CHAPTER 204 SENATE BILL No. 366 An Act concerning health care provider insurance; amending K.S.A. 40-3401, 40-3403, 40-3404 and 40-3414 and repealing the existing sections. Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 40-3401 is hereby amended to read as follows: 40-
3401. As used in this act the following terms shall have the meanings
respectively ascribed to them herein.

      (a) ``Applicant'' means any health care provider.

      (b) ``Basic coverage'' means a policy of professional liability insurance
required to be maintained by each health care provider pursuant to the
provisions of subsection (a) or (b) of K.S.A. 40-3402 and amendments
thereto.

      (c) ``Commissioner'' means the commissioner of insurance.

      (d) ``Fiscal year'' means the year commencing on the effective date
of this act and each year, commencing on the first day of that month,
thereafter.

      (e) ``Fund'' means the health care stabilization fund established pur-
suant to subsection (a) of K.S.A. 40-3403 and amendments thereto.

      (f) ``Health care provider'' means a person licensed to practice any
branch of the healing arts by the state board of healing arts with the
exception of physician assistants, a person who holds a temporary permit
to practice any branch of the healing arts issued by the state board of
healing arts, a person engaged in a postgraduate training program ap-
proved by the state board of healing arts, a medical care facility licensed
by the department of health and environment, a health maintenance or-
ganization issued a certificate of authority by the commissioner of insur-
ance, a podiatrist licensed by the state board of healing arts, an optom-
etrist licensed by the board of examiners in optometry, a pharmacist
licensed by the state board of pharmacy, a licensed professional nurse
who is authorized to practice as a registered nurse anesthetist, a licensed
professional nurse who has been granted a temporary authorization to
practice nurse anesthesia under K.S.A. 65-1153 and amendments thereto,
a professional corporation organized pursuant to the professional corpo-
ration law of Kansas by persons who are authorized by such law to form
such a corporation and who are health care providers as defined by this
subsection, a Kansas limited liability company organized for the purpose
of rendering professional services by its members who are health care
providers as defined by this subsection and who are legally authorized to
render the professional services for which the limited liability company
is organized, a partnership of persons who are health care providers under
this subsection, a Kansas not-for-profit corporation organized for the pur-
pose of rendering professional services by persons who are health care
providers as defined by this subsection, a nonprofit corporation organized
to administer the graduate medical education programs of community
hospitals or medical care facilities affiliated with the university of Kansas
school of medicine, a dentist certified by the state board of healing arts
to administer anesthetics under K.S.A. 65-2899 and amendments thereto,
a physical therapist registered by the state board of healing arts, a psy-
chiatric hospital licensed under K.S.A. 75-3307b and amendments
thereto, or a mental health center or mental health clinic licensed by the
secretary of social and rehabilitation services, except that health care pro-
vider does not include (1) any state institution for the mentally retarded,
(2) any state psychiatric hospital, (3) any person holding an exempt license
issued by the state board of healing arts or (4) any person holding a visiting
clinical professor license from the state board of healing arts.

      (g) ``Inactive health care provider'' means a person or other entity
who purchased basic coverage or qualified as a self-insurer on or subse-
quent to the effective date of this act but who, at the time a claim is made
for personal injury or death arising out of the rendering of or the failure
to render professional services by such health care provider, does not
have basic coverage or self-insurance in effect solely because such person
is no longer engaged in rendering professional service as a health care
provider.

      (h) ``Insurer'' means any corporation, association, reciprocal
exchange, inter-insurer and any other legal entity authorized to write bod-
ily injury or property damage liability insurance in this state, including
workers compensation and automobile liability insurance, pursuant to the
provisions of the acts contained in article 9, 11, 12 or 16 of chapter 40 of
Kansas Statutes Annotated.

      (i) ``Plan'' means the operating and administrative rules and proce-
dures developed by insurers and rating organizations or the commissioner
to make professional liability insurance available to health care providers.

      (j) ``Professional liability insurance'' means insurance providing cov-
erage for legal liability arising out of the performance of professional
services rendered or which should have been rendered by a health care
provider.

      (k) ``Rating organization'' means a corporation, an unincorporated as-
sociation, a partnership or an individual licensed pursuant to K.S.A. 40-
930 or 40-1114, or both 40-956, and amendments thereto, to make rates
for professional liability insurance.

      (l) ``Self-insurer'' means a health care provider who qualifies as a self-
insurer pursuant to K.S.A. 40-3414 and amendments thereto.

      (m) ``Medical care facility'' means the same when used in the health
care provider insurance availability act as the meaning ascribed to that
term in K.S.A. 65-425 and amendments thereto, except that as used in
the health care provider insurance availability act such term, as it relates
to insurance coverage under the health care provider insurance availa-
bility act, also includes any director, trustee, officer or administrator of a
medical care facility.

      (n) ``Mental health center'' means a mental health center licensed by
the secretary of social and rehabilitation services under K.S.A. 75-3307b
and amendments thereto, except that as used in the health care provider
insurance availability act such term, as it relates to insurance coverage
under the health care provider insurance availability act, also includes any
director, trustee, officer or administrator of a mental health center.

      (o) ``Mental health clinic'' means a mental health clinic licensed by
the secretary of social and rehabilitation services under K.S.A. 75-3307b
and amendments thereto, except that as used in the health care provider
insurance availability act such term, as it relates to insurance coverage
under the health care provider insurance availability act, also includes any
director, trustee, officer or administrator of a mental health clinic.

      (p) ``State institution for the mentally retarded'' means Winfield state
hospital and training center, Parsons state hospital and training center
and the Kansas neurological institute.

      (q) ``State psychiatric hospital'' means Larned state hospital, Osawa-
tomie state hospital, and Rainbow mental health facility and Topeka state
hospital.

      (r) ``Person engaged in residency training'' means:

      (1) A person engaged in a postgraduate training program approved
by the state board of healing arts who is employed by and is studying at
the university of Kansas medical center only when such person is engaged
in medical activities which do not include extracurricular, extra-institu-
tional medical service for which such person receives extra compensation
and which have not been approved by the dean of the school of medicine
and the executive vice-chancellor of the university of Kansas medical cen-
ter. Persons engaged in residency training shall be considered resident
health care providers for purposes of K.S.A. 40-3401 et seq., and amend-
ments thereto; and

      (2) a person engaged in a postgraduate training program approved by
the state board of healing arts who is employed by a nonprofit corporation
organized to administer the graduate medical education programs of com-
munity hospitals or medical care facilities affiliated with the university of
Kansas school of medicine or who is employed by an affiliate of the uni-
versity of Kansas school of medicine as defined in K.S.A. 76-367 and
amendments thereto only when such person is engaged in medical activ-
ities which do not include extracurricular, extra-institutional medical serv-
ice for which such person receives extra compensation and which have
not been approved by the chief operating officer of the nonprofit cor-
poration or the chief operating officer of the affiliate and the executive
vice-chancellor of the university of Kansas medical center.

      (s) ``Full-time physician faculty employed by the university of Kansas
medical center'' means a person licensed to practice medicine and surgery
who holds a full-time appointment at the university of Kansas medical
center when such person is providing health care.

      (t) ``Sexual act'' or ``sexual activity'' means that sexual conduct which
constitutes a criminal or tortious act under the laws of the state of Kansas.

      Sec.  2. K.S.A. 40-3403 is hereby amended to read as follows: 40-
3403. (a) For the purpose of paying damages for personal injury or death
arising out of the rendering of or the failure to render professional serv-
ices by a health care provider, self-insurer or inactive health care provider
subsequent to the time that such health care provider or self-insurer has
qualified for coverage under the provisions of this act, there is hereby
established the health care stabilization fund. The fund shall be held in
trust in the state treasury and accounted for separately from other state
funds. The board of governors shall administer the fund or contract for
the administration of the fund with an insurance company authorized to
do business in this state.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      (7) The commissioner shall:

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

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

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

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

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

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

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

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

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

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

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

      (10) return of any unearned surcharge;

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

      (12) notwithstanding the provisions of subsection (m), any amount
due from a judgment or settlement for an injury or death arising out of
the rendering of or failure to render professional services by a person
engaged or who was engaged in residency training or the private practice
corporations or foundations and their full-time physician faculty em-
ployed by the university of Kansas medical center or any nonprofit cor-
poration organized to administer the graduate medical education pro-
grams of community hospitals or medical care facilities affiliated with the
university of Kansas school of medicine;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      (j)  (1) Upon the payment of moneys from the health care stabiliza-
tion fund pursuant to subsection (c)(11), the board of governors shall
certify to the director of accounts and reports the amount of such pay-
ment, and the director of accounts and reports shall transfer an amount
equal to the amount certified, reduced by any amount transferred pur-
suant to paragraph (3) or (4) of this subsection (j), from the state general
fund to the health care stabilization fund.

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

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

      (4) The graduate medical education administration reserve fund is
hereby established in the state treasury. If the balance in such reserve
fund is less than $40,000 on July 1 of any year, the nonprofit corporations
organized to administer the graduate medical education programs of com-
munity hospitals or medical care facilities affiliated with the university of
Kansas school of medicine shall remit the amount necessary to increase
such balance to $40,000 to the state treasurer for credit to such reserve
fund as soon after such July 1 date as is practicable. Upon receipt of each
such remittance, the state treasurer shall credit the same to such reserve
fund. When compliance with the foregoing provisions of this paragraph
have been achieved on or after July 1 of any year in which the same are
applicable, the state treasurer shall certify to the board of governors that
such reserve fund has been funded for the year in the manner required
by law. Moneys in such reserve fund may be invested or reinvested in
accordance with the provisions of K.S.A. 40-3406, and amendments
thereto, and any income or interest earned by such investments shall be
credited to such reserve fund. Upon payment of moneys from the health
care stabilization fund pursuant to subsection (c)(11) or (c)(12) with re-
spect to any nonprofit corporations organized to administer the graduate
medical education programs of community hospitals or medical care fa-
cilities affiliated with the university of Kansas school of medicine the di-
rector of accounts and reports shall transfer an amount equal to the
amount paid from the graduate medical education administration reserve
fund to the health care stabilization fund or, if the balance in such reserve
fund is less than the amount so paid, an amount equal to the balance in
such reserve fund.

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

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

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

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

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

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

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

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

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

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

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

      Sec.  3. K.S.A. 40-3414 is hereby amended to read as follows: 40-
3414. (a) Any health care provider, or any health care system organized
and existing under the laws of this state which owns and operates two or
more medical care facilities licensed by the department of health and
environment, whose aggregate annual insurance premium is or would be
$100,000 or more for basic coverage calculated in accordance with rating
procedures approved by the commissioner pursuant to K.S.A. 40-3413
and amendments thereto, may qualify as a self-insurer by obtaining a
certificate of self-insurance from the board of governors. Upon applica-
tion of any such health care provider or health care system, on a form
prescribed by the board of governors, the board of governors may issue
a certificate of self-insurance if the board of governors is satisfied that
the applicant is possessed and will continue to be possessed of ability to
pay any judgment for which liability exists equal to the amount of basic
coverage required of a health care provider obtained against such appli-
cant arising from the applicant's rendering of professional services as a
health care provider. In making such determination the board of gover-
nors shall consider (1) the financial condition of the applicant, (2) the
procedures adopted and followed by the applicant to process and handle
claims and potential claims, (3) the amount and liquidity of assets reserved
for the settlement of claims or potential claims and (4) any other relevant
factors. The certificate of self-insurance may contain reasonable condi-
tions prescribed by the board of governors. Upon notice and a hearing in
accordance with the provisions of the Kansas administrative procedure
act, the board of governors may cancel a certificate of self-insurance upon
reasonable grounds therefor. Failure to pay any judgment for which the
self-insurer is liable arising from the self-insurer's rendering of profes-
sional services as a health care provider, the failure to comply with any
provision of this act or the failure to comply with any conditions contained
in the certificate of self-insurance shall be reasonable grounds for the
cancellation of such certificate of self-insurance. The provisions of this
subsection shall not apply to the Kansas soldiers' home, the Kansas vet-
erans' home or to any person who is a self-insurer pursuant to subsection
(d) or (e).

      (b) Any such health care provider or health care system that holds a
certificate of self-insurance shall pay the applicable surcharge set forth in
subsection (c) of K.S.A. 40-3402 and amendments thereto.

      (c) The Kansas soldiers' home and the Kansas veterans' home shall
be self-insurers and shall pay the applicable surcharge set forth in sub-
section (c) of K.S.A. 40-3402 and amendments thereto.

      (d) Persons engaged in residency training as provided in subsections
(r)(1) and (2) of K.S.A. 40-3401, and amendments thereto, shall be self-
insured by the state of Kansas for occurrences arising during such train-
ing, and such person shall be deemed a self-insurer for the purposes of
the health care provider insurance availability act. Such self-insurance
shall be applicable to a person engaged in residency training only when
such person is engaged in medical activities which do not include extra-
curricular, extra-institutional medical service for which such person re-
ceives extra compensation and which have not been approved as provided
in subsections (r)(1) and (2) of K.S.A. 40-3401, and amendments thereto.

      (e)  (1) A person engaged in a postgraduate training program ap-
proved by the state board of healing arts at a medical care facility or
mental health center in this state may be self-insured by such medical
care facility or mental health center in accordance with this subsection
(e) and in accordance with such terms and conditions of eligibility therefor
as may be specified by the medical care facility or mental health center
and approved by the board of governors. A person self-insured under this
subsection (e) by a medical care facility or mental health center shall be
deemed a self-insurer for purposes of the health care provider insurance
availability act. Upon application by a medical care facility or mental
health center, on a form prescribed by the board of governors, the board
of governors may authorize such medical care facility or mental health
center to self-insure persons engaged in postgraduate training programs
approved by the state board of healing arts at such medical care facility
or mental health center if the board of governors is satisfied that the
medical care facility or mental health center is possessed and will continue
to be possessed of ability to pay any judgment for which liability exists
equal to the amount of basic coverage required of a health care provider
obtained against a person engaged in such a postgraduate training pro-
gram and arising from such person's rendering of or failure to render
professional services as a health care provider.

      (2) In making such determination the board of governors shall con-
sider (A) the financial condition of the medical care facility or mental
health center, (B) the procedures adopted by the medical care facility or
mental health center to process and handle claims and potential claims,
(C) the amount and liquidity of assets reserved for the settlement of
claims or potential claims by the medical care facility or mental health
center and (D) any other factors the board of governors deems relevant.
The board of governors may specify such conditions for the approval of
an application as the board of governors deems necessary. Upon approval
of an application, the board of governors shall issue a certificate of self-
insurance to each person engaged in such postgraduate training program
at the medical care facility or mental health center who is self-insured by
such medical care facility or mental health center.

      (3) Upon notice and a hearing in accordance with the provisions of
the Kansas administrative procedure act, the board of governors may
cancel, upon reasonable grounds therefor, a certificate of self-insurance
issued pursuant to this subsection (e) or the authority of a medical care
facility or mental health center to self-insure persons engaged in such
postgraduate training programs at the medical care facility or mental
health center. Failure of a person engaged in such postgraduate training
program to comply with the terms and conditions of eligibility to be self-
insured by the medical care facility or mental health center, the failure
of a medical care facility or mental health center to pay any judgment for
which such medical care facility or mental health center is liable as self-
insurer of such person, the failure to comply with any provisions of the
health care provider insurance availability act or the failure to comply
with any conditions for approval of the application or any conditions con-
tained in the certificate of self-insurance shall be reasonable grounds for
cancellation of such certificate of self-insurance or the authority of a med-
ical care facility or mental health center to self-insure such persons.

      (4) A medical care facility or mental health center authorized to self-
insure persons engaged in such postgraduate training programs shall pay
the applicable surcharge set forth in subsection (c) of K.S.A. 40-3402 and
amendments thereto on behalf of such persons.

      (5) As used in this subsection (e), ``medical care facility'' does not
include the university of Kansas medical center or those community hos-
pitals or medical care facilities described in subsection (r)(2) of K.S.A.
40-3401, and amendments thereto.

      (f) For the purposes of subsection (a), ``health care provider'' may
include each health care provider in any group of health care providers
who practice as a group to provide physician services only for a health
maintenance organization, any professional corporations, partnerships or
not-for-profit corporations formed by such group and the health main-
tenance organization itself. The premiums for each such provider, health
maintenance organization and group corporation or partnership may be
aggregated for the purpose of being eligible for and subject to the stat-
utory requirements for self-insurance as set forth in this section.

      (g) The provisions of subsections (a) and (f), relating to health care
systems, shall not affect the responsibility of individual health care pro-
viders as defined in subsection (f) of K.S.A. 40-3401 and amendments
thereto or organizations whose premiums are aggregated for purposes of
being eligible for self-insurance from individually meeting the require-
ments imposed by K.S.A. 40-3402 and amendments thereto with respect
to the ability to respond to injury or damages to the extent specified
therein and K.S.A. 40-3404 and amendments thereto with respect to the
payment of the health care stabilization fund surcharge.

      (h) Each private practice corporation or foundation and their full-
time physician faculty employed by the university of Kansas medical cen-
ter and each nonprofit corporation organized to administer the graduate
medical education programs of community hospitals or medical care fa-
cilities affiliated with the university of Kansas school of medicine shall be
deemed a self-insurer for the purposes of the health care provider insur-
ance availability act. The private practice corporation or foundation of
which the full-time physician faculty is a member and each nonprofit
corporation organized to administer the graduate medical education pro-
grams of community hospitals or medical care facilities affiliated with the
university of Kansas school of medicine shall pay the applicable surcharge
set forth in subsection (a) of K.S.A. 40-3404, and amendments thereto,
on behalf of the private practice corporation or foundation and their full-
time physician faculty employed by the university of Kansas medical cen-
ter or on behalf of a nonprofit corporation organized to administer the
graduate medical education programs of community hospitals or medical
care facilities affiliated with the university of Kansas school of medicine.

      (i)  (1) Subject to the provisions of paragraph (4), for the purposes of
the health care provider insurance availability act, each nonprofit cor-
poration organized to administer the graduate medical education pro-
grams of community hospitals or medical care facilities affiliated with the
university of Kansas school of medicine shall be deemed to have been a
health care provider as defined in section 1, and amendments thereto,
from and after July 1, 1997.

      (2) Subject to the provisions of paragraph (4), for the purposes of the
health care provider insurance availability act, each nonprofit corporation
organized to administer the graduate medical education programs of com-
munity hospitals or medical care facilities affiliated with the university of
Kansas school of medicine shall be deemed to have been a self insurer
within the meaning of subsection (h) of this section, and amendments
thereto, from and after July 1, 1997.

      (3) Subject to the provisions of paragraph (4), for the purposes of the
health care provider insurance availability act, the election of fund cov-
erage limits for each nonprofit corporation organized to administer the
graduate medical education programs of community hospitals or medical
care facilities affiliated with the university of Kansas school of medicine
shall be deemed to have been effective at the highest option, as provided
in subsection (1) of section 2, and amendments thereto, from and after
July 1, 1997.

      (4) No nonprofit corporation organized to administer the graduate
medical education programs of community hospitals or medical care fa-
cilities affiliated with the university of Kansas school of medicine shall be
required to pay to the fund any annual premium surcharge for any period
prior to the effective date of this act. Any annual premium surcharge for
the period commencing on the effective date of this act and ending on
June 30, 2001, shall be prorated.

      Sec.  4. K.S.A. 40-3404 is hereby amended to read as follows: 40-
3404. (a) Except for any health care provider whose participation in the
fund has been terminated pursuant to subsection (i) of K.S.A. 40-3403
and amendments thereto, the board of governors shall levy an annual
premium surcharge on each health care provider who has obtained basic
coverage and upon each self-insurer for each fiscal year. This provision
shall not apply to optometrists and pharmacists on or after July 1, 1991
nor to physical therapists on or after July 1, 1995, nor to health mainte-
nance organizations on and after July 1, 1997. Such premium surcharge
shall be an amount based upon a rating classification system established
by the board of governors which is reasonable, adequate and not unfairly
discriminating. The annual premium surcharge upon the university of
Kansas medical center for persons engaged in residency training, as de-
scribed in paragraph (1) of subsection (r)(1) of K.S.A. 40-3401, and
amendments thereto, shall be based on an assumed aggregate premium
of $600,000. The annual premium surcharge upon the employers of per-
sons engaged in residency training, as described in paragraph (2) of sub-
section (r)(2) of K.S.A. 40-3401, and amendments thereto, shall be based
on an assumed aggregate premium of $400,000. The surcharge on such
$400,000 amount shall be apportioned among the employers of persons
engaged in residency training, as described in paragraph (2) of subsection
(r)(2) of K.S.A. 40-3401, and amendments thereto, based on the number
of residents employed as of July 1 of each year. The annual premium
surcharge upon any nonprofit corporation organized to administer the
graduate medical education programs of community hospitals or medical
care facilities affiliated with the university of Kansas school of medicine
shall be based upon an assumed aggregate premium of $10,000. The sur-
charge on such assumed aggregate premium shall be apportioned among
all such nonprofit corporations.

      (b) In the case of a resident health care provider who is not a self-
insurer, the premium surcharge shall be collected in addition to the an-
nual premium for the basic coverage by the insurer and shall not be
subject to the provisions of K.S.A. 40-252, 40-1113 40-955 and 40-2801
et seq., and amendments thereto. The amount of the premium surcharge
shall be shown separately on the policy or an endorsement thereto and
shall be specifically identified as such. Such premium surcharge shall be
due and payable by the insurer to the board of governors within 30 days
after the annual premium for the basic coverage is received by the insurer,
but in the event basic coverage is in effect at the time this act becomes
effective, such surcharge shall be based upon the unearned premium until
policy expiration and annually thereafter. Within 15 days immediately
following the effective date of this act, the board of governors shall send
to each insurer information necessary for their compliance with this sub-
section. The certificate of authority of any insurer who fails to comply
with the provisions of this subsection shall be suspended pursuant to
K.S.A. 40-222, and amendments thereto, until such insurer shall pay the
annual premium surcharge due and payable to the board of governors.
In the case of a nonresident health care provider or a self-insurer, the
premium surcharge shall be collected in the manner prescribed in K.S.A.
40-3402, and amendments thereto.

      (c) In setting the amount of such surcharge, the board of governors
may require any health care provider who has paid a surcharge for less
than 24 months to pay a higher surcharge than other health care provid-
ers.

 Sec.  5. K.S.A. 40-3401, 40-3403, 40-3404 and 40-3414 are hereby
repealed.

      Sec.  6. This act shall take effect and be in force from and after its
publication in the Kansas register.

Approved May 22, 2001.
 Published in the Kansas Register May 31, 2001.
__________