Brief⁽¹⁾

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 diabetes.

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 regulatory agency.

• 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 health insurance.

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 supplies.



• 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 benefits.



• 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.

Background

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 Medicare+Choice alternatives.

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 http://www.ink.org/public/legislative/fulltext-bill.html.