Session of 1999
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

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  1       include claim experience, health status and duration of coverage since
  2       issue.
  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
  5       thereto.
  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

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  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-

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  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 at least
17       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


  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
  9       members.
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
14       benefits;
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
23       repealed.
24        Sec.  4. This act shall take effect and be in force from and after its
25       publication in the statute book.