Session of 1999
HOUSE BILL No. 2434
By Representative Faber
9 AN ACT relating to accident and health insurance; concerning the small
10 employer health care plans; amending K.S.A. 1998 Supp. 40-2209d
11 and 40-2209e and repealing the existing sections.
13 Be it enacted by the Legislature of the State of Kansas:
14 Section 1. K.S.A. 1998 Supp. 40-2209d is hereby amended to read
15 as follows: 40-2209d. As used in this act:
16 (a) "Actuarial certification" means a written statement by a member
17 of the American academy of actuaries or other individual acceptable to
18 the commissioner that a small employer carrier is in compliance with the
19 provisions of K.S.A. 40-2209h, and amendments thereto, based upon the
20 person's examination, including a review of the appropriate records and
21 of the actuarial assumptions and methods used by the small employer
22 carrier in establishing premium rates for applicable health benefit plans.
23 (b) "Approved service area" means a geographical area, as approved
24 by the commissioner to transact insurance in this state, within which the
25 carrier is authorized to provide coverage.
26 (c) "Base premium rate" means, for each class of business as to a
27 rating period, the lowest premium rate charged or that could have been
28 charged under the rating system for that class of business, by the small
29 employer carrier to small employers with similar case characteristics for
30 health benefit plans with the same or similar coverage.
31 (d) "Carrier" or "small employer carrier" means any insurance com-
32 pany, nonprofit medical and hospital service corporation, nonprofit op-
33 tometric, dental, and pharmacy service corporations, municipal group-
34 funded pool, fraternal benefit society or health maintenance organization,
35 as these terms are defined by the Kansas Statutes Annotated, that offers
36 health benefit plans covering eligible employees of one or more small
37 employers in this state.
38 (e) "Case characteristics" means, with respect to a small employer,
39 the geographic area in which the employees reside; the age and sex of
40 the individual employees and their dependents; the appropriate industry
41 classification as determined by the carrier, and the number of employees
42 and dependents and such other objective criteria as may be approved
43 family composition by the commissioner. "Case characteristics" shall not
HB 2434 2
1 include claim experience, health status and duration of coverage since
3 (f) "Class of business" means all or a separate grouping of small em-
4 ployers established pursuant to K.S.A. 40-2209g, and amendments
6 (g) "Commissioner" means the commissioner of insurance.
7 (h) "Department" means the insurance department.
8 (i) "Dependent" means the spouse or child of an eligible employee,
9 subject to applicable terms of the health benefits plan covering such em-
10 ployee and the dependent eligibility standards established by the board.
11 (j) "Eligible employee" means an employee who works on a full-time
12 basis, with a normal work week of 30 or more hours, and includes a sole
13 proprietor, a partner of a partnership or an independent contractor, pro-
14 vided such sole proprietor, partner or independent contractor is included
15 as an employee under a health benefit plan of a small employer but does
16 not include an employee who works on a part-time, temporary or substi-
17 tute basis.
18 (k) "Financially impaired" means a member which, after the effective
19 date of this act, is not insolvent but is:
20 (1) Deemed by the commissioner to be in a hazardous financial con-
21 dition pursuant to K.S.A. 40-222d, and amendments thereto; or
22 (2) placed under an order of rehabilitation or conservation by a court
23 of competent jurisdiction.
24 (l) "Health benefit plan" means any hospital or medical expense pol-
25 icy, health, hospital or medical service corporation contract, and a plan
26 provided by a municipal group-funded pool, or a health maintenance
27 organization contract offered by an employer or any certificate issued
28 under any such policies, contracts or plans. "Health benefit plan" does
29 not include policies or certificates covering only accident, credit, dental,
30 disability income, long-term care, hospital indemnity, medicare supple-
31 ment, specified disease, vision care, coverage issued as a supplement to
32 liability insurance, insurance arising out of a workers compensation or
33 similar law, automobile medical-payment insurance, or insurance under
34 which benefits are payable with or without regard to fault and which is
35 statutorily required to be contained in any liability insurance policy or
36 equivalent self-insurance.
37 (m) "Index rate" means, for each class of business as to a rating period
38 for small employers with similar case characteristics, the arithmetic av-
39 erage of the applicable base premium rate and the corresponding highest
40 premium rate.
41 (n) "Initial enrollment period" means the period of time specified in
42 the health benefit plan during which an individual is first eligible to enroll
43 in a small employer health benefit plan. Such period shall be no less
HB 2434 3
1 favorable than a period beginning on the employee's or member's date
2 of initial eligibility and ending 31 days thereafter.
3 (o) "Late enrollee" means an eligible employee or dependent who
4 requests enrollment in a small employer's health benefit plan following
5 the initial enrollment period provided under the terms of the first plan
6 for which such employee or dependent was eligible through such small
7 employer, however an eligible employee or dependent shall not be con-
8 sidered a late enrollee if:
9 (1) The individual:
10 (A) Was covered under another employer-provided health benefit
11 plan or was covered under section 607(1) of the employee retirement
12 income security act of 1974 (ERISA) at the time the individual was eli-
13 gible to enroll;
14 (B) states in writing, at the time of the initial eligibility, that coverage
15 under another employer health benefit plan was the reason for declining
16 enrollment but only if the group policyholder or the accident and sickness
17 issuer required such a written statement and provided the individual with
18 notice of the requirement for a written statement and the consequences
19 of such written statement;
20 (C) has lost coverage under another employer health benefit plan or
21 under section 607(1) of the employee retirement income security act of
22 1974 (ERISA) as a result of the termination of employment, reduction in
23 the number of hours of employment, termination of employer contribu-
24 tions toward such coverage, the termination of the other plan's coverage,
25 death of a spouse, or divorce or legal separation; and
26 (D) requests enrollment within 63 days after the termination of cov-
27 erage under another employer health benefit plan; or
28 (2) the individual is employed by an employer who offers multiple
29 health benefit plans and the individual elects a different health benefit
30 plan during an open enrollment period; or
31 (3) a court has ordered coverage to be provided for a spouse or minor
32 child under a covered employee's plan.
33 (p) "New business premium rate" means, for each class of business
34 as to a rating period, the lowest premium rate charged or offered, or
35 which could have been charged or offered, by the small employer carrier
36 to small employers with similar case characteristics for newly issued health
37 benefit plans with the same or similar coverage.
38 (q) "Preexisting conditions exclusion" means a policy provision which
39 excludes or limits coverage for charges or expenses incurred during a
40 specified period not to exceed 90 days following the insured's effective
41 date of enrollment as to a condition , whether physical or mental, re-
42 gardless of the cause of the condition for which medical advice, diagnosis,
43 care or treatment was recommended or received in the six months im-
HB 2434 4
1 mediately preceding the effective date of enrollment.
2 (r) "Premium" means moneys paid by a small employer or eligible
3 employees or both as a condition of receiving coverage from a small em-
4 ployer carrier, including any fees or other contributions associated with
5 the health benefit plan.
6 (s) "Rating period" means the calendar period for which premium
7 rates established by a small employer carrier are assumed to be in effect
8 but any period of less than one year shall be considered as a full year.
9 (t) " Waiting period" means a period of time after full-time employ-
10 ment begins before an employee is first eligible to enroll in any applicable
11 health benefit plan offered by the small employer.
12 (u) "Small employer" means any person, firm, corporation, partner-
13 ship or association eligible for group sickness and accident insurance pur-
14 suant to subsection (a) of K.S.A. 40-2209, and amendments thereto, ac-
15 tively engaged in business whose total employed work force consisted of,
16 on at least 50% of its working days during the preceding year, of
two and no more than 50 eligible employees, the majority of whom were
18 employed within the state. In determining the number of eligible em-
19 ployees, companies which are affiliated companies or which are eligible
20 to file a combined tax return for purposes of state taxation, shall be con-
21 sidered one employer. Except as otherwise specifically provided, provi-
22 sions of this act which apply to a small employer which has a health benefit
23 plan shall continue to apply until the plan anniversary following the date
24 the employer no longer meets the requirements of this definition.
25 (v) "Affiliate" or "affiliated" means an entity or person who directly
26 or indirectly through one or more intermediaries, controls or is controlled
27 by, or is under common control with, a specified entity or person.
28 Sec. 2. K.S.A. 1998 Supp. 40-2209e is hereby amended to read as
29 follows: 40-2209e. (a) Any individual or group health benefit plan issued
30 to a group authorized by subsection (a) of K.S.A. 40-2209, and amend-
31 ments thereto, shall be subject to the provisions of this act if it provides
32 health care benefits covering employees of a small employer and if it
33 meets any one of the following conditions:
34 (1) Any portion of the premium is paid by a small employer, or any
35 covered individual, whether through wage adjustments, reimbursement,
36 withholding or otherwise;
37 (2) the health benefit plan is treated by the employer or any of the
38 covered individuals as part of a plan or program for the purposes of sec-
39 tion 106 or section 162 of the United States internal revenue code; or
40 (3) with the permission of the board, the carrier elects to renew or
41 continue a health benefit plan covering employees of an employer who
42 no longer meets the definition of a "small employer."
43 (b) For purposes of this act an aggregation of two or more small
HB 2434 5
1 employers covered under a trust arrangement or a policy issued to an
2 association of small employers pursuant to K.S.A. 40-2209, and amend-
3 ments thereto, shall permit employee or member units of
more than two
4 one or more but less than 51 employees or members and their dependents
5 to participate in any health benefit plan to which this act applies. Any
6 group which includes employee or member units of 50 or fewer employ-
7 ees shall be subject to the provisions of this act notwithstanding its inclu-
8 sion of employee or member units with more than 50 employees or
10 (c) Except as expressly provided in this act, no health benefit plan
11 offered to a small employer shall be subject to:
12 (1) Any law that would inhibit any carrier from contracting with pro-
13 viders or groups of providers with respect to health care services or
15 (2) any law that would impose any restriction on the ability to nego-
16 tiate with providers regarding the level or method of reimbursing care or
17 services provided under the health benefit plan.
18 (d) Individual policies of accident and sickness insurance issued to
19 individuals and their dependents totally independent of any group, as-
20 sociation or trust arrangement permitted under K.S.A. 40-2209, and
21 amendments thereto, shall not be subject to the provisions of this act.
22 Sec. 3. K.S.A. 1998 Supp. 40-2209d and 40-2209e are hereby
24 Sec. 4. This act shall take effect and be in force from and after its
25 publication in the statute book.