Ch. 13             1997 Session Laws of Kansas             35

Chapter 13


An Act concerning health maintenance organizations; regarding financial projections sub-
mitted in connection with applications for certificates of authority; amending K.S.A. 1996 Supp. 40-3203 and repealing the existing section.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 1996 Supp. 40-3203 is hereby amended to read as
follows: 40-3203. (a) Except as otherwise provided by this act, it shall be
unlawful for any person to provide health care services in the manner
prescribed in subsection (n) of K.S.A. 40-3202 and amendments thereto
without first obtaining a certificate of authority from the commissioner.

(b) Applications for a certificate of authority shall be made in the form
required by the commissioner and shall be verified by an officer or au-
thorized representative of the applicant and shall set forth or be accom-
panied by:

(1) A copy of the basic organizational documents of the applicant such
as articles of incorporation, partnership agreements, trust agreements or
other applicable documents;

(2) a copy of the bylaws, regulations or similar document, if any, reg-
ulating the conduct of the internal affairs of the applicant;

(3) a list of the names, addresses, official capacity with the organi-
zation and biographical information for all of the persons who are to be
responsible for the conduct of its affairs, including all members of the
governing body, the officers and directors in the case of a corporation
and the partners or members in the case of a partnership or corporation;

36             1997 Session Laws of Kansas             Ch. 13

(4) a sample or representative copy of any contract or agreement
made or to be made between the health maintenance organization and
any class of providers and a copy of any contract made or agreement made
or to be made, excluding individual employment contracts or agreements,
between third party administrators, marketing consultants or persons
listed in subsection (3) and the health maintenance organization;

(5) a statement generally describing the organization, its enrollment
process, its operation, its quality assurance mechanism, its internal griev-
ance procedures, the methods it proposes to use to offer its enrollees an
opportunity to participate in matters of policy and operation, the geo-
graphic area or areas to be served, the location and hours of operation of
the facilities at which health care services will be regularly available to
enrollees in the case of staff and group practices, the type and specialty
of health care personnel and the number of personnel in each specialty
category engaged to provide health care services in the case of staff and
group practices, and a records system providing documentation of utili-
zation rates for enrollees. In cases other than staff and group practices,
the organization shall provide a list of names, addresses and telephone
numbers of providers by specialty;

(6) copies of all contract forms the organization proposes to offer
enrollees together with a table of rates to be charged;

(7) the following statements of the fiscal soundness of the organiza-

(A) Descriptions of financing arrangements for operational deficits
and for developmental costs if operational one year or less;

(B) a copy of the most recent unaudited financial statements of the
health maintenance organization;

(C) financial projections using an accrual accounting system with gen-
erally accepted accounting principles
in conformity with statutory ac-
counting practices prescribed or otherwise permitted by the department
of insurance of the state of domicile
for a minimum of three years from
the anticipated date of certification and on a monthly basis from the date
of certification through one year. If the health maintenance organization
is expected to incur a deficit, projections shall be made for each deficit
year and for one year thereafter. Financial projections shall include:

(i) Monthly statements of revenue and expense for the first year on
a gross dollar as well as per-member-per-month basis, with quarters con-
sistent with standard calendar year quarters;

(ii) quarterly statements of revenue and expense for each subsequent

(iii) a quarterly balance sheet; and

(iv) statement and justification of assumptions;

(8) a description of the procedure to be utilized by a health mainte-
nance organization to provide for:

Ch. 13             1997 Session Laws of Kansas             37

(A) Offering enrollees an opportunity to participate in matters of pol-
icy and operation of the health maintenance organization;

(B) monitoring of the quality of care provided by such organization
including, as a minimum, peer review; and

(C) resolving complaints and grievances initiated by enrollees;

(9) a written irrevocable consent duly executed by such applicant, if
the applicant is a nonresident, appointing the commissioner as the person
upon whom lawful process in any legal action against such organization
on any cause of action arising in this state may be served and that such
service of process shall be valid and binding in the same extent as if
personal service had been had and obtained upon said nonresident in this

(10) a plan, in the case of group or staff practices, that will provide
for maintaining a medical records system which is adequate to provide
an accurate documentation of utilization by every enrollee, such system
to identify clearly, at a minimum, each patient by name, age and sex and
to indicate clearly the services provided, when, where, and by whom, the
diagnosis, treatment and drug therapy, and in all other cases, evidence
that contracts with providers require that similar medical records systems
be in place;

(11) evidence of adequate insurance coverage or an adequate plan
for self-insurance to respond to claims for injuries arising out of the fur-
nishing of health care; and

(12) such other information as may be required by the commissioner
to make the determinations required by K.S.A. 40-3204 and amendments

(c) The commissioner may promulgate rules and regulations the com-
missioner deems necessary to the proper administration of this act to
require a health maintenance organization, subsequent to receiving its
certificate of authority to submit the information, modifications or
amendments to the items described in subsection (b) to the commissioner
prior to the effectuation of the modification or amendment or to require
the health maintenance organization to indicate the modifications to the
commissioner. Any modification or amendment for which the approval
of the commissioner is required shall be deemed approved unless dis-
approved within 30 days, except the commissioner may postpone the ac-
tion for such further time, not exceeding an additional 30 days, as nec-
essary for proper consideration.

Sec. 2. K.S.A. 1996 Supp. 40-3203 is hereby repealed.

Sec. 3. This act shall take effect and be in force from and after its
publication in the statute book.

Approved March 24, 1997.