SESSION OF 2021
SUPPLEMENTAL NOTE ON SENATE BILL NO. 290
As Recommended by Senate Committee on
Financial Institutions and Insurance
Brief*
SB 290 would amend coverage requirements specified
in the Health Care Provider Insurance Availability Act
(HCPIAA) for all new and renewal professional liability
insurance policies for defined health care providers.
Beginning January 1, 2022, the bill would increase the
required minimum professional liability insurance coverage
(termed “basic coverage”) maintained by a defined health
care provider from $200,000 per claim and $600,000 per year
aggregate to $500,000 per claim and $1,500,000 per year
aggregate. The number of options for coverage levels limiting
the liability of the Health Care Stabilization Fund (HCSF or
Fund) would be reduced from three to two. The bill would also
amend provisions concerning the membership on the HCSF
Board of Governors (Board) and make amendments to
criteria associated with the qualification of a medical care or
health care facility as a self-insurer.
The bill would delete an expired provision and make
technical amendments relating to form and style.
[Note: Professional liability insurance is medical
malpractice or medical liability insurance and is defined in the
HCPIAA (KSA 40-3401) as “insurance providing coverage for
legal liability arising out of the performance of professional
services rendered or that should have been rendered by a
health care provider.”]
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*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.kslegislature.org
Required Health Care Provider Professional Liability
Insurance Coverage (Section 1)
The bill would clarify the current levels of professional
liability insurance coverage required to be maintained by a
health care provider under the HCPIAA would continue in
effect through December 31, 2021. As a condition of active
licensure or other statutory authorization to render
professional service as a health care provider in Kansas on
and after January 1, 2022, each resident health care provider
would be required to maintain a policy of professional liability
insurance approved by the Commissioner of Insurance
(Commissioner) and issued by an insurer duly authorized to
transact business in Kansas in which the limit of the insurer’s
liability would be no less than $500,000 per claim and subject
to an annual aggregate of not less than $1,500,000 for all
claims during the policy period. Self-insured health care
providers and those health care providers to whom the
current coverage requirements do not apply would be exempt
from this coverage limit.
HCSF Board of Governors Membership; HCSF Liability
(Section 2)
Board Membership
The bill would amend Board membership provisions to
require at least two of the three members appointed by the
Commissioner from a list of nominees submitted to the
Commissioner by the Kansas Medical Society to be doctors
of medicine who are licensed to practice medicine and
surgery in Kansas. The bill would make technical updates to
language designating the remaining Board member
appointments.
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Liability of the HCSF
The bill would increase, from $300,000 to $500,000, the
minimum amount of liability on the HCSF, if the Fund is liable,
for the HCSF to pay a judgment or settlement by making
installment payments of $500,000 or 10.0 percent of the
judgment, whichever is greater.
Coverage Options
Each health care provider subject to the HCPIAA must
choose among HCSF coverage options. The three current
HCSF coverage options would remain available through
December 31, 2021, and would limit the HCSF liability with
respect to judgments or settlements relating to injury or death
arising from the rendering of or failure to render professional
services from July 1, 1989, and prior to January 1, 2022.
On and after January 1, 2022, every health care
provider would be required to choose one of two HCSF
coverage options limiting the HCSF liability for judgments or
settlements relating to injury or death arising from the
rendering of or failure to render professional services, as
follows:
● $500,000 for any one judgment or settlement
against a health care provider, subject to an
aggregate limit of $1,500,000 for all judgments and
settlements arising from all claims made in the
fiscal year against such health care provider; or
● $1,500,000 for any one judgment or settlement
against a health care provider, subject to an
aggregate limit of $4,500,000 for all judgments and
settlements arising from all claims made in the
fiscal year against such health care provider.
Captive insurers; qualification as self-insurer. The
bill would further specify a medical care facility or health care
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facility deemed as a self-insurer may opt out of the coverage
requirements, as long as such facility substantially meets the
minimum coverage requirements created by the bill through
coverage provided by the facility’s captive insurance
coverage.
Excess coverage. The bill would also specify the
Board shall have the authority to adjust certain coverage
amounts needed to effectuate provisions of the HCPIAA,
provided such minimum coverage is not less than $1.0 million
per claim and $3.0 million in the aggregate.
Inactive Health Care Provider Tail Coverage
The bill would delete a subsection that expired on July 1,
2014, limiting HCSF liability for inactive health care providers
to those health care providers in compliance with HCSF
requirements for not less than five years or those who
remedy noncompliance as provided in statute. [Note: 2014
law authorized this “tail coverage” immediately upon the
cancellation or inactivation of a Kansas license and that
provider’s professional liability insurance policy.]
Liability of Insurer for HCSF-Covered Provider or
Self-Insurer (Section 3)
The bill would update a provision limiting liability for a
claim for personal injury or death arising out of the rendering
of or failure to render professional services by such health
care provider. The bill would provide for such claims, the
insurer of a health care provider covered by the HCSF or self-
insurer shall be liable only for the amount of basic coverage
in effect on the date of the incident giving rise to the claim,
which is subject to an annual aggregate amount of not less
than three times the primary amount for all such claims
against the health care provider.
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Notification; Actions Filed for Personal Injury or Death
Arising out of the Rendering of or Failure to Render
Professional Services (Section 4)
The bill would update language regarding a plaintiff’s
service of a copy of a petition upon the Board to include
certified mail, priority mail, commercial delivery service, or
first-class mail and require such service within 30 calendar
days from the filing of such petition.
Certificate of Self-Insurance; Requirements on Certain
Facilities (Section 5)
The bill would modify provisions pertaining to
requirements on medical care or health care facilities certified
as self-insurers. Those modifications would:
●
● Update criteria specified for the determination of
the Board regarding qualification for a certificate of
self-insurance to include any other factors the
Board deems relevant and further specify:
○ Any applicant that owns and operates more
than one medical care facility or more than
one health care facility shall be deemed
qualified by the Board, if such applicant is
insured by a captive insurance company (as
defined in KSA 2020 Supp. 40-4301) or under
the laws of the state of domicile of any such
captive insurance company.
Claims Made for Incidents Occurring after January 1,
2022 (Section 6)
The bill would update language referencing claims made
against a resident or nonresident health care provider on and
after July 1, 2014, to specify the minimum professional
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liability coverage policy limits associated with the HCSF
liability would be the limits in effect on the date of the incident
giving rise to a claim.
The bill would also specify for claims made for incidents
occurring on or after January 1, 2022, the aggregate Fund
liability for all judgments and settlements made in any fiscal
year against a resident or nonresident inactive health care
provider shall not exceed three times the basic coverage limit.
Background
The bill was introduced by the Senate Committee on
Ways and Means. [Note: The House Committee on Insurance
and Pensions introduced 2021 HB 2380, which is
substantially similar to SB 290, as recommended by Senate
Committee.]
History of the HCSF and coverage limits. The
HCPIAA (enacted in 1976) created the Health Care
Stabilization Fund in an effort to stabilize the availability of
medical professional liability coverage for health care
providers. The law created a basic liability requirement for
certain health care providers and established an availability
plan in order to provide required basic professional liability
insurance coverage for those providers of health care in
Kansas unable to obtain such coverage from the commercial
market. The HSCF receives revenue from professional
liability coverage surcharge payments made by health care
providers. Responding to a medical malpractice liability crisis,
the 1988 Legislature conducted an interim study and
authorized significant changes to the HCPIAA in 1989 SB 18.
Among those changes, the bill created three different options
for health care providers to supplement their basic $200,000
per claim coverage purchased from a commercial insurer or
the Health Care Provider Insurance Availability Plan:
$100,000, $300,000, or $800,000 per claim (with annual
aggregate limits three times the per claim coverage).
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Senate Committee on Financial Institutions and
Insurance
In the Senate Committee hearing, representatives of the
Kansas Medical Society provided proponent testimony,
stating the bill is intended to address both current needs as
well as anticipated market conditions in future years with new
minimum coverage requirements, by increasing both the
“basic coverage” and the Fund’s “excess coverage” limits.
This update of both coverage limits (previously updated in
1984 and 1989 law) addresses a concern noted by the
Kansas Supreme Court that the limits had not been adjusted.
The bill also would permit the HCSF to offer a higher limit of
excess coverage. The conferees’ testimony noted a
concerning trend is developing with reinsurance markets
significantly contracting and limiting their underwriting of
higher limit policies. By increasing the excess coverage limits,
the bill would help ensure the availability of such coverage.
Written-only proponent testimony was submitted by
representatives of the Kansas Chiropractic Association,
Kansas Hospital Association, and Kansas Trial Lawyers
Association.
The Executive Director of the HSCF submitted written-
only neutral testimony, highlighting the history of the HCPIAA
and the effort to provide affordable professional liability
insurance for health care providers. The testimony indicated
the HCSF currently provides coverage for more than 16,000
defined health care providers. During FY 2020, the Fund
closed 524 claim files and paid nearly $28 million in
compensation to those who were injured. The testimony
noted the Kansas Medical Society is working with the agency
to ensure a smooth transition if this bill becomes law.
[Note: In its report to the 2021 Legislature, the Health
Care Stabilization Fund Oversight Committee indicated
support for a proposal to change the required coverage limits
and number of offerings to be introduced by the Kansas
Medical Society and Kansas Hospital Association in the 2021
Session.]
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Fiscal Information
According to the fiscal note prepared by the Division of
the Budget, the HCSF indicates enactment of the bill would
increase the current levels of coverage. The Fund would
collect higher surcharge rates from providers. Expenditures
would increase if the changes in the bill result in higher
judgments and settlements. The cost of attorney and
attorney-related expenses would likely also increase. The
changes in the bill would, the agency notes, require an
actuarial study to be conducted to determine the fiscal effect.
The cost of the study would be approximately $27,000. The
bill would affect all defined health care providers licensed to
practice in Kansas.
Any fiscal effect associated with the bill is not reflected
in The FY 2022 Governor’s Budget Report.
Health Care Stabilization Fund; professional liability insurance; health care providers;
minimum coverage; Health Care Stabilization Fund Board of Governors
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Statutes affected: As introduced: 40-3402, 40-3403, 40-3408, 40-3409, 40-3414, 40-3424