to such
protections
as are afforded to health organizations under the provisions of
K.S.A. 77-
501 et seq., and amendments thereto, pertaining to summary
proceedings.
New Sec. 18. ``Mandatory control
event'' means any of the following
events:
(a) The filing of an RBC report by the
health organization which
indicates that the health organization's total adjusted capital is
less than
its mandatory control level RBC;
(b) the notification by the commissioner
to the health organization of
an adjusted RBC report that indicates the event described in
subsection
(a) if:
(1) The health organization does not
challenge the adjusted RBC re-
port pursuant to section 20 and amendments thereto; or
(2) the commissioner has rejected such
challenge.
New Sec. 19. In the event of a
mandatory control level event the
commissioner shall take actions as are necessary to cause the
health or-
ganization to be placed under regulatory control under K.S.A.
40-3605 et
seq., and amendments thereto. In that event, the mandatory
control level
event shall be deemed sufficient grounds for the commissioner to
take
action under K.S.A. 40-3605 et seq., and amendments thereto,
and the
commissioner shall have the rights, powers and duties with respect
to the
health organization as are set forth in K.S.A. 40-3605 et
seq., and amend-
ments thereto. In the event the commissioner takes actions pursuant
to
an adjusted RBC report, the health organization shall be entitled
to such
protections as are afforded to health organizations under the
provisions
of K.S.A. 77-501 et seq. and amendments thereto, pertaining
to summary
proceedings. Notwithstanding any of the foregoing, the
commissioner
may forego action for up to 90 days after the mandatory control
level
event if there is a reasonable expectation that the mandatory
control level
event may be eliminated within the 90-day period.
New Sec. 20. (a) Upon notification
to a health organization by the
commissioner of an adjusted RBC report; or
(b) upon notification to an health
organization by the commissioner
that:
(1) The health organization's RBC plan or
revised RBC plan is un-
satisfactory; and
(2) such notification constitutes a
regulatory action level event with
respect to such health organization; or
(c) upon notification to any health
organization by the commissioner
that the health organization has failed to adhere to its RBC plan
or revised
RBC plan and that such failure has a substantial adverse effect on
the
ability of the health organization to eliminate the company action
level
event with respect to the health organization in accordance with
its RBC
plan or revised RBC plan; or
(d) upon notification to an health
organization by the commissioner
of a corrective order with respect to the health organization, the
health
organization shall have the right to a hearing under the Kansas
adminis-
trative procedure act, at which the health organization may
challenge any
determination or action by the commissioner. The health
organization
shall notify the commissioner of its request for a hearing within
five days
after the notification by the commissioner under subsections (a),
(b), (c)
or (d). Upon receipt of the health organization's request for a
hearing,
the commissioner shall set a date for the hearing, which date shall
be no
less than 10 nor more than 30 days after receipt of the health
organiza-
tion's request. Such hearing shall be governed by K.S.A. 77-513
through
77-532 and amendments thereto.
New Sec. 21. (a) All RBC reports,
RBC plans and any corrective
orders, including the working papers and the results of any
analysis of a
health organization performed under this act shall be kept
confidential
by the commissioner. This information shall not be made public or
subject
to subpoena, other than by the commissioner and then only for the
pur-
pose of enforcement actions taken by the commissioner pursuant to
this
act or any other provision of the insurance laws of this state.
(b) RBC instructions, RBC reports,
adjusted RBC reports, RBC
plans and revised RBC plans are intended solely for use by the
commis-
sioner in monitoring the solvency of health organizations and the
need
for possible corrective action with respect to health organizations
and shall
not be used by the commissioner for ratemaking nor considered or
intro-
duced as evidence in any rate proceeding nor used by the
commissioner
to calculate or derive any elements of an appropriate premium level
or
rate of return for any line of insurance which an health
organization or
any affiliate is authorized to write.
(c) (1) The commissioner may share
or exchange any documents,
materials or other information, including confidential and
privileged doc-
uments referred to in subsection (a), received in the performance
of the
commissioner's duties under this act, with:
(A) The NAIC;
(B) other state, federal or international
regulatory agencies; and
(C) other state, federal or international
law enforcement authorities.
(2) (A) The sharing or exchanging
of documents, materials or other
information under this subsection shall be conditioned upon the
recipi-
ent's authority and agreement to maintain the confidential and
privileged
status, if any, of the documents, materials or other information
being
shared or exchanged.
(B) No waiver of an existing privilege or
claim of confidentiality in
the documents, materials or information shall occur as a result of
disclo-
sure to the commissioner under this section or as a result of
sharing as
authorized by paragraph (1) of subsection (c).
(3) The commissioner of insurance is
hereby authorized to adopt such
rules and regulations establishing protocols governing the exchange
of
information as may be necessary to implement and carry out the
provi-
sions of this act.
New Sec. 22. The comparison of a
health organization's total ad-
justed capital to any of its RBC levels is a regulatory tool, and
shall not
be used to rank health organizations generally. Therefore, except
as oth-
erwise required under the provisions of this act, the making,
publishing,
disseminating, circulating or placing before the public, or
causing, directly
or indirectly to be made, published, disseminated, circulated or
placed
before the public, in a newspaper, magazine or other publication,
or in
the form of a notice, circular, pamphlet, letter or poster, or over
any radio
or television station, or in any other way, an advertisement,
announce-
ment or statement containing an assertion, representation or
statement
with regard to the RBC levels of any health organization, or of any
com-
ponent derived in the calculation, by any health organization,
agent, bro-
ker or other person engaged in any manner in the insurance business
is
prohibited. Notwithstanding the foregoing, if any materially false
state-
ment with respect to the comparison regarding a health
organization's
total adjusted capital to any of its RBC levels or an inappropriate
com-
parison of any other amount to the health organization's RBC levels
is
published in any written publication and the health organization is
able
to demonstrate to the commissioner with substantial proof the
falsity or
misrepresentative nature of such statement, the health organization
may
publish a rebuttal if the sole purpose of such publication is to
rebut the
materially false or improper statement.
New Sec. 23. The provisions of this
act are supplemental to any other
provisions of the laws of this state, and shall not preclude nor
limit any
other powers or duties of the commissioner under such laws,
including
but not limited to K.S.A. 40-3605 et seq. and amendments
thereto.
New Sec. 24. Any foreign health
organization, upon the written re-
quest of the commissioner, shall submit to the commissioner an
RBC
report as of the end of the calendar year just ended the later
of:
(a) The date an RBC report would be
required to be filed by a do-
mestic health organization under this act; or
(b) Fifteen days after the request is
received by the foreign health
organization.
Any foreign health organization, at the
written request of the commis-
sioner, shall submit promptly to the commissioner a copy of any
RBC
plan that is filed with the insurance commissioner of any other
state.
New Sec. 25. In the event of a
company action level event, regulatory
action level event or authorized control level event with respect
to any
foreign health organization as determined under the RBC statute
appli-
cable in the state of domicile of the health organization or, if no
RBC
provision is in force in that state, under the provisions of this
act, if the
insurance commissioner of the state of domicile of the foreign
health
organization fails to require the foreign health organization to
file an RBC
plan in the manner specified under the RBC statute or, if there are
no
RBC provisions in force in the state, under section 6, 7, 8, 9, 10
and 11,
and amendments thereto, the commissioner may require the
foreign
health organization to file an RBC plan with the commissioner. In
such
event, the failure of the foreign health organization to file an
RBC plan
with the commissioner shall be grounds to order the health
organization
to cease and desist from writing new insurance business in this
state.
New Sec. 26. In the event of a
mandatory control level event with
respect to any foreign health organization, if no domiciliary
receiver has
been appointed with respect to the foreign health organization
under the
rehabilitation and liquidation statute applicable in the state of
domicile
of the foreign health organization, the commissioner may make
applica-
tion to the district court as permitted under K.S.A. 40-3605 et
seq. and
amendments thereto with respect to the liquidation of property of
foreign
health organizations found in this state, and the occurrence of the
man-
datory control level event shall be considered adequate grounds for
the
application.
New Sec. 27. All notices by the
commissioner to a health organiza-
tion which may result in regulatory action under this act shall be
effective
upon dispatch if transmitted by registered or certified mail, or in
the case
of any other transmission shall be effective upon the health
organization's
receipt of such notice.
New Sec. 28. If any provision of
this act, or the application of the act
to any person or circumstance, is held invalid, such determination
shall
not affect the provisions or applications of this act which can be
given
effect without the invalid provision or application, and to that
end the
provisions of this act are severable.
New Sec. 29. (a) Any regulatory
action based upon any RBC report
required to be filed by a health organization for such health
organization's
operations during calendar years 2000 and 2001 shall be subject to
the
following:
(1) In the event of a company action
level event with respect to any
health organization, the commissioner shall take no regulatory
action un-
der this act with respect to such health organization.
(2) In the event of a regulatory action
level event with respect to any
health organization under either subsection (a) or (b) of section
12, and
amendments thereto, the commissioner shall take such action with
re-
spect to such health organization under sections 6 through 11,
inclusive,
and amendments thereto, as the commissioner deems necessary.
(3) In the event of a regulatory action
level event with respect to any
health organization under any of subsections (c), (d), (e) or (f)
of section
12, and amendments thereto, or an authorized control level event,
the
commissioner shall take such action with respect to such health
organi-
zation under sections 12 through 15, inclusive, and amendments
thereto,
as the commissioner deems necessary.
(4) In the event of a mandatory control
level event with respect to
any health organization, the commissioner shall take action with
respect
to such health organization as required under sections 16 and 17,
and
amendments thereto.
(b) The provisions of subsection (a)
shall not limit the right of the
commissioner to proceed as authorized by any other provision of
chapter
40 of the Kansas Statutes Annotated, and amendments thereto or
any
rule and regulation adopted thereunder.
New Sec. 30. The commissioner may
adopt reasonable rules and reg-
ulations necessary for the implementation of this act.
New Sec. 31. Sections 2 through 31,
inclusive, and amendments
thereto, shall constitute and may be cited as the health
organization risk
based capital act.
New Sec. 32. (a) If uncovered
expenditures exceed 10% of total
health care expenditures for two consecutive months, a health
mainte-
nance organization shall place an uncovered expenditure insolvency
de-
posit with the commissioner, with an organization or trustee
acceptable
to the commissioner through which a custodial or controlled account
is
maintained, cash or securities that are acceptable to the
commissioner.
The deposit at all times shall have a fair market value in an
amount 120%
of the health maintenance organization's outstanding liability for
uncov-
ered expenditures for enrollees in this state, including incurred
but not
reported claims, and shall be calculated as of the first day of the
month
and maintained for the remainder of the month. If a health
maintenance
organization is not otherwise required to file a quarterly report,
such
health maintenance organization shall file a report within 45 days
of the
end of the calendar quarter with information sufficient to
demonstrate
compliance with this section.
(b) The deposit required under this
section shall be in addition to the
deposit required under K.S.A. 40-3227, and amendments thereto,
and
shall be deemed to be an admitted asset of the health maintenance
or-
ganization in the determination of such health maintenance
organization's
net worth. All income from deposits or trust accounts shall be
deemed
to be assets of the health maintenance organization and may be
withdrawn
from the deposit or account quarterly with the approval of the
commis-
sioner.
(c) A health maintenance organization
that has made a deposit may
withdraw that deposit or any part of the deposit if: (1) A
substitute deposit
of cash or securities of equal amount and value is made;
(2) the fair
market value of such substitute deposit exceeds the amount of the
re-
quired deposit; or (3) the deposit required under subsection
(a) is re-
duced or eliminated. Deposits, substitutions or withdrawals may be
made
only with the prior written approval of the commissioner.
(d) The deposit required under this
section shall be held in trust and
may be used only as provided under this section. The commissioner
may
use all or any portion of the deposit of an insolvent health
maintenance
organization for administrative costs associated with administering
such
deposit and the payment of any claim of an enrollee of this state
for
uncovered expenditures in this state. Each claim for uncovered
expend-
itures shall be paid on a pro rata basis based on assets available
to pay
the ultimate liability for incurred expenditures. A partial
distribution may
be made pending final distribution. Any amount of such deposit
remain-
ing shall be paid into the liquidation or receivership of the
health main-
tenance organization.
(e) The commissioner by regulation may
prescribe the time, manner
and form for filing claims under subsection (d).
(f) The commissioner by regulation or
order may require health
maintenance organizations to file annual, quarterly or more
frequent re-
ports deemed necessary to demonstrate compliance with this section.
The
commissioner may require that the reports include liability for
uncovered
expenditures as well as an audit opinion.
(g) The deposit required under this
section may be satisfied through
other arrangement acceptable to the commissioner including
parental
guarantees and letters of credit.
(h) The commissioner may adopt rules and
regulations to implement
this section.
New Sec. 33. (a) In the event of an
insolvency of a health mainte-
nance organization, the commissioner may order that all other
carriers
that participated in the enrollment process with the insolvent
health main-
tenance organization at a group's last regular enrollment period
shall offer
the group's enrollees of the insolvent health maintenance
organization a
30-day enrollment period commencing upon the date of insolvency.
Un-
der such order each carrier shall offer to each enrollee of the
insolvent
health maintenance organization the same coverages that such
insolvent
health maintenance organization had offered to each enrollee of
the
group at such group's last regular enrollment period at rates
determined
in accordance with the successor health maintenance organization's
ex-
isting rating methodology.
(b) Any individual or enrollee who has
health insurance coverage in-
voluntarily terminated because of the insolvency of such
individual's or
enrollee's health maintenance organization shall be treated as the
equiv-
alent of a federally defined eligible individual for the purposes
of the
Kansas uninsurable health insurance plan act, K.S.A. 40-2117 et
seq. and
amendments thereto.
New Sec. 34. (a) A rehabilitation
liquidation or conservation of a
health maintenance organization shall be deemed to be the
rehabilitation,
liquidation or conservation of an insurance company and shall be
con-
ducted under the supervision of the commissioner pursuant to the
law
governing the rehabilitation, liquidation or conservation of
insurance
companies. The commissioner may apply for an order directing the
com-
missioner to rehabilitate, liquidate or conserve a health
maintenance or-
ganization upon any one or more grounds set out in the insurers
super-
vision, rehabilitation and liquidation act, K.S.A. 40-3605 et
seq., and
amendments thereto, or when in the commissioner's discretion the
con-
tinued operation of such health maintenance organization would be
haz-
ardous either to the enrollees of such health maintenance
organization or
to the people of this state. Each enrollee of such health
maintenance
organization shall have the same priority in the event of
liquidation or
rehabilitation as the law provides to policy holders of an health
organi-
zation.
(b) For purpose of determining the
priority of distribution of general
assets, any claim of any enrollee or enrollees' beneficiary shall
have the
same priority as established by K.S.A. 40-3641, and amendments
thereto,
for policyholders and beneficiaries of insureds of insurance
companies. If
an enrollee is liable to a nonparticipating provider for services
provided
pursuant to and covered by the health maintenance organization,
such
liability shall have the status of such enrollee's claim for
distribution of
general assets. A provider who is obligated by statute or agreement
to
hold any enrollee harmless from liability for services provided
pursuant
to and covered by a health maintenance organization shall have a
priority
of distribution of the general assets immediately following that of
enroll-
ees and enrollees' beneficiaries as described herein, and
immediately pre-
ceding the priority of distribution described in subsection (d) of
K.S.A.
40-3641 and amendments thereto.
New Sec. 35. (a) Whenever the
commissioner determines that the
financial condition of a health maintenance organization is such
that its
continued operation might be hazardous to its enrollees, creditors
or the
general public, or that such health maintenance organization has
violated
any provisions of this act, the commissioner, after notice and
hearing, may
order such health maintenance organization to take action
reasonably nec-
essary to rectify the condition or violation. Such action may
include, but
not limited to one or more of the following:
(1) Reduce the total amount of present
and potential liability for ben-
efits by reinsurance or other method acceptable to the
commissioner;
(2) reduce the volume of any new business
being accepted;
(3) reduce expenses by specified methods
acceptable to the commis-
sioner;
(4) suspend or limit the writing of any
new business for a period of
time;
(5) increase the health maintenance
organization's capital and surplus
by contribution; or
(6) take such other steps the
commissioner may deem appropriate
under the circumstances.
(b) The commissioner may adopt rules and
regulations which set uni-
form standards and criteria for early warning that the continued
operation
of any health maintenance organization might be hazardous to its
enroll-
ees, creditors or the general public and set standards for
evaluating the
financial condition of any health maintenance organization.
New Sec. 36. Sections 32 through
35, and amendments thereto, shall
be part of and supplemental to the health maintenance organization
act
cited at K.S.A. 40-3201 et seq., and amendments thereto.
Sec. 37. K.S.A. 1999 Supp. 40-3202
is hereby amended to read as
follows: 40-3202. As used in this act:
(a) ``Commissioner'' means the
commissioner of insurance of the
state of Kansas.
(b) ``Basic health care services'' means
but is not limited to usual
physician, hospitalization, laboratory, x-ray, emergency and
preventive
services and out-of-area coverage.
(c) ``Capitated basis'' means a fixed per
member per month payment
or percentage of premium payment wherein the provider assumes
risk
for the cost of contracted services without regard to the type,
value or
frequency of services provided. For purposes of this definition,
capitated
basis includes the cost associated with operating staff model
facilities.
(d) ``Carrier'' means a health
maintenance organization, an insurer,
a nonprofit hospital and medical service corporation, or other
entity re-
sponsible for the payment of benefits or provision of services
under a
group contract.
(d)
(e) ``Certificate of coverage'' means a statement of
the essential
features and services of the health maintenance organization
coverage
which is given to the subscriber by the health maintenance
organization,
medicare provider organization or by the group contract holder.
(e)
(f) ``Copayment'' means an amount an enrollee must pay
in order
to receive a specific service which is not fully prepaid.
(f)
(g) ``Deductible'' means an amount an enrollee is
responsible to
pay out-of-pocket before the health maintenance organization begins
to
pay the costs associated with treatment.
(g)
(h) ``Director'' means the secretary of health and
environment.
(h)
(i) ``Disability'' means an injury or illness that
results in a sub-
stantial physical or mental limitation in one or more major life
activities
such as working or independent activities of daily living that a
person was
able to do prior to the injury or illness.
(i)
(j) ``Enrollee'' means a person who has entered into a
contractual
arrangement or on whose behalf a contractual arrangement has
been
entered into with a health maintenance organization or the medicare
pro-
vider organization for health care services.
(j)
(k) ``Grievance'' means a written complaint submitted
in accord-
ance with the formal grievance procedure by or on behalf of the
enrollee
regarding any aspect of the health maintenance organization or the
med-
icare provider organization relative to the enrollee.
(k) (l) ``Group
contract'' means a contract for health care services
which by its terms limits eligibility to members of a specified
group. The
group contract may include coverage for dependents.
(l) (m) ``Group
contract holder'' means the person to which a group
contract has been issued.
(m) (n) ``Health
care services'' means basic health care services and
other services, medical equipment and supplies which may include,
but
are not limited to, medical, surgical and dental care;
psychological, ob-
stetrical, osteopathic, optometric, optic, podiatric, nursing,
occupational
therapy services, physical therapy services, chiropractic services
and phar-
maceutical services; health education, preventive medical,
rehabilitative
and home health services; inpatient and outpatient hospital
services, ex-
tended care, nursing home care, convalescent institutional care,
labora-
tory and ambulance services, appliances, drugs, medicines and
supplies;
and any other care, service or treatment for the prevention,
control or
elimination of disease, the correction of defects or the
maintenance of
the physical or mental well-being of human beings.
(n) ``Health Carrier'' means a person
that undertakes to provide or
arrange for the delivery of basic health care services to
enrollees on a
prepaid basis, except for enrollee responsibility for
copayments or de-
ductibles or both. Insurers subject ot K.S.A.
40-3001 et seq., and
amend-
ments thereto, and dental service corporations as defined
in K.S.A. 40-
19a01 et seq., and
amendments thereto, shall not be considered health
carriers for the purposes of this act.
(o) ``Health maintenance
organization'' means an organization which:
(1) Provides or otherwise makes available
to enrollees health care
services, including at a minimum those basic health care services
which
are determined by the commissioner to be generally available on an
in-
sured or prepaid basis in the geographic area served;
(2) is compensated, except for reasonable
copayments, for the pro-
vision of basic health care services to enrollees solely on a
predetermined
periodic rate basis;
(3) provides physician services directly
through physicians who are
either employees or partners of such organization or under
arrangements
with a physician or any group of physicians or under arrangements
as an
independent contractor with a physician or any group of
physicians;
(4) is responsible for the availability,
accessibility and quality of the
health care services provided or made available.
(o)
(p) ``Individual contract'' means a contract for health
care services
issued to and covering an individual. The individual contract may
include
dependents of the subscriber.
(p)
(q) ``Individual practice association'' means a
partnership, corpo-
ration, association or other legal entity which delivers or
arranges for the
delivery of basic health care services and which has entered into a
services
arrangement with persons who are licensed to practice medicine
and
surgery, dentistry, chiropractic, pharmacy, podiatry, optometry or
any
other health profession and a majority of whom are licensed to
practice
medicine and surgery. Such an arrangement shall provide:
(1) That such persons shall provide their
professional services in ac-
cordance with a compensation arrangement established by the entity;
and
(2) to the extent feasible for the
sharing by such persons of medical
and other records, equipment, and professional, technical and
adminis-
trative staff.
(q) (r) ``Medical
group'' or ``staff model'' means a partnership, asso-
ciation or other group:
(1) Which is composed of health
professionals licensed to practice
medicine and surgery and of such other licensed health
professionals,
including but not limited to dentists, chiropractors, pharmacists,
optom-
etrists and podiatrists as are necessary for the provision of
health services
for which the group is responsible;
(2) a majority of the members of which
are licensed to practice med-
icine and surgery; and
(3) the members of which: (A) As their
principal professional activity
over 50% individually and as a group responsibility are engaged in
the
coordinated practice of their profession for a health maintenance
organ-
ization; (B) pool their income and distribute it among themselves
accord-
ing to a prearranged salary or drawing account or other plan, or
are sal-
aried employees of the health maintenance organization; (C)
share
medical and other records and substantial portions of major
equipment
and of professional, technical and administrative staff; and (D)
establish
an arrangement whereby the enrollee's enrollment status is not
known to
the member of the group who provides health services to the
enrollee.
(r)
(s) ``Medicare provider organization'' means an
organization
which:
(1) Is a provider-sponsored organization
as defined by Section 4001
of the Balanced Budget Act of 1997 (PL 105-33); and
(2) provides or otherwise makes available
to enrollees basic health
care services pursuant to Section 4001 of the Balanced Budget Act
of
1997 (PL 105-33).
(s) (t) ``Net
worth'' means the excess of assets over liabilities as de-
termined by the commissioner from the latest annual report filed
pur-
suant to K.S.A. 40-3220 and amendments thereto.
(t)
(u) ``Person'' means any natural or artificial person
including but
not limited to individuals, partnerships, associations, trusts or
corpora-
tions.
(u)
(v) ``Physician'' means a person licensed to practice
medicine and
surgery under the healing arts act.
(v)
(w) ``Provider'' means any physician, hospital or other
person
which is licensed or otherwise authorized in this state to furnish
health
care services.
(w)
(x) ``Uncovered expenditures'' means the costs of
health care
services that are covered by a health maintenance organization for
which
an enrollee would also be liable in the event of the organization's
insol-
vency as determined by the commissioner from the latest annual
state-
ment filed pursuant to K.S.A. 40-3220 and amendments thereto
and
which are not guaranteed, insured or assumed by any person or
organi-
zation other than the carrier.
Sec. 38. K.S.A. 1999 Supp. 40-3209
is hereby amended to read as
follows: 40-3209. (a) All forms of group and individual
certificates of cov-
erage and contracts issued by the organization to enrollees or
other mar-
keting documents purporting to describe the organization's health
care
services shall contain as a minimum:
(1) A complete description of the health
care services and other ben-
efits to which the enrollee is entitled;
(2) The locations of all facilities, the
hours of operation and the serv-
ices which are provided in each facility in the case of individual
practice
associations or medical staff and group practices, and, in all
other cases,
a list of providers by specialty with a list of addresses and
telephone
numbers;
(3) the financial responsibilities of the
enrollee and the amount of
any deductible, copayment or coinsurance required;
(4) all exclusions and limitations on
services or any other benefits to
be provided including any deductible or copayment feature and all
re-
strictions relating to pre-existing conditions;
(5) all criteria by which an enrollee may
be disenrolled or denied re-
enrollment;
(6) service priorities in case of
epidemic, or other emergency condi-
tions affecting demand for medical services;
(7) in the case of a health maintenance
organization, a provision that
an enrollee or a covered dependent of an enrollee whose coverage
under
a health maintenance organization group contract has been
terminated
for any reason but who remains in the service area and who has
been
continuously covered by the health maintenance organization for at
least
three months shall be entitled to obtain a converted contract or
have such
coverage continued under the group contract for a period of six
months
following which such enrollee or dependent shall be entitled to
obtain a
converted contract in accordance with the provisions of this
section. The
converted contract shall provide coverage at least equal to the
conversion
coverage options generally available from insurers or mutual
nonprofit
hospital and medical service corporations in the service area at
the ap-
plicable premium cost. The group enrollee or enrollees shall be
solely
responsible for paying the premiums for the alternative coverage.
The
frequency of premium payment shall be the frequency customarily
re-
quired by the health maintenance organization, mutual nonprofit
hospital
and medical service corporation or insurer for the policy form and
plan
selected, except that the insurer, mutual nonprofit hospital and
medical
service corporation or health maintenance organization shall
require pre-
mium payments at least quarterly. The coverage shall be available
to all
enrollees of any group without medical underwriting. The
requirement
imposed by this subsection shall not apply to a contract which
provides
benefits for specific diseases or for accidental injuries only, nor
shall it
apply to any employee or member or such employee's or member's
cov-
ered dependents when:
(A) Such person was terminated for cause
as permitted by the group
contract approved by the commissioner;
(B) any discontinued group coverage was
replaced by similar group
coverage within 31 days; or
(C) the employee or member is or could be
covered by any other
insured or noninsured arrangement which provides expense incurred
hos-
pital, surgical or medical coverage and benefits for individuals in
a group
under which the person was not covered prior to such termination.
Writ-
ten application for the converted contract shall be made and the
first
premium paid not later than 31 days after termination of the group
cov-
erage or receipt of notice of conversion rights from the health
mainte-
nance organization, whichever is later, and shall become effective
the day
following the termination of coverage under the group contract.
The
health maintenance organization shall give the employee or member
and
such employee's or member's covered dependents reasonable notice
of
the right to convert at least once within 30 days of termination of
coverage
under the group contract. The group contract and certificates may
include
provisions necessary to identify or obtain identification of
persons and
notification of events that would activate the notice requirements
and
conversion rights created by this section but such requirements and
rights
shall not be invalidated by failure of persons other than the
employee or
member entitled to conversion to comply with any such provisions.
In
addition, the converted contract shall be subject to the provisions
con-
tained in paragraphs (2), (4), (5), (6), (7), (8), (9), (13), (14),
(15), (16),
(17) and (19) of subsection (j) of K.S.A. 40-2209, and
amendments
thereto;
(8) (A) group contracts shall
contain a provision extending payment
of such benefits until discharged or for a period not less than 31
days
following the expiration date of the contract, whichever is
earlier, for
covered enrollees and dependents confined in a hospital on the date
of
termination;
(B) a provision that coverage under any
subsequent replacement con-
tract that is intended to afford continuous coverage will commence
im-
mediately following expiration of any prior contract with respect
to cov-
ered services not provided pursuant to subparagraph (8)(A); and
(9) an individual contract shall provide
for a 10-day period for the
enrollee to examine and return the contract and have the premium
re-
funded, but if services were received by the enrollee during the
10-day
period, and the enrollee returns the contract to receive a refund
of the
premium paid, the enrollee must pay for such services.
(b) No health maintenance organization or
medicare provider organ-
ization authorized under this act shall contract with any provider
under
provisions which require enrollees to guarantee payment, other than
co-
payments and deductibles, to such provider in the event of
nonpayment
by the health maintenance organization or medicare provider
organiza-
tion for any services which have been performed under contracts
between
such enrollees and the health maintenance organization or medicare
pro-
vider organization. Further, any contract between a health
maintenance
organization or medicare provider organization and a provider shall
pro-
vide that if the health maintenance organization or medicare
provider
organization fails to pay for covered health care services as set
forth in
the contract between the health maintenance organization or
medicare
provider organization and its enrollee, the enrollee or covered
dependents
shall not be liable to any provider for any amounts owed by the
health
maintenance organization or medicare provider organization. If
there is
no written contract between the health maintenance organization or
med-
icare provider organization and the provider or if the written
contract fails
to include the above provision, the enrollee and dependents are not
liable
to any provider for any amounts owed by the health maintenance
organ-
ization or medicare provider organization. Any action by a
provider to
collect or attempt to collect from a subscriber or enrollee any
sum owed
by the health maintenance organization to a provider shall be
deemed to
be an unconscionable act within the meaning of K.S.A. 50-627 and
amend-
ments thereto.
(c) No group or individual certificate of
coverage or contract form or
amendment to an approved certificate of coverage or contract form
shall
be issued unless it is filed with the commissioner. Such contract
form or
amendment shall become effective within 30 days of such filing
unless
the commissioner finds that such contract form or amendment does
not
comply with the requirements of this section.
(d) Every contract shall include a clear
and understandable descrip-
tion of the health maintenance organization's or medicare provider
or-
ganization's method for resolving enrollee grievances.
(e) The provisions of subsections (A),
(B), (C), (D) and (E) of K.S.A.
40-2209 and 40-2215 and amendments thereto shall apply to all
contracts
issued under this section, and the provisions of such sections
shall apply
to health maintenance organizations.
(f) In lieu of any of the requirements
of subsection (a), the commis-
sioner may accept certificates of coverage issued by a medicare
provider
organization in conformity with requirements imposed by any
appropriate
federal regulatory agency.
Sec. 39. K.S.A. 1999 Supp. 40-3220
is hereby amended to read as
follows: 40-3220. Every health maintenance organization and
medicare
provider organization authorized under this act shall annually on
or before
the first day of March, file a verified report with the
commissioner, show-
ing its condition on the last day of the preceding calendar year,
on forms
prescribed by the commissioner. Such report shall include:
(a) A financial statement of the
organization, including its balance
sheet and receipts and disbursements for the preceding year;
and
(b) such other information relating to
the performance of health
maintenance organizations as shall be required by the
commissioner.
Every health maintenance organization and medicare provider
organi-
zation authorized under this act shall be subject to the
provisions of K.S.A.
40-225 and amendments thereto.
Sec. 40. K.S.A. 1999 Supp. 40-3227
is hereby amended to read as
follows: 40-3227. (a) Except as provided in paragraph (e),
before issuing
any certificate of authority, the commissioner shall require
that the health
maintenance organization have an initial net worth of $1,500,000
and
shall thereafter maintain the minimum net worth required under
subsec-
tion (b).
(b) Except as provided in subsections
(c) and (d) of this section, every
health maintenance organization shall maintain a minimum net
worth
equal to the greater of:
(1) $1,000,000; or
(2) two percent of annual premium
revenues as reported on the most
recent annual financial statement filed with the commissioner on
the first
$150,000,000 of premium and 1% of annual premium on the premium
in
excess of $150,000,000; or
(3) an amount equal to the sum of
three months uncovered health
care expenditures as reported on the most recent financial
statement filed
with the commissioner; or
(4) an amount equal to the sum
of:
(A) Eight percent of annual health
care expenditures except those paid
on a capitated basis or managed hospital payment basis as
reported on
the most recent financial statement filed with the commissioner;
and
(B) four percent of annual hospital
expenditures paid on a managed
hospital payment basis as reported on the most recent financial
statement
filed with the commissioner.
(c) A health maintenance organization
licensed on or before the day
preceding the effective date of this section must maintain a
minimum net
worth of:
(1) Twenty-five percent of the amount
required by subsection (b) by
December 31, 2000;
(2) 50% of the amount required by
subsection (b) by December 31,
2001;
(3) 75% of the amount required by
subsection (b) by December 31,
2002; and
(4) 100% of the amount required by
subsection (b) by December 31,
2003.
(d) In determining net worth, no debt
shall be considered fully sub-
ordinated unless the subordination clause is in a form
acceptable to the
commissioner. An interest obligation relating to the repayment
of any
subordinated debt shall be similarly subordinated. The interest
expenses
relating to the repayment of a fully subordinated debt shall be
considered
covered expenses. A debt incurred by a note meeting the
requirements of
this section, and otherwise acceptable to the commissioner,
shall not be
considered a liability and shall be recorded as
equity.
(e) The net worth requirements of
subsections (a) through (d) shall
not apply to any health organization contracting with the Kansas
de-
partment of social and rehabilitation services to provide
services provided
under title XIX and title XXI of the social security act or any
other public
benefits, provided the public benefit contracts represent at
least 90% of
the premium volume of the health organization.
(f) Unless otherwise provided
below, each health maintenance or-
ganization doing business in this state shall deposit with any
organization
or trustee acceptable to the commissioner through which a custodial
or
controlled account is utilized, cash, securities or any combination
of these
or other measures, for the benefit of all of the enrollees of the
health
maintenance organization, that are acceptable in the amount of
$150,000
for a medical group or staff model health maintenance organization
or
$300,000 for an individual practice association.
(b) (g) The
commissioner may waive any of the deposit requirements
set forth in subsection (a) (f) whenever
satisfied that: (1) The organization
has sufficient net worth and an adequate history of generating net
income
to assure its financial viability for the next year; or (2) the
organization's
performance and obligations are guaranteed by an organization with
suf-
ficient net worth and an adequate history of generating net income;
or
(3) the assets of the organization or its contracts with insurers,
hospital
or medical service corporations, governments or other organizations
are
reasonably sufficient to assure the performance of its
obligations.
(c) When an organization has
achieved a net worth not including land,
buildings and equipment of at least $1,000,000 or has
achieved a net
worth including land, buildings and equipment of at least
$5,000,000, the
annual deposit requirement shall not
apply.
(d) If the organization has a
guaranteeing organization which has
been in operation for at least five years and has a net
worth not including
land, buildings and equipment of at least $1,000,000 or
which has been
in operation for at least 10 years and has a net worth
including land,
buildings and equipment of at least $5,000,000, the annual
deposit re-
quirement shall not apply. If the guaranteeing organization
is sponsoring
more than one organization, the net worth requirement shall
be increased
by a multiple equal to the number of such organizations.
This require-
ment to maintain a deposit in excess of the deposit
required of an accident
and health insurer shall not apply during any time that the
guaranteeing
organization maintains for each organization it sponsors a
net worth at
least equal to the capital and surplus requirements set
forth in article 11
of chapter 40 of the Kansas Statutes Annotated for an
accident and health
insurer.
(e) (h) The
deposit requirements imposed by this act shall not apply
to health maintenance organizations not organized under the laws of
this
state to the extent an amount equal to or exceeding that required
by this
act has been deposited with the commissioner or an organization or
trus-
tee acceptable to the department of insurance of its state of
domicile for
the benefit of Kansas enrollees.
(f) (i) All
income from deposits shall belong to the depositing organ-
ization and shall be paid to it as it becomes available. A health
mainte-
nance organization that has made a securities deposit may withdraw
that
deposit or any part thereof after making a substitute deposit of
cash,
securities or any combination of these or other measures of equal
amount
and value. Any securities shall be approved by the commissioner
before
being substituted.
(j) Every health maintenance
organization, when determining liabil-
ity, shall include an amount estimated in the aggregate to
provide for any
unearned premium and for the payment of all claims for health
care ex-
penditures that have been incurred, whether reported or
unreported, that
are unpaid and for which the organization is or may be liable,
and to
provide for the expense of adjustment or settlement of those
claims.
(g) (k) The
commissioner shall require that each health maintenance
organization have a plan for handling insolvency which allows for
contin-
uation of benefits for the duration of the contract period for
which pre-
miums have been paid and continuation of benefits to members who
are
confined on the date of insolvency in an inpatient facility until
their dis-
charge or expiration of benefits. In considering such a plan, the
commis-
sioner may require:
(1) Insurance to cover the expenses to be
paid for continued benefits
after an insolvency;
(2) provisions in provider contracts that
obligate the provider to pro-
vide services for the duration of the period after the health
maintenance
organization's insolvency for which premium payment has been made
and
until the enrollees' discharge from inpatient facilities;
(3) insolvency reserves;
(4) acceptable letters of credit; or
(5) any other arrangements to assure that
benefits are continued as
specified in this subsection (g) (k).
Sec. 41. K.S.A. 1999 Supp. 40-3606
is hereby amended to read as
follows: 40-3606. This act shall apply to all insurance companies,
fraternal
benefit societies, health maintenance organizations, reciprocal
insurance
exchanges, mutual nonprofit hospital and medical service
corporations,
captive insurance companies, group funded pools except municipal
group
funded pools governed by K.S.A. 12-2616 through 12-2629 and
amend-
ments thereto, prepaid service plans operating under article 19a of
chap-
ter 40 of the Kansas Statutes Annotated, regardless of whether such
en-
tities are authorized to do business in this state, and such
entities which
are in the process of organization.
Sec. 42. K.S.A. 1999 Supp. 45-221
is hereby amended to read as
follows: 45-221. (a) Except to the extent disclosure is otherwise
required
by law, a public agency shall not be required to disclose:
(1) Records the disclosure of which is
specifically prohibited or re-
stricted by federal law, state statute or rule of the Kansas
supreme court
or the disclosure of which is prohibited or restricted pursuant to
specific
authorization of federal law, state statute or rule of the Kansas
supreme
court to restrict or prohibit disclosure.
(2) Records which are privileged under
the rules of evidence, unless
the holder of the privilege consents to the disclosure.
(3) Medical, psychiatric, psychological
or alcoholism or drug depend-
ency treatment records which pertain to identifiable patients.
(4) Personnel records, performance
ratings or individually identifia-
ble records pertaining to employees or applicants for employment,
except
that this exemption shall not apply to the names, positions,
salaries and
lengths of service of officers and employees of public agencies
once they
are employed as such.
(5) Information which would reveal the
identity of any undercover
agent or any informant reporting a specific violation of law.
(6) Letters of reference or
recommendation pertaining to the char-
acter or qualifications of an identifiable individual.
(7) Library, archive and museum materials
contributed by private
persons, to the extent of any limitations imposed as conditions of
the
contribution.
(8) Information which would reveal the
identity of an individual who
lawfully makes a donation to a public agency, if anonymity of the
donor
is a condition of the donation.
(9) Testing and examination materials,
before the test or examination
is given or if it is to be given again, or records of individual
test or ex-
amination scores, other than records which show only passage or
failure
and not specific scores.
(10) Criminal investigation records,
except that the district court, in
an action brought pursuant to K.S.A. 45-222, and amendments
thereto,
may order disclosure of such records, subject to such conditions as
the
court may impose, if the court finds that disclosure:
(A) Is in the public interest;
(B) would not interfere with any
prospective law enforcement action;
(C) would not reveal the identity of any
confidential source or un-
dercover agent;
(D) would not reveal confidential
investigative techniques or proce-
dures not known to the general public;
(E) would not endanger the life or
physical safety of any person; and
(F) would not reveal the name, address,
phone number or any other
information which specifically and individually identifies the
victim of any
sexual offense in article 35 of chapter 21 of the Kansas Statutes
Anno-
tated, and amendments thereto.
(11) Records of agencies involved in
administrative adjudication or
civil litigation, compiled in the process of detecting or
investigating vio-
lations of civil law or administrative rules and regulations, if
disclosure
would interfere with a prospective administrative adjudication or
civil
litigation or reveal the identity of a confidential source or
undercover
agent.
(12) Records of emergency or security
information or procedures of
a public agency, or plans, drawings, specifications or related
information
for any building or facility which is used for purposes requiring
security
measures in or around the building or facility or which is used for
the
generation or transmission of power, water, fuels or
communications, if
disclosure would jeopardize security of the public agency, building
or
facility.
(13) The contents of appraisals or
engineering or feasibility estimates
or evaluations made by or for a public agency relative to the
acquisition
of property, prior to the award of formal contracts therefor.
(14) Correspondence between a public
agency and a private individ-
ual, other than correspondence which is intended to give notice of
an
action, policy or determination relating to any regulatory,
supervisory or
enforcement responsibility of the public agency or which is widely
dis-
tributed to the public by a public agency and is not specifically
in response
to communications from such a private individual.
(15) Records pertaining to
employer-employee negotiations, if dis-
closure would reveal information discussed in a lawful executive
session
under K.S.A. 75-4319, and amendments thereto.
(16) Software programs for electronic
data processing and documen-
tation thereof, but each public agency shall maintain a register,
open to
the public, that describes:
(A) The information which the agency
maintains on computer facil-
ities; and
(B) the form in which the information can
be made available using
existing computer programs.
(17) Applications, financial statements
and other information sub-
mitted in connection with applications for student financial
assistance
where financial need is a consideration for the award.
(18) Plans, designs, drawings or
specifications which are prepared by
a person other than an employee of a public agency or records which
are
the property of a private person.
(19) Well samples, logs or surveys which
the state corporation com-
mission requires to be filed by persons who have drilled or caused
to be
drilled, or are drilling or causing to be drilled, holes for the
purpose of
discovery or production of oil or gas, to the extent that
disclosure is limited
by rules and regulations of the state corporation commission.
(20) Notes, preliminary drafts, research
data in the process of anal-
ysis, unfunded grant proposals, memoranda, recommendations or
other
records in which opinions are expressed or policies or actions are
pro-
posed, except that this exemption shall not apply when such records
are
publicly cited or identified in an open meeting or in an agenda of
an open
meeting.
(21) Records of a public agency having
legislative powers, which re-
cords pertain to proposed legislation or amendments to proposed
legis-
lation, except that this exemption shall not apply when such
records are:
(A) Publicly cited or identified in an
open meeting or in an agenda
of an open meeting; or
(B) distributed to a majority of a quorum
of any body which has au-
thority to take action or make recommendations to the public agency
with
regard to the matters to which such records pertain.
(22) Records of a public agency having
legislative powers, which re-
cords pertain to research prepared for one or more members of
such
agency, except that this exemption shall not apply when such
records are:
(A) Publicly cited or identified in an
open meeting or in an agenda
of an open meeting; or
(B) distributed to a majority of a quorum
of any body which has au-
thority to take action or make recommendations to the public agency
with
regard to the matters to which such records pertain.
(23) Library patron and circulation
records which pertain to identi-
fiable individuals.
(24) Records which are compiled for
census or research purposes and
which pertain to identifiable individuals.
(25) Records which represent and
constitute the work product of an
attorney.
(26) Records of a utility or other public
service pertaining to individ-
ually identifiable residential customers of the utility or service,
except that
information concerning billings for specific individual customers
named
by the requester shall be subject to disclosure as provided by this
act.
(27) Specifications for competitive
bidding, until the specifications
are officially approved by the public agency.
(28) Sealed bids and related documents,
until a bid is accepted or all
bids rejected.
(29) Correctional records pertaining to
an identifiable inmate or re-
lease, except that:
(A) The name; photograph and other
identifying information; sen-
tence data; parole eligibility date; custody or supervision level;
disciplinary
record; supervision violations; conditions of supervision,
excluding
requirements pertaining to mental health or substance abuse
counseling;
location of facility where incarcerated or location of parole
office main-
taining supervision and address of a releasee whose crime was
committed
after the effective date of this act shall be subject to disclosure
to any
person other than another inmate or releasee, except that the
disclosure
of the location of an inmate transferred to another state pursuant
to the
interstate corrections compact shall be at the discretion of the
secretary
of corrections;
(B) the ombudsman of corrections, the
attorney general, law enforce-
ment agencies, counsel for the inmate to whom the record pertains
and
any county or district attorney shall have access to correctional
records to
the extent otherwise permitted by law;
(C) the information provided to the law
enforcement agency pursu-
ant to the sex offender registration act, K.S.A. 22-4901, et
seq., and
amendments thereto, shall be subject to disclosure to any person,
except
that the name, address, telephone number or any other information
which
specifically and individually identifies the victim of any offender
required
to register as provided by the Kansas offender registration act,
K.S.A. 22-
4901 et seq. and amendments thereto, shall not be disclosed;
and
(D) records of the department of
corrections regarding the financial
assets of an offender in the custody of the secretary of
corrections shall
be subject to disclosure to the victim, or such victim's family, of
the crime
for which the inmate is in custody as set forth in an order of
restitution
by the sentencing court.
(30) Public records containing
information of a personal nature
where the public disclosure thereof would constitute a clearly
unwar-
ranted invasion of personal privacy.
(31) Public records pertaining to
prospective location of a business
or industry where no previous public disclosure has been made of
the
business' or industry's interest in locating in, relocating within
or expand-
ing within the state. This exception shall not include those
records per-
taining to application of agencies for permits or licenses
necessary to do
business or to expand business operations within this state, except
as
otherwise provided by law.
(32) The bidder's list of contractors who
have requested bid proposals
for construction projects from any public agency, until a bid is
accepted
or all bids rejected.
(33) Engineering and architectural
estimates made by or for any pub-
lic agency relative to public improvements.
(34) Financial information submitted by
contractors in qualification
statements to any public agency.
(35) Records involved in the obtaining
and processing of intellectual
property rights that are expected to be, wholly or partially vested
in or
owned by a state educational institution, as defined in K.S.A.
76-711, and
amendments thereto, or an assignee of the institution organized and
ex-
isting for the benefit of the institution.
(36) Any report or record which is made
pursuant to K.S.A. 65-4922,
65-4923 or 65-4924, and amendments thereto, and which is
privileged
pursuant to K.S.A. 65-4915 or 65-4925, and amendments thereto.
(37) Information which would reveal the
precise location of an ar-
cheological site.
(38) Any financial data or traffic
information from a railroad company,
to a public agency, concerning the sale, lease or rehabilitation of
the
railroad's property in Kansas.
(39) Risk-based capital reports,
risk-based capital plans and corrective
orders including the working papers and the results of any analysis
filed
with the commissioner of insurance in accordance with K.S.A. 1999
Supp.
40-2c20 and section 21, and amendments thereto.
(40) Memoranda and related materials
required to be used to support
the annual actuarial opinions submitted pursuant to subsection (b)
of
K.S.A. 40-409, and amendments thereto.
(41) Disclosure reports filed with the
commissioner of insurance un-
der subsection (a) of K.S.A. 1999 Supp. 40-2,156, and
amendments
thereto.
(42) All financial analysis ratios and
examination synopses concerning
insurance companies that are submitted to the commissioner by the
na-
tional association of insurance commissioners' insurance regulatory
infor-
mation system.
(43) Any records the disclosure of which
is restricted or prohibited
by a tribal-state gaming compact.
(44) Market research, market plans,
business plans and the terms and
conditions of managed care or other third party contracts,
developed or
entered into by the university of Kansas medical center in the
operation
and management of the university hospital which the chancellor of
the
university of Kansas or the chancellor's designee determines would
give
an unfair advantage to competitors of the university of Kansas
medical
center.
(b) Except to the extent disclosure is
otherwise required by law or as
appropriate during the course of an administrative proceeding or on
ap-
peal from agency action, a public agency or officer shall not
disclose fi-
nancial information of a taxpayer which may be required or
requested by
a county appraiser or the director of property valuation to assist
in the
determination of the value of the taxpayer's property for ad
valorem tax-
ation purposes; or any financial information of a personal nature
required
or requested by a public agency or officer, including a name, job
descrip-
tion or title revealing the salary or other compensation of
officers, em-
ployees or applicants for employment with a firm, corporation or
agency,
except a public agency. Nothing contained herein shall be construed
to
prohibit the publication of statistics, so classified as to prevent
identifi-
cation of particular reports or returns and the items thereof.
(c) As used in this section, the term
``cited or identified'' shall not
include a request to an employee of a public agency that a document
be
prepared.
(d) If a public record contains material
which is not subject to dis-
closure pursuant to this act, the public agency shall separate or
delete
such material and make available to the requester that material in
the
public record which is subject to disclosure pursuant to this act.
If a public
record is not subject to disclosure because it pertains to an
identifiable
individual, the public agency shall delete the identifying portions
of the
record and make available to the requester any remaining portions
which
are subject to disclosure pursuant to this act, unless the request
is for a
record pertaining to a specific individual or to such a limited
group of
individuals that the individuals' identities are reasonably
ascertainable, the
public agency shall not be required to disclose those portions of
the record
which pertain to such individual or individuals.
(e) The provisions of this section shall
not be construed to exempt
from public disclosure statistical information not descriptive of
any iden-
tifiable person.
(f) Notwithstanding the provisions of
subsection (a), any public rec-
ord which has been in existence more than 70 years shall be open
for
inspection by any person unless disclosure of the record is
specifically
prohibited or restricted by federal law, state statute or rule of
the Kansas
supreme court or by a policy adopted pursuant to K.S.A. 72-6214,
and
amendments thereto.
New Sec. 43. (a) Sections 43
through 45 and amendments thereto
shall be known as the Kansas health care prompt payment act and
shall
apply to any policy of accident and sickness insurance issued or
renewed
in this state.
(b) The provisions of the Kansas health
care prompt payment act shall
take effect and be in force on and after January 1, 2001.
New Sec. 44. As used in sections 43
through 45 and amendments
thereto:
(a) The term ``clean claim'' means a
claim that has no defect or im-
propriety, including any lack of required substantiating
documentation,
or particular circumstance requiring special treatment that
prevents
timely payment from being made on the claim under the Kansas
health
care prompt payment act.
(b) The term ``claim'' means a written
proof of loss as defined in
paragraph (7) of subsection (A) of K.S.A. 40-2203, and
amendments
thereto, or an electronic proof of loss which contains the
information
required by paragraph (7) of subsection (A) of K.S.A. 40-2203,
and
amendments thereto.
(c) The term ``policy of accident and
sickness insurance'' means any
policy or contract insuring against loss resulting from sickness or
bodily
injury or death by accident, or both, any hospital or medical
expense
policy, health, hospital, medical service corporation contract
issued by a
stock or mutual company or association, a health maintenance
organiza-
tion or any other insurer, third party administrator or other
entity which
pays claims pursuant to a policy of accident and sickness
insurance. The
term policy of accident and sickness insurance does not include any
policy
or contract of reinsurance, life insurance, endowment or annuity
contract,
policies or certificates covering only credit, disability income,
long-term
care, medicare supplement, dental, drug, or vision-care only
policy, cov-
erage issued as a supplement to liability insurance, insurance
arising out
of a workers compensation or similar law, automobile
medical-payment
insurance or insurance under which benefits are payable without
regard
to fault and which is statutorily required to be contained in any
liability
insurance policy or equivalent self-insurance.
New Sec. 45. (a) Within 30 days
after receipt of any claim, and
amendments thereto, any insurer issuing a policy of accident and
sickness
insurance shall pay a clean claim for reimbursement in accordance
with
this section or send a written or electronic notice acknowledging
receipt
of and the status of the claim. Such notice shall include the date
such
claim was received by the insurer and state that:
(1) The insurer refuses to reimburse all
or part of the claim and spec-
ify each reason for denial; or
(2) additional information is necessary
to determine if all or any part
of the claim will be reimbursed and what specific additional
information
is necessary.
(b) If any insurer issuing a policy of
accident and sickness insurance
fails to comply with subsection (a), such insurer shall pay
interest at the
rate of 1% per month on the amount of the claim that remains
unpaid
30 days after the receipt of the claim. The interest paid pursuant
to this
subsection shall be included in any late reimbursement without
requiring
the person who filed the original claim to make any additional
claim for
such interest.
(c) After receiving a request for
additional information, the person
claiming reimbursement shall submit all additional information
requested
by the insurer within 30 days after receipt of the request for
additional
information. Failure to furnish such additional information within
the
time required shall not invalidate nor reduce the claim if it was
not rea-
sonably possible to give such information within such time,
provided such
proof is furnished as soon as possible as defined (within the time
pre-
scribed) in paragraph (7) of subsection (A) of K.S.A. 40-2203, and
amend-
ments thereto.
(d) Within 15 days after receipt of all
the requested additional infor-
mation, an insurer issuing a policy of accident and sickness
insurance shall
pay a clean claim in accordance with this section or send a written
or
electronic notice that states:
(1) Such insurer refuses to reimburse all
or part of the claim; and
(2) specifies each reason for denial. Any
insurer issuing a policy of
accident and sickness insurance that fails to comply with this
subsection
shall pay interest on any amount of the claim that remains unpaid
at the
rate of 1% per month.
(e) The provisions of subsection (b)
shall not apply when there is a
good faith dispute about the legitimacy of the claim, or when there
is a
reasonable basis supported by specific information that such claim
was
submitted fraudulently.
(f) Any violation of this act by an
insurer issuing a policy of accident
and sickness insurance with flagrant and conscious disregard of the
pro-
visions of this act or with such frequency as to constitute a
general busi-
ness practice shall be considered a violation of the unfair trade
practices
act in K.S.A. 40-2401 et seq. and amendments thereto.
(g) The commissioner of insurance shall
adopt rules and regulations
necessary to carry out the provisions of the Kansas health care
prompt
payment act.
Sec. 46. K.S.A. 1999 Supp. 40-2404
is hereby amended to read as
follows: 40-2404. The following are hereby defined as unfair
methods
of competition and unfair or deceptive acts or practices in the
business
of insurance:
(1) Misrepresentations and false
advertising of insurance policies.
Making, issuing, circulating or causing to be made, issued or
circulated,
any estimate, illustration, circular, statement, sales
presentation, omission
or comparison which:
(a) Misrepresents the benefits,
advantages, conditions or terms of any
insurance policy;
(b) misrepresents the dividends or share
of the surplus to be received
on any insurance policy;
(c) makes any false or misleading
statements as to the dividends or
share of surplus previously paid on any insurance policy;
(d) is misleading or is a
misrepresentation as to the financial condition
of any person, or as to the legal reserve system upon which any
life insurer
operates;
(e) uses any name or title of any
insurance policy or class of insurance
policies misrepresenting the true nature thereof;
(f) is a misrepresentation for the
purpose of inducing or tending to
induce the lapse, forfeiture, exchange, conversion or surrender of
any
insurance policy;
(g) is a misrepresentation for the
purpose of effecting a pledge or
assignment of or effecting a loan against any insurance policy;
or
(h) misrepresents any insurance policy as
being shares of stock.
(2) False information and advertising
generally. Making, publishing,
disseminating, circulating or placing before the public, or
causing, directly
or indirectly, to be made, published, disseminated, circulated or
placed
before the public, in a newspaper, magazine or other publication,
or in
the form of a notice, circular, pamphlet, letter or poster, or over
any radio
or television station, or in any other way, an advertisement,
announce-
ment or statement containing any assertion, misrepresentation or
state-
ment with respect to the business of insurance or with respect to
any
person in the conduct of such person's insurance business, which is
un-
true, deceptive or misleading.
(3) Defamation. Making,
publishing, disseminating or circulating, di-
rectly or indirectly, or aiding, abetting or encouraging the
making, pub-
lishing, disseminating or circulating of any oral or written
statement or
any pamphlet, circular, article or literature which is false, or
maliciously
critical of or derogatory to the financial condition of any person,
and which
is calculated to injure such person.
(4) Boycott, coercion and
intimidation. Entering into any agreement
to commit, or by any concerted action committing, any act of
boycott,
coercion or intimidation resulting in or tending to result in
unreasonable
restraint of the business of insurance, or by any act of boycott,
coercion
or intimidation monopolizing or attempting to monopolize any part
of the
business of insurance.
(5) False statements and entries.
(a) Knowingly filing with any super-
visory or other public official, or knowingly making, publishing,
dissemi-
nating, circulating or delivering to any person, or placing before
the pub-
lic, or knowingly causing directly or indirectly, to be made,
published,
disseminated, circulated, delivered to any person, or placed before
the
public, any false material statement of fact as to the financial
condition
of a person.
(b) Knowingly making any false entry of a
material fact in any book,
report or statement of any person or knowingly omitting to make a
true
entry of any material fact pertaining to the business of such
person in any
book, report or statement of such person.
(6) Stock operations and advisory
board contracts. Issuing or deliv-
ering or permitting agents, officers or employees to issue or
deliver,
agency company stock or other capital stock, or benefit
certificates or
shares in any common-law corporation, or securities or any special
or
advisory board contracts or other contracts of any kind promising
returns
and profits as an inducement to insurance. Nothing herein shall
prohibit
the acts permitted by K.S.A. 40-232, and amendments thereto.
(7) Unfair discrimination. (a)
Making or permitting any unfair dis-
crimination between individuals of the same class and equal
expectation
of life in the rates charged for any contract of life insurance or
life annuity
or in the dividends or other benefits payable thereon, or in any
other of
the terms and conditions of such contract.
(b) Making or permitting any unfair
discrimination between individ-
uals of the same class and of essentially the same hazard in the
amount
of premium, policy fees or rates charged for any policy or contract
of
accident or health insurance or in the benefits payable thereunder,
or in
any of the terms or conditions of such contract, or in any other
manner
whatever.
(c) Refusing to insure, or refusing to
continue to insure, or limiting
the amount, extent or kind of coverage available to an individual,
or charg-
ing an individual a different rate for the same coverage solely
because of
blindness or partial blindness. With respect to all other
conditions, in-
cluding the underlying cause of the blindness or partial blindness,
persons
who are blind or partially blind shall be subject to the same
standards of
sound actuarial principles or actual or reasonably anticipated
experience
as are sighted persons. Refusal to insure includes denial by an
insurer of
disability insurance coverage on the grounds that the policy
defines ``dis-
ability'' as being presumed in the event that the insured loses
such per-
son's eyesight. However, an insurer may exclude from coverage
disabili-
ties consisting solely of blindness or partial blindness when such
condition
existed at the time the policy was issued.
(d) Refusing to insure, or refusing to
continue to insure, or limiting
the amount, extent or kind of coverage available for accident and
health
and life insurance to an applicant who is the proposed insured or
charge
a different rate for the same coverage or excluding or limiting
coverage
for losses or denying a claim incurred by an insured as a result of
abuse
based on the fact that the applicant who is the proposed insured
is, has
been, or may be the subject of domestic abuse, except as provided
in
subpart (v). ``Abuse'' as used in this subsection (7)(d) means one
or more
acts defined in subsection (a) or (b) of K.S.A. 60-3102 and
amendments
thereto between family members, current or former household
members,
or current or former intimate partners.
(i) An insurer may not ask an applicant
for life or accident and health
insurance who is the proposed insured if the individual is, has
been or
may be the subject of domestic abuse or seeks, has sought or had
reason
to seek medical or psychological treatment or counseling
specifically for
abuse, protection from abuse or shelter from abuse.
(ii) Nothing in this section shall be
construed to prohibit a person
from declining to issue an insurance policy insuring the life of an
individ-
ual who is, has been or has the potential to be the subject of
abuse if the
perpetrator of the abuse is the applicant or would be the owner of
the
insurance policy.
(iii) No insurer that issues a life or
accident and health policy to an
individual who is, has been or may be the subject of domestic abuse
shall
be subject to civil or criminal liability for the death or any
injuries suffered
by that individual as a result of domestic abuse.
(iv) No person shall refuse to insure,
refuse to continue to insure,
limit the amount, extent or kind of coverage available to an
individual or
charge a different rate for the same coverage solely because of
physical
or mental condition, except where the refusal, limitation or rate
differ-
ential is based on sound actuarial principles.
(v) Nothing in this section shall be
construed to prohibit a person
from underwriting or rating a risk on the basis of a preexisting
physical
or mental condition, even if such condition has been caused by
abuse,
provided that:
(A) The person routinely underwrites or
rates such condition in the
same manner with respect to an insured or an applicant who is not
a
victim of abuse;
(B) the fact that an individual is, has
been or may be the subject of
abuse may not be considered a physical or mental condition; and
(C) such underwriting or rating is not
used to evade the intent of this
section or any other provision of the Kansas insurance code.
(vi) Any person who underwrites or rates
a risk on the basis of pre-
existing physical or mental condition as set forth in subsection
(7)(d)(v),
shall treat such underwriting or rating as an adverse underwriting
decision
pursuant to K.S.A. 40-2,112, and amendments thereto.
(vii) The provisions of subsection (d)
shall apply to all policies of life
and accident and health insurance issued in this state after the
effective
date of this act and all existing contracts which are renewed on or
after
the effective date of this act.
(8) Rebates. (a) Except as
otherwise expressly provided by law, know-
ingly permitting, offering to make or making any contract of life
insur-
ance, life annuity or accident and health insurance, or agreement
as to
such contract other than as plainly expressed in the insurance
contract
issued thereon; paying, allowing, giving or offering to pay, allow
or give,
directly or indirectly, as inducement to such insurance, or
annuity, any
rebate of premiums payable on the contract, any special favor or
advan-
tage in the dividends or other benefits thereon, or any valuable
consid-
eration or inducement whatever not specified in the contract; or
giving,
selling, purchasing or offering to give, sell or purchase as
inducement to
such insurance contract or annuity or in connection therewith, any
stocks,
bonds or other securities of any insurance company or other
corporation,
association or partnership, or any dividends or profits accrued
thereon,
or anything of value whatsoever not specified in the contract.
(b) Nothing in subsection (7) or (8)(a)
shall be construed as including
within the definition of discrimination or rebates any of the
following
practices:
(i) In the case of any contract of life
insurance or life annuity, paying
bonuses to policyholders or otherwise abating their premiums in
whole
or in part out of surplus accumulated from nonparticipating
insurance.
Any such bonuses or abatement of premiums shall be fair and
equitable
to policyholders and for the best interests of the company and its
poli-
cyholders;
(ii) in the case of life insurance
policies issued on the industrial debit
plan, making allowance to policyholders who have continuously for a
spec-
ified period made premium payments directly to an office of the
insurer
in an amount which fairly represents the saving in collection
expenses; or
(iii) readjustment of the rate of premium
for a group insurance policy
based on the loss or expense experience thereunder, at the end of
the
first or any subsequent policy year of insurance thereunder, which
may
be made retroactive only for such policy year.
(9) Unfair claim settlement
practices. It is an unfair claim settlement
practice if any of the following or any rules and regulations
pertaining
thereto are: (A) Committed flagrantly and in conscious disregard of
such
provisions, or (B) committed with such frequency as to indicate a
general
business practice.
(a) Misrepresenting pertinent facts or
insurance policy provisions re-
lating to coverages at issue;
(b) failing to acknowledge and act
reasonably promptly upon com-
munications with respect to claims arising under insurance
policies;
(c) failing to adopt and implement
reasonable standards for the
prompt investigation of claims arising under insurance
policies;
(d) refusing to pay claims without
conducting a reasonable investi-
gation based upon all available information;
(e) failing to affirm or deny coverage of
claims within a reasonable
time after proof of loss statements have been completed;
(f) not attempting in good faith to
effectuate prompt, fair and equi-
table settlements of claims in which liability has become
reasonably clear;
(g) compelling insureds to institute
litigation to recover amounts due
under an insurance policy by offering substantially less than the
amounts
ultimately recovered in actions brought by such insureds;
(h) attempting to settle a claim for less
than the amount to which a
reasonable person would have believed that such person was entitled
by
reference to written or printed advertising material accompanying
or
made part of an application;
(i) attempting to settle claims on the
basis of an application which
was altered without notice to, or knowledge or consent of the
insured;
(j) making claims payments to insureds or
beneficiaries not accom-
panied by a statement setting forth the coverage under which
payments
are being made;
(k) making known to insureds or claimants
a policy of appealing from
arbitration awards in favor of insureds or claimants for the
purpose of
compelling them to accept settlements or compromises less than
the
amount awarded in arbitration;
(l) delaying the investigation or payment
of claims by requiring an
insured, claimant or the physician of either to submit a
preliminary claim
report and then requiring the subsequent submission of formal proof
of
loss forms, both of which submissions contain substantially the
same in-
formation;
(m) failing to promptly settle claims,
where liability has become rea-
sonably clear, under one portion of the insurance policy coverage
in order
to influence settlements under other portions of the insurance
policy cov-
erage; or
(n) failing to promptly provide a
reasonable explanation of the basis
in the insurance policy in relation to the facts or applicable law
for denial
of a claim or for the offer of a compromise settlement.
(10) Failure to maintain complaint
handling procedures. Failure of
any person, who is an insurer on an insurance policy, to maintain a
com-
plete record of all the complaints which it has received since the
date of
its last examination under K.S.A. 40-222, and amendments thereto;
but
no such records shall be required for complaints received prior to
the
effective date of this act. The record shall indicate the total
number of
complaints, their classification by line of insurance, the nature
of each
complaint, the disposition of the complaints, the date each
complaint was
originally received by the insurer and the date of final
disposition of each
complaint. For purposes of this subsection, ``complaint'' means any
writ-
ten communication primarily expressing a grievance related to the
acts
and practices set out in this section.
(11) Misrepresentation in insurance
applications. Making false or
fraudulent statements or representations on or relative to an
application
for an insurance policy, for the purpose of obtaining a fee,
commission,
money or other benefit from any insurer, agent, broker or
individual.
(12) Statutory violations. Any
violation of any of the provisions of
K.S.A. 40-276a, 40-1515, and amendments thereto, or K.S.A. 1999
Supp.
40-2,155 and amendments thereto.
(13) Disclosure of information
relating to adverse underwriting de-
cisions and refund of premiums. Failing to comply with the
provisions of
K.S.A. 40-2,112, and amendments thereto, within the time prescribed
in
such section.
(14) Rebates and other inducements in
title insurance. (a) No title
insurance company or title insurance agent, or any officer,
employee,
attorney, agent or solicitor thereof, may pay, allow or give, or
offer to pay,
allow or give, directly or indirectly, as an inducement to
obtaining any
title insurance business, any rebate, reduction or abatement of any
rate
or charge made incident to the issuance of such insurance, any
special
favor or advantage not generally available to others of the same
classifi-
cation, or any money, thing of value or other consideration or
material
inducement. The words ``charge made incident to the issuance of
such
insurance'' includes, without limitations, escrow, settlement and
closing
charges.
(b) No insured named in a title insurance
policy or contract nor any
other person directly or indirectly connected with the transaction
involv-
ing the issuance of the policy or contract, including, but not
limited to,
mortgage lender, real estate broker, builder, attorney or any
officer, em-
ployee, agent representative or solicitor thereof, or any other
person may
knowingly receive or accept, directly or indirectly, any rebate,
reduction
or abatement of any charge, or any special favor or advantage or
any
monetary consideration or inducement referred to in (14)(a).
(c) Nothing in this section shall be
construed as prohibiting:
(i) The payment of reasonable fees for
services actually rendered to
a title insurance agent in connection with a title insurance
transaction;
(ii) the payment of an earned commission
to a duly appointed title
insurance agent for services actually performed in the issuance of
the
policy of title insurance; or
(iii) the payment of reasonable
entertainment and advertising ex-
penses.
(d) Nothing in this section prohibits the
division of rates and charges
between or among a title insurance company and its agent, or one
or
more title insurance companies and one or more title insurance
agents,
if such division of rates and charges does not constitute an
unlawful rebate
under the provisions of this section and is not in payment of a
forwarding
fee or a finder's fee.
(e) No title insurer or title agent may
accept any order for, issue a
title insurance policy to, or provide services to, an applicant if
it knows
or has reason to believe that the applicant was referred to it by
any pro-
ducer of title business or by any associate of such producer, where
the
producer, the associate, or both, have a financial interest in the
title in-
surer or title agent to which business is referred unless the
producer has
disclosed to the buyer, seller and lender the financial interest of
the pro-
ducer of title business or associate referring the title insurance
business.
(f) No title insurer or title agent may
accept an order for title insur-
ance business, issue a title insurance policy, or receive or retain
any pre-
mium, or charge in connection with any transaction if: (i) The
title insurer
or title agent knows or has reason to believe that the transaction
will
constitute controlled business for that title insurer or title
agent, and (ii)
20% or more of the gross operating revenue of that title insurer or
title
agent during the six full calendar months immediately preceding
the
month in which the transaction takes place is derived from
controlled
business. The prohibitions contained in this subparagraph shall not
apply
to transactions involving real estate located in a county that has
a popu-
lation, as shown by the last preceding decennial census, of 10,000
or less.
(g) The commissioner shall adopt any
regulations necessary to carry
out the provisions of this act.
(15) Disclosure of nonpublic
personal information. No person shall
disclose any nonpublic personal information to a nonaffiliated
third party
contrary to the provisions of title V of the Gramm-Leach-Bliley
act of
1999 (public law 106-102). The commissioner may adopt rules and
reg-
ulations necessary to carry out this section. Such rules and
regulations
shall be consistent with and not more restrictive than standards
contained
in regulations promulgated under title V of the
Gramm-Leach-Bliley act
of 1999 (public law 106-102) by federal regulatory agencies
governing
financial institutions doing business in Kansas.
New Sec. 47. As used in sections 47
through 53 and amendments
thereto:
(a) ``Carrier'' means any insurance
company, nonprofit medical and
hospital service corporation, nonprofit optometric, dental, or
pharmacy
service corporation, municipal group-funded pool, fraternal benefit
so-
ciety or health maintenance organization, as these terms are
defined by
chapter 40 of the Kansas Statutes Annotated, and amendments
thereto,
that offers health benefit plans covering eligible employees of one
or more
small employers in the state.
(b) ``Health committee'' means the Kansas
business health policy
committee as specified in section 48, and amendments thereto.
(c) ``Dependent'' means the spouse or any
child of an eligible em-
ployee.
(d) ``Eligible employee'' shall have the
meaning ascribed to it in
K.S.A. 40-2209d and amendments thereto.
(e) ``Health benefit plan'' means any
hospital or medical expense pol-
icy, health, hospital or medical services corporation contract, and
a plan
provided by a municipal group-funded pool, or a health
maintenance
organization contract offered by any employer or any certificate
issued
under any such policy, contract or plan.
(f) ``Kansas business health
partnership'' or ``health partnership''
means a nonrisk bearing nonprofit corporation that has responded to
a
request for a proposal by the health committee and has been
selected by
the health committee to provide health insurance through multiple
un-
affiliated participating carriers to small employers and their
employees.
(g) ``Low wage or modest wage employee''
means any employee
whose family income does not exceed 200% of the poverty level.
(h) ``Small employer'' shall have the
meaning ascribed to it in K.S.A.
40-2209d and amendments thereto.
New Sec. 48. (a) The governor of
the state of Kansas shall appoint a
cabinet level committee which shall be known as the Kansas
business
health policy committee.
(b) The Kansas business health policy
committee, hereinafter re-
ferred to as the health committee, shall consist of:
(1) The secretary of the department of
commerce and housing or the
secretary's designee;
(2) the secretary of the department of
social and rehabilitation serv-
ices or the secretary's designee;
(3) the commissioner of insurance or the
commissioner's designee;
(4) one member appointed by the president
of the senate;
(5) one member appointed by the speaker
of the house of represen-
tatives;
(6) one member appointed by the minority
leader of the senate;
(7) one member appointed by the minority
leader of the house of
representatives; and
(8) three members at large from the
private sector appointed by the
governor.
The secretary of each state agency represented
on this committee shall
provide such staff and other resources as the health committee may
re-
quire.
(c) (1) The initial meeting of the
health committee shall be convened
within 60 days after the effective date of this act by the governor
at a time
and place designated by the governor.
(2) Meetings of the health committee
subsequent to its initial meet-
ing shall be held and conducted in accordance with policies and
proce-
dures established by the health committee.
(3) Commencing at the time of the initial
meeting of the health com-
mittee, the powers, authorities, duties and responsibilities
conferred and
imposed upon the health committee by this act shall be operative
and
effective.
(d) The health committee shall develop
and approve a request for
proposals for a qualified entity to serve as the Kansas business
health
partnership, hereinafter referred to as health partnership, which
shall
provide a mechanism to combine federal and state subsidies with
contri-
butions from employers and employees to purchase health insurance
in
accordance with guidelines developed by the health committee.
(e) The health committee shall evaluate
responses to the request for
proposals and select the qualified entity to serve as the health
partnership.
(f) The health committee shall:
(1) Develop and approve subsidy
eligibility criteria provided that:
(A) Low wage and modest wage employees of
small employers shall
be eligible for subsidies if:
(1) The small employer has not previously
offered health insurance
coverage; or
(2) the small employer has previously
offered health insurance cov-
erage and a majority of such small employer's employees are low
wage
or modest wage employees as defined in section 1;
(B) any small employer's employee with a
child who is eligible for
coverage under the state childrens' health insurance program
established
by K.S.A. 1999 Supp. 38-2001 et seq., and amendments
thereto, or in the
state medical assistance program shall be eligible automatically
for a sub-
sidy and shall be included in the determination of eligibility for
the small
employer and its low-and-modest wage employees; and
(C) at least 70% of the small employer's
employees are insured
through the partnership; and
(2) determine and arrange for eligibility
determination for subsidies
of low wage or modest wage employees; and
(3) develop subsidy schedules based upon
employee wage levels.
(g) The health committee shall oversee
and monitor the ongoing op-
eration of any subsidy program and the financial accountability of
all sub-
sidy funds.
(h) The health committee is hereby
authorized to accept funds from
the federal government, or its agencies, or any other source
whatsoever
for research studies, investigation, planning and other purposes
related
to implementation of the objectives of this act. Any funds so
received
shall be deposited in the state treasury and shall be credited to a
special
revenue fund which is hereby created and shall be known as the
health
committee insurance fund and used in accordance with or direction
of
the contributing federal agencies. Expenditures from such fund may
be
made for any purpose in keeping with the responsibilities,
functions and
authority of the department. Warrants on such fund shall be drawn
in
the same manner as required of other state agencies upon
vouchers
signed by the secretary of the department of social and
rehabilitation
services upon receiving prior approval of the health committee.
(i) The health committee is authorized to
develop policies for the use
of additional federal or private funds to subsidize health
insurance cov-
erage for low-and-modest wage employees of predominantly
low-wage
small employers.
(j) The health committee is hereby
authorized to organize, or cause
to be organized, one or more advisory committees. No member of
any
advisory committee established under this subsection shall receive
any
payment or other compensation from the health partnership. The
mem-
bership of each advisory committee established under this
subsection
shall contain at least one representative who is a small employer
and one
representative who is an eligible employee as defined in section 1
and
one representative of the insurance industry.
New Sec. 49. (a) The health
partnership selected by the health com-
mittee shall:
(1) Be a domestic not-for-profit
corporation; and
(2) have a board of directors which
includes among its members at
least one director who is a small employer and at least one
director who
is an employee.
(3) No director shall have any interest
in any business which sells
health insurance or which provides or delivers any health care
services.
(b) Operate the Kansas business health
partnership.
New Sec. 50. The health partnership
shall develop and offer two or
more health benefit plans to small employers. In any health benefit
plan
developed under this act, any carrier may contract for coverage
within
the scope of this act notwithstanding any mandated coverages
otherwise
required by state law. Except for preventative and health screening
serv-
ices, the provisions of K.S.A. 40-2,100 to 40-2,105, inclusive,
40-2114 and
subsection (i) of 40-2209 and 40-2229 and 40-2230, and K.S.A.
1999
Supp. 40-2,163, 40-2,164, 40-2,165 and 40-2,166, and amendments
thereto, shall not be mandatory with respect to any health benefit
plan
developed under this act. In performing these duties, the health
part-
nership shall:
(a) Develop and offer two or more
lower-cost benefit plans such that:
(1) Each health benefit plan is
consistent with any criteria established
by the health partnership;
(2) each health benefit plan shall be
offered by all participating car-
riers except that no participating carrier shall be required to
offer any
health benefit plan, or portion thereof, which such participating
carrier
is not licensed or authorized to offer in this state;
(3) no participating carrier shall offer
any health benefit plan devel-
oped under this act to any small employer unless such small
employer is
covered through the health partnership.
(b) Develop and make available one or
more supplemental health
benefit plans or one or more other benefit options so that the
total pack-
age of health benefits available to all eligible children who
receive health
benefits through the health partnership meets, at a minimum,
standards
established by the federal health insurance program.
(c) Offer coverage to any qualifying
small employer.
(d) Offer employees of participating
small employers a choice of par-
ticipating carriers.
(e) (1) Include centralized and
consolidated enrollment, billing and
customer service functions;
(2) use one standard enrollment form for
all participating carriers;
and
(3) submit one consolidated bill to the
small employer.
(f) Issue or cause to be issued a request
for proposals and contract
with a qualified vendor for any administrative or other service not
per-
formed by the health committee or provided to the health
committee
under subsection (b) of section 48.
(g) Issue a request for proposals and
selectively contract with carriers.
(h) Establish conditions of participation
for small employers that con-
form with K.S.A. 40-2209b et seq., and amendments thereto,
and the
health insurance portability and accountability act of 1996 (Public
Law
104-191).
(i) Enroll small employers and their
eligible employees and depend-
ents in health benefit plans developed under this act.
(j) Bill and collect premiums from
participating small employers in-
cluding any share of the premium paid by such small employer's
enrolled
employees.
(k) Remit funds collected under
subsection (h) to the appropriate
contracted carriers.
(l) Provide that each eligible
low-or-modest wage employee shall be
permitted to enroll in such employee's choice of participating
carrier.
(m) Develop premium rating policies for
small employers.
(1) In consultation with the health
committee, the health partnership
shall ensure, to the maximum extent possible, that the combined
effect
of the premium rating and subsidy policies is that subsidized
workers and
the dependents of such subsidized workers can afford coverage.
(2) Any rating policy developed under
this subsection may vary with
respect to subsidy status of workers and the dependents of such
workers.
(n) Be authorized to contract for
additional group vision, dental and
life insurance plans, and other limited insurance products.
(o) Take whatever action is necessary to
assure that any adult or child
who receives health benefit coverage through the health benefit
partner-
ship and who is eligible for the state medical assistance program
shall
remain eligible to participate in the state health insurance
premium pay-
ment program.
(p) Coordinate with the department of
social and rehabilitation serv-
ices to assure that any funds available for the coverage of infants
and
pregnant women under the state medical assistance program are
also
available for the benefit of eligible infants and pregnant women
who re-
ceive health benefit coverage through the health partnership.
New Sec. 51. The health committee
may provide a mechanism for
direct subsidies to low and modest wage employees of employers
acquir-
ing coverage through a direct contract with a carrier rather than
through
the health partnership, and for provision to such employees of a
supple-
mental benefit plan as described in subsection (a) of section
50.
New Sec. 52. The department of
social and rehabilitation services
shall investigate and pursue all possible policy options to bring
into this
partnership title XIX and the title XXI eligible families of any
employees
employed by a small employer. Further, the department of social
and
rehabilitation services shall develop and seek federal approval of
any ap-
propriate variance or state plan amendment for the state children's
health
insurance program established by K.S.A. 1999 Supp. 38-2001 et
seq., and
amendments thereto, and the state medical assistance program
required
to accomplish the purposes of this act.
New Sec. 53. (a) Sections 47
through 53 and amendments thereto
shall be known as the Kansas business health partnership act.
(b) The provisions of the Kansas business
health partnership act shall
expire on July 1, 2002.
New Sec. 54. As used in sections 54
through 56 and amendments
thereto:
(a) (1) ``Amusement ride'' means
any mechanical or electrical device
that carries or conveys passengers along, around or over a fixed or
re-
stricted route or course or within a defined area for the purpose
of giving
its passengers amusement, pleasure, thrills or excitement and shall
in-
clude but not be limited to:
(A) Rides commonly known as ferris
wheels, carousels, parachute
towers, bungee jumping, reverse bungee jumping, tunnels of love
and
roller coasters;
(B) equipment generally associated with
winter activities, such as ski
lifts, ski tows, j-bars, t-bars, chair lifts and aerial
tramways;
(C) equipment not originally designed to
be used as an amusement
ride, such as cranes or other lifting devices, when used as part of
an
amusement ride;
(D) any inflatable equipment or other
device that does not have a
rigid structure or frame and which is inflated or otherwise
supported by
air pressure; and
(E) any amusement ride not excluded under
paragraph (2) of this
subsection.
(2) ``Amusement ride'' shall not
include:
(A) Games, concessions and associated
structures;
(B) any single passenger coin-operated
ride that: (i) Is manually, me-
chanically or electrically operated; (ii) is customarily placed in
a public
location; and (iii) does not normally require the supervision or
services of
an operator; and
(C) nonmechanized playground equipment,
including, but not lim-
ited to, swings, seesaws, stationary spring-mounted animal
features, rider-
propelled merry-go-rounds, climbers, slides, trampolines and
physical fit-
ness devices.
(b) ``Operator'' means a person actually
engaged in or directly con-
trolling the operations of an amusement ride.
(c) ``Owner'' means a person who owns,
leases, controls or manages
the operations of an amusement ride and may include the state or
any
political subdivision of the state.
New Sec. 55. No amusement ride
shall be operated in this state un-
less at the time of operation the owner has in effect an insurance
policy,
written by an insurance company authorized to do business in
Kansas,
insuring the owner and operator against liability for bodily injury
to per-
sons arising out of the operation of the amusement ride. Such
insurance
policy shall:
(a) Provide for coverage in an amount not
less than $1,000,000 except
that this requirement shall not apply if the owner of such
amusement
ride is the state, any subdivision of the state or a not-for-profit
organi-
zation organized under the laws of Kansas; and
(b) name as an additional insured any
person contracting with the
owner for the amusement ride's operation.
New Sec. 56. The governing body of
any city or county may establish
and enforce safety standards for amusement rides and may require
in-
surance in an amount which exceeds the amount required by section
55,
and amendments thereto. The governing body of any city or county
may
allow, in lieu of an insurance policy, an owner or operator to be
self-
insured.
New Sec. 57. (a) Sections 54
through 57 and amendments thereto
shall be known as the amusement ride insurance act.
(b) The amusement ride insurance act
shall take effect and be in force
on and after January 1, 2001.
Sec. 58. K.S.A. 40-2a23, 40-2b22, 40-12a09 and K.S.A.
1999 Supp.
40-2404, 40-3202, 40-3209, 40-3220, 40-3227, 40-3606 and 45-221
are
hereby repealed.
Sec. 59. On January 1, 2001, K.S.A.
40-2a15 and 40-2b14 are hereby
repealed.
Sec. 60. This act shall take effect
and be in force from and after its
publication in the statute book.
Approved May 15, 2000.
__________