Insurance companies always ask me, “What’s with the Kansas Stabilization Fund?” The answer as to why it exists is easy. The answer to how to use it is a tad more difficult.
The Kansas Health Care Provider Insurance Availability Act, enacted in 1976, includes three principal features: (1) a requirement that all health care providers, as defined under K.S.A. 40-3401, maintain professional liability insurance coverage as a condition of licensure; (2) creation of a joint underwriting association, the “Health Care Provider Insurance Availability Plan,” to provide professional liability coverage for those health care providers who cannot purchase coverage in the commercial insurance market; and (3) creation of the Health Care Stabilization Fund (KHCSF). The KHCSF serves two functions: (1) provide supplemental coverage above the primary coverage purchased by health care providers, and (2) serve as reinsurer of the Availability Plan.
The KHCSF’s “primary function” is that of “excess professional liability coverage,” and is “triggered when the basic professional liability insurer’s projected loss exposure exceeds $200,000.” Kansas Legislative Research Department, Health Care Stabilization Fund and Kansas Medical Malpractice Law, at *2 (Nov. 30, 2016) Three fund excess coverage levels are available to health care providers. The three levels are as follows:
Fund coverage limits are always in excess of any other available professional liability coverage available.
Several specific categories of medical professionals and facilities are required to comply with the Availability Act as a condition of licensure. As of January 1, 2015, three additional categories of licensed adult care homes (assisted living facilities, nursing facilities, and residential health care facilities) are also required to comply with the Act as a condition of licensure. Nursing and residential health care facilities licensed by the Kansas Department for Aging and Disability Services have been subject to the requirements of the Act beginning January 1, 2015.
Pursuant to K.S.A. 40-3402, facilities must maintain a claims-made policy of professional liability insurance with limits of at least $200,000 per claim and $600,000 annual aggregate for all claims made during the policy period. The insurer which provides such a policy must notify the board of governors of the KHCSF within 30 days after the effective date of the policy that such coverage is or will be in effect. Policies offered to licensed adult care homes are further required to cover prior acts pursuant to K.S.A. 40-3413(g). Specifically:
Such professional liability insurance policies shall have limits of coverage not exceeding $1,000,000 per claim, subject to not more than $3,000,000 annual aggregate liability for all claims made as a result of personal injury or death arising out of the rendering of or failure to render professional services within the state on or before December 31, 2014. Such professional liability insurance policies shall be made available… to… nursing facilities licensed by the state of Kansas, assisted living facilities licensed by the state of Kansas and residential health care facilities licensed by the state of Kansas that will be in compliance with K.S.A. 40-3402, and amendments thereto, on January 1, 2015.
K.S.A. 40-3421(a) requires any insurer providing professional liability insurance coverage to a health care provider licensed in Kansas (as defined by K.S.A. 40-3401) to “report to the appropriate state health care provider regulatory agency and the board of governors on forms prescribed by the board of governors any written or oral claim or action for damages for medical malpractice.” “The report shall be filed no later than 30 days following the insurer’s receipt of notice of the claim or action.”
Receipt of a pre-suit settlement demand or a claim “without a formal legal action being filed” would typically trigger an insurer’s claim reporting duty. The completed form should be mailed to the appropriate State of Kansas health care provider regulatory agency and the KHCSF in Topeka. For nursing and residential health care facilities, the appropriate regulatory agency would be the Department for Aging and Disability Services.
Pursuant to K.S.A. 40-3421(b), upon the request of the agency to which a report is made, the health care provider insurer may be required to provide additional information, including the names of all defendants involved in the claim, a summary of the occurrence. Insurers who fail to timely comply with these reporting obligations could be subject to a significant civil fine:
Any insurer which fails to report any information as required by this section shall be subject, after proper notice and an opportunity to be heard, to a civil fine assessed by the board of governors in an amount not exceeding $1,000 for each day after the thirty-day period for reporting that the information is not reported.
Pursuant to K.S.A. 40-3403, the Fund is liable for any settlements or judgments in excess of the basic coverage limits required by the Act, up to the limit of coverage selected by the health care provider. When the situation arises that a settlement (as opposed to a judgement) is reached between the facility, its insurer and the claimant, which is in excess of basic coverage limits, the Fund will provide the additional monies for the settlement up to the selected amount of coverage, but the settlement must be approved by the Court. An application must be made by the Claimant for approval and if the Court approves the settlement, the Fund will provide the money to the Plaintiff.
For more detailed information regarding the Kansas Health Care Stabilization Fund, visit http://hcsf.kansas.gov.