SESSION OF 1998
SUPPLEMENTAL NOTE ON
SUBSTITUTE FOR SENATE BILL NO. 439
As Recommended by House Committee on
Sub. for S.B. 439 would amend several sections of Kansas
health maintenance organization (HMO) regulatory statutes to
incorporate into those statutes the regulation of Medicare provider
organizations referred to as provider-sponsored organizations or
PSOs; amend several statutes applicable to group health insurance; and add a new statute mandating increased coverage for
Medicare provider-sponsored organizations. Areas of existing
law that would be made applicable to PSOs include:
- Definitions--"Medicare Provider Organization" would be
defined as in federal law which allows such entities to provide
services to Medicare recipients. Reference to PSOs would be
added to the definitions of "Certificate of coverage," "Grievance," and "Enrollee."
- Certificate of authority--PSOs would be required to obtain a
certificate of authority from the Insurance Commissioner prior
to providing services and to provide samples of contracts and
other financial information required by the Commissioner;
however, there would be no requirement on PSOs relating to
enrollee involvement in management of the organization. The
Commissioner would have the authority to accept any report
or application filed by a PSO with the appropriate agency of
another state or of the federal government.
- Application for a certificate of authority--the Commissioner
has 60 days in which to approve an application for a certificate of authority and, prior to issuance, must find a PSO
applicant will provide or arrange for health care services to be
provided on a prepaid basis and be in compliance with any
deposit or solvency requirements that the Commissioner
might establish by rules and regulations.
- Denial--the Commissioner, with reasonable cause, may deny,
suspend, or revoke a certificate of authority of a PSO.
- Powers--a PSO may own, lease, or operate medical facilities,
contract for additional services, and offer benefits covering
out-of-area or emergency services.
- Consumer information--the PSO must provide prospective
enrollees a description of services and benefits; the location
of facilities and hours of operation; a listing of providers by
specialty with address and telephone numbers; and the
copayments and deductibles for which the enrollee is responsible. In addition, a PSO must identify all exclusions and
limitations on services and restrictions pertaining to pre-existing conditions and the criteria for disenrollment; explain
service priorities; hold enrollees harmless if the provider group
does not pay for all covered services; and clearly describe the
procedure for resolving grievances.
In lieu of the listed disclosures, the Commissioner may accept
certificates of coverage issued by a PSO which is in conformity with requirements imposed by the appropriate federal
- Contract--a PSO may utilize prepaid per capita or prepaid
aggregate fixed sum contracts.
- Examinations--the Commissioner must examine the affairs of
the PSO at least once every three years or, in lieu of a state
examination, accept the examination of another state or of
the federal government.
- Federal exemption--a PSO could not be restricted by state law
from doing what it is authorized to do by federal law.
- Financial responsibility--a PSO would have to file an annual
financial statement with the Commissioner. Its officers would
be personally liable for willful and intentional violations of this
law and be responsible for funds collected in a fiduciary
relationship with the PSO.
On a matter unrelated to PSOs, the bill would repeal the
requirement that the Commissioner of Insurance publish all health
maintenance rules and regulations.
Kassebaum-Kennedy amendments. The bill also would
include the provisions of 1998 H.B. 2705 to:
- rewrite the statute which establishes who is eligible for
participation in the Kansas Uninsurable Health Insurance Plan
(high risk pool) and makes eligible persons who were previously covered in a high risk pool of another state;
- for small and large groups, add the definition of "preexisting
conditions exclusion" from the federal act not previously
incorporated into the Kansas statutes and clarifies that the
exclusion period does not exceed 90 days following the date
of enrollment for conditions identified in the 90 days prior to
the effective date of enrollment (not coverage);
- for small and large groups, count as creditable coverage
toward any preexisting condition the time a child would spend
in a state health insurance program for children established
pursuant to federal law (Title XXI);
- remove from the statutes references to the Small Employer
Health Care Plan, its Board of Directors, and the Small
Employer Health Reinsurance Program as well as references
to "basic" and "standard" health plans; and
- make other technical changes as necessitated by the redrafting of K.S.A. 40-2209, the basic statute governing group
Increased health insurance coverage for the treatment of
diabetes. Finally, Sub. for S.B. 439 would require individual and
group health insurance policies, medical service plans, contracts,
nonprofit medical and hospital service corporations, and health
maintenance organizations to provide coverage for certain
equipment and supplies used in the treatment of diabetes.
- Coverage for equipment and supplies would be limited to
hypodermic needles and supplies used exclusively with
diabetes management and outpatient self-management
training and education, if prescribed by a health care professional legally authorized to prescribe such services and
- Coverage for diabetes management and outpatient self-management training and education would have to be
provided only if ordered by a health care professional legally
authorized to prescribe such services and the diabetic is
treated at an approved program, is treated by a person
certified by the National Certification Board for Diabetes
Educators, or is, as to nutritional education, treated by a
licensed dietitian pursuant to an approved treatment plan.
- Benefits under the amendment would be subject to
copayments and deductibles applicable to all other covered
- The mandate for covering diabetes equipment, supplies, and
education and training would not apply to Medicare supplemental policies, long-term care policies, specific disease
policies, or specified accident coverages set out in rules and
regulations adopted by the Insurance Commissioner.
That part of Sub. for S.B. 439 dealing with PSOs was
requested by the Insurance Commissioner (originally in S.B. 439).
The Commissioner's representative explained the bill would give
the Insurance Commissioner authority to regulate Medicare
provider sponsored organizations in nearly the same manner as it
currently regulates health maintenance organizations. He noted
Congress, through the Balanced Budget Act authorized
Medicare+Choice Plans to be offered through HMOs or a PSO.
Since Kansas has no regulation of PSOs, S.B. 439 puts in place
the authority to regulate doctors and hospitals who offer their
services directly to Medicare enrollees on a risk bearing basis
without using an insurer as an intermediary. The federal act
includes consumer protection provisions applicable to all
The American Association of Retired Persons, the Kansas
Association of Health Plans, and the Kansas Hospital Association
supported S.B. 439.
Further, the provisions of the substitute bill concerning
Kassebaum-Kennedy were requested by the Insurance Commissioner originally in H.B. 2705. The Commissioner's representative
explained that the changes proposed by the bill arise from a
review of the 1997 federal legislation and its implementation in
Kansas and from technical corrections suggested by the Office of
the Revisor of Statutes.
Finally, the provisions of the substitute bill concerning
diabetes were a part of H.B. 2997 and supported by the American
Diabetes Association, the Kansas Diabetes Association, diabetes
educators, and a dietitian. Representatives of the Health Insurance Association of America and the Kansas Employer Coalition
on Health spoke against the diabetes provisions.
1. *Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at