CHAPTER 34 SENATE BILL No. 441 An Act concerning insurance; relating to health care; amending K.S.A. 1999 Supp. 40-2121,
40-2209f and 40-2209m and repealing the existing sections. Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 1999 Supp. 40-2121 is hereby amended to read as
follows: 40-2121. (a) Following the close of each fiscal year, the admin-
istering carrier shall determine the net premiums, the plan expenses of
administration and the incurred losses for the year. Any net loss of the
plan determined after taking into account amounts transferred pursuant
to subsection (h) of K.S.A. 79-4804, and amendments thereto, investment
income and other appropriate gains and losses shall be assessed by the
board to all members of the association in proportion to their respective
shares of total health insurance premiums received in this state during
the calendar year coinciding with or ending during the fiscal year of the
association or any other equitable basis as may be provided in the plan
of operation. For health maintenance organization members and insur-
ance arrangements, the proportionate share of losses shall be determined
through application of an equitable formula based upon claims paid on
the value of services provided. In sharing losses, the board may abate or
defer in whole or in part the assessment of a member if, in the opinion
of the board, payment of the assessment would endanger the ability of
the member to fulfill its contractual obligations. Health insurance benefits
paid by an insurance arrangement that are less than an amount deter-
mined by the board to justify the cost of collection shall not be considered
for purposes of determining assessments. Net gains, if any, shall be held
at interest to offset future losses or allocated to reduce future premiums.
In addition to any annual assessment at the close of the fiscal year of the
plan authorized by this subsection, the board may provide for interim
assessments of the members of the association, subject to the approval of
the commissioner, as may be necessary to assure the financial capability
of the association in meeting the incurred or estimated claims expenses
of the plan and the operating and administrative expenses of the plan.

      (b) In addition to any assessment authorized by subsection (a), the
board may assess the members of the association for any initial costs
associated with developing and implementing the plan to the extent such
costs exceed the funds transferred to the uninsurable health insurance
plan fund pursuant to K.S.A. 40-2125 and amendments thereto. Such
assessment shall be allocated among the members of the association in
the manner prescribed by subsection (a) of this section or any other eq-
uitable formula established by the board. Assessments under this subsec-
tion shall not be subject to the credit against premium tax under subsec-
tion (c).

      (c) For taxable years commencing after December 31, 1995, and
prior to January 1, 1998, 80% of any assessment made against a member
of the association pursuant to subsection (a) of this section may be claimed
by such member as a credit against such member's premium or privilege
tax liability imposed by K.S.A. 12-2624, 40-252 or 40-3213 and amend-
ments thereto, for the taxable year in which such assessment is paid. For
the tax year commencing after December 31, 1997, 70% of any assess-
ment made against a member of the association pursuant to subsection
(a) of this section may be claimed by such member as a credit against
such member's premium tax liability imposed by K.S.A. 12-2624, 40-252
or 40-3213 and amendments thereto, for the taxable year in which such
assessment is paid.

      For the tax year commencing after December 31, 1998, 65% of any
assessment made against a member of the association pursuant to sub-
section (a) of this section may be claimed by such member as a credit
against such member's premium tax liability imposed by K.S.A. 12-2624,
40-252 or 40-3213 and amendments thereto, for the taxable year in which
such assessment is paid.

      For the tax year commencing after December 31, 1999, 60% of any
assessment made against a member of the association pursuant to sub-
section (a) of this section may be claimed by such member as a credit
against such member's premium tax liability imposed by K.S.A. 12-2624,
40-252 or 40-3213 and amendments thereto, for the taxable year in which
such assessment is paid.

      The amendments made to the Kansas uninsurable health insurance
plan act by chapter 190 of the 1997 Session Laws of Kansas shall expire
on January 1, 2001.

      (d) In addition to the assessments otherwise authorized herein, the
board shall assess all issuers of medicare supplement policies covering
persons within this state to the extent necessary to assure that the excess
losses, if any, are distributed among such issuers of medicare supplement
policies in a ratio equal to the percentage market share in Kansas of each
such issuer for medicare supplement policies covering persons eligible
for medicare by reason of age. The association shall also assess to such
issuers of medicare supplement policies the costs the association incurs
in operating the reinsurance program, making assessments, and collecting
and distributing moneys, which shall be assessed pro rata to such issuers
based on the market share of such issuers of medicare supplement poli-
cies covering persons eligible for medicare by reason of age. Such as-
sessment shall occur not later than July 1 of each year, based on such
excess losses and such market shares for the immediately preceding cal-
endar year. Issuers of medicare supplement policies shall remit the
amount so assessed to the association within the time frames established
by the board for payment of assessment otherwise authorized herein. The
association shall pay to any issuer of medicare supplement policies enti-
tled thereto such amount as is necessary to result in the equalization
among all issuers of medicare supplement policies in Kansas of excess
losses in a proportion equivalent to the percentage market share in Kansas
of each issuer of medicare supplement policies covering persons eligible
for medicare by reason of age. The amount of such assessments received
by an insurer shall not be accounted for as premium income nor shall
such amounts be subject to premium tax. The amount of such assessments
shall not be available for use in premium tax credits provided for under
subsection (c) of K.S.A. 1999 Supp. 40-2122, and amendments thereto.
The association shall have the ability to enforce assessments through its
board.

      Sec.  2. K.S.A. 1999 Supp. 40-2209f is hereby amended to read as
follows: 40-2209f. Health benefit plans covering small employers that are
issued or renewed within this state or outside this state covering persons
residing in this state shall be subject to the following provisions, as ap-
plicable:

      (a) Such policy may impose a preexisting conditions exclusion, not to
exceed 90 days following the date of enrollment, for conditions whether
physical or mental, regardless of the cause of the condition for which
medical advice, diagnosis, care or treatment was recommended or re-
ceived in the six months prior to the effective date of enrollment. Any
preexisting conditions exclusion shall run concurrently with any waiting
period.

      (b) Such policy shall waive such a preexisting conditions exclusion to
the extent the employee or member or individual dependent or family
member was covered by (1) a group or individual sickness and accident
policy, (2) coverage under section 607(1) of the employees retirement
income security act of 1974 (ERISA), (3) a group specified in K.S.A. 40-
2222 and amendments thereto (4) part A or part B of title XVIII of the
social security act, (5) title XIX of the social security act, other than cov-
erage consisting solely of benefits under section 1928, (6) chapter 55 of
title 10 United States code, (7) a state children's health insurance program
established pursuant to title XXI of the social security act, (8) medical
care program of the indian health service or of a tribal organization, (9)
the Kansas uninsurable health plan act pursuant to K.S.A. 40-2217 et seq.
and amendments thereto or similar health benefits risk pool of another
state, (10) a health plan offered under chapter 89 of title 5, United States
code, (11) a health benefit plan under section 5(e) of the peace corps act
(22 U.S.C. 2504 (e) or (12) a group subject to K.S.A. 12-2616 et seq. and
amendments thereto which provided hospital, medical and surgical ex-
pense benefits within 63 days prior to the effective date of coverage under
a health benefit plan with no gap in coverage. A group policy shall credit
the periods of prior coverage specified in this subsection without regard
to the specific benefits covered during the period of prior coverage. Any
period that the employee or member is in a waiting period for any cov-
erage under a group health plan or is in an affiliation period shall be taken
into account in determining the continuous period under this subsection.

      (c) A carrier may exclude a late enrollee except during an open en-
rollment period.

      (d) Except as expressly provided by this act, every carrier doing busi-
ness in the small employer market retains the authority to underwrite and
rate individual accident and sickness insurance policies, and to rate small
employer groups using generally accepted actuarial practices.

      (e) No health benefit plan issued by a carrier may limit or exclude,
by use of a rider or amendment applicable to a specific individual, cov-
erage by type of illness, treatment, medical condition or accident, except
for preexisting conditions as permitted under subsection (a).

      (f) In the absence of the small employer's decision to the contrary,
all health benefit plans shall make coverage available to all the eligible
employees of a small employer without a waiting period. The decision of
whether to impose a waiting period for eligible employees of a small
employer shall be made by the small employer, who may only choose
from the waiting periods offered by the carrier. No waiting period shall
be greater than 90 days and shall permit coverage to become effective no
later than the first day of the month immediately following completion
of the waiting period.

      (g) The benefit structure of any health benefit plan subject to this act
may be changed by the carrier to make it consistent with the benefit
structure contained in health benefit plans developed by the board for
marketing to new groups but this shall not preclude the development and
marketing of other health benefit plans to small employers.

      (h)  (1) Except as provided in subsection (f), requirements used by a
small employer carrier in determining whether to provide coverage to a
small employer, including requirements for minimum participation of el-
igible employees and minimum employer contributions, shall be applied
uniformly among all small employers with the same number of eligible
employees applying for coverage or receiving coverage from the small
employer carrier.

      (2) A small employer carrier may vary application of minimum par-
ticipation requirements and minimum employer contribution require-
ments only by the size of the small employer group.

      (3)  (A) Except as provided in provision (B), in applying minimum
participation requirements with respect to a small employer, a small em-
ployer carrier shall not consider employees or dependents who have qual-
ifying existing coverage in a health benefit plan sponsored by another
employer in determining whether the applicable percentage of partici-
pation is met.

      (B) With respect to a small employer, a small employer carrier may
consider employees or dependents who have coverage under another
health benefit plan sponsored by such small employer in applying mini-
mum participation requirements.

      (i) (h) For the purposes of this section, the term ``preexisting condi-
tions exclusion'' shall mean, with respect to coverage, a limitation or ex-
clusion of benefits relating to a condition based on the fact that the con-
dition was present before the date of enrollment for such coverage
whether or not any medical advice, diagnosis, care or treatment was rec-
ommended or received before such date.

      (j) (i) For the purposes of this section, the term ``date of enrollment''
means the date the individual is enrolled under the group policy or, if
earlier, the first day of the waiting period for such enrollment.

      (k) (j) For the purposes of this section, the term ``waiting period''
means with respect to a group policy the period which must pass before
the individual is eligible to be covered for benefits under the terms of the
policy.

      Sec.  3. K.S.A. 1999 Supp. 40-2209m is hereby amended to read as
follows: 40-2209m. (a) Each small employer carrier shall actively market
health benefit plan coverage to eligible small employers in the state.

      (b)  (1) Except as provided in paragraph (2), no small employer car-
rier, agent or broker shall, directly or indirectly, engage in the following
activities:

      (A) Encouraging or directing small employers to refrain from filing
an application for coverage with the small employer carrier because of
the health status, claims experience, industry, occupation or geographic
location of the small employer;

      (B) encouraging or directing small employers to seek coverage from
another carrier because of the health status, claims experience, industry,
occupation or geographic location of the small employer.

      (2) The provisions of paragraph (1) shall not apply with respect to
information provided by a small employer carrier or producer to a small
employer regarding the established geographic service area or a restricted
network provision of a small employer carrier.

      (c)  (1) Except as provided in paragraph (2), no small employer car-
rier shall, directly or indirectly, enter into any contract, agreement or
arrangement with an agent or broker that provides for or results in the
compensation paid to such person for the sale of a health benefit plan to
be varied because of the health status, claims experience, industry, oc-
cupation or geographic location of the small employer.

      (2) Paragraph (1) shall not apply with respect to a compensation ar-
rangement that provides compensation to an agent or broker on the basis
of percentage of premium, provided that the percentage shall not vary
because of the health status, claims experience, industry, occupation or
geographic area of the small employer.

      (d)  No small employer carrier shall terminate, fail to renew or limit
its contract or agreement of representation with an agent or broker for
any reason related to the health status, claims experience, occupation, or
geographic location of the small employers placed by the agent or broker
with the small employer carrier.

      (e) No small employer carrier, agent or broker shall induce or oth-
erwise encourage a small employer to separate or otherwise exclude an
employee from health coverage or benefits provided in connection with
the employee's employment.

      (f) Denial by a small employer carrier of an application for coverage
from a small employer shall be in writing and shall state the reason or
reasons for the denial.

      (g) The commissioner may adopt rules and regulations setting forth
additional standards to provide for the fair marketing and broad availa-
bility of health benefit plans to small employers in this state.

      (h) If a small employer carrier enters into a contract, agreement or
other arrangement with a third-party administrator to provide adminis-
trative, marketing or other services related to the offering of health ben-
efit plans to small employers in this state, the third-party administrator
shall be subject to this section as if it were a small employer carrier.

      (i) The board shall make available a broadly publicized toll free tel-
ephone number for access by small employers to information concerning
this act and the health benefit plans developed pursuant to K.S.A. 40-
2209.

      (j) Except as provided in paragraph (l), for the purposes of this act,
carriers that are affiliated companies or that are eligible to file a consol-
idated tax return shall be treated as one carrier and any restrictions or
limitations imposed by this act shall apply as if all health benefit plans
issued to small employers in this state by such affiliated carriers were
issued by one carrier.

      (k) (j) An affiliated carrier that is a health maintenance organization
having a certificate of authority under K.S.A. 40-3201 et seq. and amend-
ments thereto, may be considered to be a separate carrier for the purpose
of this act.

 Sec.  4. K.S.A. 1999 Supp. 40-2121, 40-2209f and 40-2209m are
hereby repealed.
 Sec.  5. This act shall take effect and be in force from and after its
publication in the statute book.

Approved March 29, 2000.
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