Insurance Legislation Adopted By The 1998 Ky General Assembly (Regular Session)

BULLETIN 98-5 INSURANCE LEGISLATION ADOPTED BY THE 1998 KENTUCKY GENERAL ASSEMBLY (REGULAR SESSION) April 30, 1998 THIS BULLETIN IS FOR INFORMATION ONLY. IT DOES NOT AMEND PROVISIONS OF THE KENTUCKY REVISED STATUTES OR THE KENTUCKY ADMINISTRATIVE REGULATIONS. THE COMPLETE AND ACCURATE TEXT OF THE LAW CAN BE SECURED WHEN THE 1998 ACTS OF THE KENTUCKY GENERAL ASSEMBLY ARE PUBLISHED IN THE SUMMER OF 1998. UNLESS OTHERWISE NOTED, THE EFFECTIVE DATE OF THE LEGISLATION IS JULY 14, 1998. (Bills as enacted are available on the LRC website at http:// www.lrc.state.ky.us/home.htm) SENATE BILL 19, LONG TERM CARE - PREMIUM EXCLUDED FROM INCOME TAX: This bill amends KRS 141.010 to exclude premium for long term care insurance from income tax beginning with tax years after December 31, 1997. Contact: Revenue Cabinet, (502) 564-4581 SENATE BILL 55, MOTORCYCLE INSURANCE: This bill amends KRS 304.49-040 to require every insurer writing liability coverage for motorcycles to make available for purchase basic reparations benefits, added reparations benefits, uninsured motorist, and underinsured motorist coverages. Contact: Property and Casualty Division, (502) 564-6046 SENATE BILL 63, HEALTH INSURANCE COVERAGE - FOR AUTISM: This bill defines autism and mandates coverage of a maximum of $500 per month per child (defined as a person 2 to 21 years of age) for therapeutic respite and rehabilitative care. It applies only to health benefit plans subject to KRS 304 Subtitle 17A. Contact: Life and Health Division, (502) 564-6088 SENATE BILL 105, REINSURERS - EXEMPT FROM REQUIREMENT TO HAVE SPECIAL INVESTIGATION UNITS: Section 1 amends KRS 304.47-080 to relieve reinsurers from the requirement to have special investigation units for its reinsurance business. Section 2 amends KRS 304.47-030 to relieve reinsurers from the requirement to include a fraud warning statement on applications for its reinsurance business. Note that the insurer is still required to have a special investigation unit and fraud warnings on applications for any business other than its reinsurance business. Contact: Insurance Fraud Investigation Division, (502) 564-1461 SENATE BILL 128, CHILDREN’S HEALTH INSURANCE PROGRAM: This bill creates the Children’s Health Insurance Program within the Cabinet for Health Services to provide health care for indigent children who are not otherwise eligible for health insurance. The Cabinet for Health Services will develop the schedule of benefits and premium contribution per family, as well as the content and premium contributions for riders to existing employer-sponsored health insurance policies. Contact: Life and Health Division, (502) 564-6088 SENATE BILL 135, MANAGED CARE PLANS - PROVIDER DIRECTORY AND COCHLEAR IMPLANTS: Section 1 requires that managed care plans give an enrollee current participating provider directory, information about financial incentives for providers, and notice of a designated primary care provider’s withdrawal from the provider network. Section 2 mandates coverage for cochlear implants in all health benefit plans. Contact: Life and Health Division, (502) 564-6088 SENATE BILL 150, FRAUD DIVISION - RATIFICATION: This bill confirms an executive order officially creating the separate Division of Insurance Fraud Investigation within the Department. Contact: Insurance Fraud Investigation Division, (502) 564-1461 SENATE BILL 152, ALLIANCE - REORGANIZATION: This bill amends KRS 304.17A-020 to allow the Board to reorganize the Alliance and to change the title of the director. It also confirms Executive Order 96-884. Contact: Kentucky Health Purchasing Alliance, (502) 564-4747 SENATE BILL 227, HEALTH INSURANCE: This bill makes amendments to HB 315 Section 28 and to SB 63 Section 2. The impact of these amendments will be determined by the Legislative Research Commission. Contact: Life and Health Division, (502) 564-6088 SENATE BILL 337, FRANCHISE DISABILITY INSURANCE: This bill amends KRS 304.17-390 to expand the definition of franchise insurance to include disability insurance sold to three (3) or more employees or ten (10) or more association members. Contact: Life and Health Division, (502) 564-6088 SENATE BILL 343, FRATERNAL BENEFIT SOCIETY - FUNERAL BENEFIT INCREASE: This bill amends KRS 304.29-171 to increase the maximum amount a fraternal benefit society can pay for funeral benefits from $500 to $10,000. Contact: Life and Health Division, (502) 564-6088 SENATE BILL 353, CLOSED CLAIM REPORT - REPEALED: This bill repeals KRS 304.3-245 which required each casualty insurer to file with its annual financial statement a report of closed claims. Contact: Property and Casualty Division, (502) 564-6046 HOUSE BILL 106, MOTORCYCLE HELMET: This bill allows persons over age twenty-one (21) to operate a motorcycle without a helmet if they have health insurance. The county clerk is to notify the carrier that upon termination of coverage the carrier is to notify the Department of Vehicle Registration. Contact: Life and Health Division, (502) 564-6088 HOUSE BILL 112, ANNUITIES - ALSO REGULATED BY DEPARTMENT OF FINANCIAL INSTITUTIONS: This bill specifically asserts jurisdiction on behalf of the Department of Financial Institutions over variable annuity products. Note that it does not alter the Department of Insurance jurisdiction over annuities which continues under KRS Chapter 304. Contact: Legal Division, (502) 564-6032 HOUSE BILL 161, AGENT LICENSE - LOSS FOR FAILURE TO PAY CHILD SUPPORT: This bill provides that agent licenses, as well as other licenses issued by the state, shall be denied, revoked, or suspended upon notification from the Cabinet for Human Resources of failure to pay child support for one (1) year. Insurance and annuity companies are subject to subpoenas issued by CHR for records or information of delinquent parent’s assets. Failure to respond to the subpoena may result in a $500 fine. Insurance companies, included in the definition of "financial institutions," are required to participate in a data match system to identify assets of the delinquent parent. Companies may be ordered to withhold or to deliver these assets to CHR. Contact: Legal Division, (502) 564-6032 HOUSE BILL 267, SAFE DRIVER DISCOUNTS - FOR SENIOR CITIZENS: This bill amends KRS 304.13-063 to provide for appropriate reduction for premium charges for a period of three (3) to five (5) years after completion of an accident prevention course. Contact: Property and Casualty Division, (502) 564-6046 HOUSE BILL 312, STRUCTURED SETTLEMENTS - TRANSFER OF ANNUITY PAYMENTS: This bill adds new sections to KRS Chapter 454 to provide, among other things, that no transfer of structured settlement payment rights shall be effective and no annuity issuer shall be required to pay any transferee unless the transfer has been approved in advance by a court order. Contact: Legal Division, (502) 564-6032 HOUSE BILL 315, HEALTH INSURANCE REFORM: THE EFFECTIVE DATE OF THIS LEGISLATION IS APRIL 10, 1998. This bill revises health insurance reforms enacted in 1994 and 1996. It also brings Kentucky law into compliance with the federal Health Insurance Portability and Accountability Act. The main provisions are as follows:  Guarantee issue for HIPAA eligible individuals, individuals who have been residents of Kentucky for twelve (12) months, and small groups.  Pre-existing condition exclusions prohibited for HIPAA eligible individuals. For others, may impose exclusions up to twelve (12) months with credit for prior coverage. In addition, for individuals who are not HIPAA eligible, may exclude pregnancy as a pre-existing condition.  Portability for all insureds giving credit for prior coverage as long as gap in coverage is no more than sixty-three (63) days. Insurers must provide certification of prior coverage.  Guarantee renewal at the option of the insured with some specified exceptions.  One standard plan to be defined by Commissioner and to be offered by each insurer in the individual or small group market. Agents must provide applicants with benefit comparison sheets. Insurers may offer additional health benefit plans as they choose in any market segment.  Rates must be filed with the Department and the Attorney General. May use after filing and before approval. Deemed approved in sixty (60) days if Department does not take any action. Department may withdraw approval and require refund of excess premium. Rate increases limited for individuals, small groups, and associations. Phase-in of experience rated premium for insured currently under modified community rating.  Guaranteed Acceptance Program (GAP) set up to reimburse insurers for medical expenses of individuals with specified high cost conditions. Commissioner may add to the high cost conditions list through administrative regulation. Funding to be provided through assessments of insurers and stop-loss carriers, appropriation from General Fund, and certain premium tax revenues.  Employer-organized associations allowed to self-insure with certificate of filing from Commissioner. Index rate based only on that employer-organized association’s experience.  Self-insured plans may select any licensed third party administration.  Amnesty offered until January 1, 1999, with Commissioner’s approval, to insurers which left the Kentucky market after reform in July, 1995.  Alliance phased out by June 30, 1999.  Kentucky Kare no longer available to non-state employees at contract renewal date.  Income tax deduction for health insurance premium.  Patient Protection Act to establish consumers’ rights in managed care plans.  Data to be reported to Commissioner annually.  Financial impact statement on proposed mandated health benefits to be given to legislative committee before vote on new benefit. Additional detailed summaries and instructions are available from the Life and Health Division. Contact: Life and Health Division, (502) 564-6088 HOUSE BILL 338, PSNs AND HMOs - SUBJECT TO MORE OF INSURANCE CODE: This bill amends KRS 304.17A-300 to designate the subtitles of the Insurance Code that apply to Provider-Sponsored Integrated Health Delivery Networks. It also amends KRS 304.17A-310 to delete authorization for a PSN to use a surety bond for initial net worth. In addition, it amends KRS 304.38-200 to subject Health Maintenance Organizations to the provisions of KRS Chapter 304 Subtitles 6 and 8. Contact: Financial Standards and Examinations Division, (502) 564-6082 or Legal Division, (502) 564- 6032 HOUSE BILL 340, KENTUCKY KARE - REORGANIZATION: This bill moves Kentucky Kare from the Personnel Cabinet to the Finance Cabinet, establishes Kentucky Kare as an authority, and names the Commissioner as a non-voting member of the governing board. Contact: Kentucky Kare Health Insurance Authority, (502) 573-1707 HOUSE BILL 380, HEALTH INSURANCE COVERAGE - FOR DIABETES: This bill creates a new section of KRS 304 Subtitle 17A mandating coverage for specific diabetes related services and supplies as well as training and education. Contact: Life and Health Division, (502) 564-6088 HOUSE BILL 390, AGENT COUNTER-SIGNATURE: This bill amends KRS 304.9-140 to allow nonresident property and casualty agents to sell insurance in this state. It also removes the requirement for counter-signatures on property and casualty policies sold in Kentucky by nonresident agents. Contact: Agent Licensing Division, (502) 564-6004. HOUSE BILL 394, SALVAGE TITLE TAXES: This bill amends KRS 134.810 and KRS 132.200 to provide that motor vehicles with a salvage title held by an insurance company on January 1 shall be subject to ad valorem tax only as goods held for sale in the regular course of business and shall be exempt from local property tax. Contact: Revenue Cabinet, (502) 564-4853 HOUSE BILL 401, INSURANCE FRAUD AND CONSUMER PROTECTION: Sections 1 to 3 amend KRS 304.2-400, 304.2-410, and 304.2-440 to delete provisions that directed that funds in the Department of Insurance Regulatory Trust Fund in excess of $2 million lapse to the General Fund. Section 4 amends KRS 304.9-440 to allow administrative action if the licensee has been convicted of a misdemeanor for which restitution is ordered in excess of $300 or a felony involving certain crimes or has had other licenses revoked. Section 5 requires licensees to notify the Commissioner of revocation of certain other licenses. Sections 7 to 9 amend KRS 304.47-020, 304.47-040, and 304.47-050 to expand the scope of insurance fraud violations to include "criminal syndicate," fraudulent solicitation for an insolvent insurer, and the removal or concealment of an insurer’s records or assets. Contact: Insurance Fraud Investigation Division, (502) 564-1461 HOUSE BILL 402, DENIAL OF INSURANCE - CANNOT BE BASED ON CREDIT, NATURAL CAUSES, OR UNPREVENTABLE LOSSES: This bill amends KRS 304.20-040 and 304.20-340 to prohibit declination or termination of insurance solely because of the insured’s credit history, prior non-standard coverage, or losses due to natural or unpreventable causes. Contact: Property and Casualty Division, (502) 564-6046 HOUSE BILL 406, MEDICAID PEER REVIEW: This bill primarily addresses peer review of the levels of care for Medicaid recipients. Insurers involved in Medicaid partnerships may be impacted. Contact: Department for Medicaid Services, (502) 564-4321 HOUSE BILL 414, VIATICALS: This bill places viatical transactions within the jurisdiction of the Department of Insurance, requires settlement brokers to be licensed, allows the Commissioner to examine the affairs of these licensees, and provides consumer protections. Contact: Agent Licensing Division, (502) 564-6004 Life and Health Division, (502) 564-6088 HOUSE BILL 415, PROPERTY AND CASUALTY GUARANTY ASSOCIATION: This bill amends KRS 304 Subtitle 36 to bring Kentucky law into closer conformity with revisions of the NAIC Model Act. Also, it increases the statutory claim cap from $100,000 to $300,000, excludes claims of policyholders who have a net worth of $25 million or who are affiliated with the insolvent insurer, and clarifies that the Guaranty Association is a last resort for recovery. Contact: Kentucky Insurance Guaranty Association, (502) 327-0819 HOUSE BILL 429, BANKS SELLING INSURANCE: This bill amends KRS 287.080 to allow banks to sell all kinds of insurance. In addition, this bill creates a new section of KRS 304 Subtitle 9 to allow an agency employee to receive compensation for referral of a consumer to a licensed person and to establish requirements banks must fulfill as an insurance agency. Contact: Legal Division, (502) 564-6032 HOUSE BILL 440, CONSUMER PROTECTION AND EDUCATION DIVISION: This bill confirms the executive order creating the Consumer Protection and Education Division within the Department of Insurance. Contact: Consumer Protection and Education Division, (502) 564-6034 HOUSE BILL 448, ASSESSMENT COMPANIES: Section 1 provides that no new assessment companies shall be formed under KRS Chapter 299 and that existing assessment companies that have no business activities for one (1) year shall remain forever inoperative. Section 2 grants the Commissioner authority to take certain actions. Section 3 requires assessment companies to file certain information with the Commissioner. Contact: Legal Division, (502) 564-6032 HOUSE BILL 457, PROVIDER DISCOUNTS - PASSING ON TO INSUREDS: This bill amends KRS 304.17A-150, making it an unfair trade practice if an insurer fails to compute an insured’s coinsurance or cost-sharing on the basis of the amount the insurer actually pays the provider. Contact: Legal Division, (502) 564-6032 HOUSE BILL 475, AGENT LICENSE - RENEWALS: This bill amends KRS 304.9-260, 304.9-270, and 304.9-280 to require the Department to distribute by January 31 a listing of licensees whose appointments were in effect during the previous calendar year. It also requires the insurer to pay the license fee for any licensee not expressly terminated by December 31 of the previous calendar year. Contact: Agent Licensing Division, (502) 564-6004 HOUSE BILL 493, REPARATION BENEFITS PAYMENTS: This bill allows no-fault carriers to negotiate with a provider for a reduction in charges. Also, this bill amends KRS 304.39-210 to allow insureds to direct payment of benefits among different elements of loss, to establish benefits are not overdue if the insured has given written directions for the payment of benefits among the different elements of loss, and to allow carriers to make payments directly to providers if the claimant so directs. Contact: Property and Casualty Division, (502) 564-6046 HOUSE BILL 496, DEPARTMENT OF INSURANCE - HOUSEKEEPING: This bill makes technical corrections as well as minor clarification and removes inadvertent conflicts among statutes. Section 1 amends KRS 299.370 to clarify investments. Section 2 amends KRS 304.2-065 to clarify the meaning of NAIC IRIS test. Section 3 amends KRS 304.2-205 to clarify that HMOs are subject to the same financial statement filing requirements as other insurers. Section 4 amends KRS 304.2-210 to correct grammar. Section 5 amends KRS 304.2-270 to broaden the Department’s ability to share information with other state agencies. Section 6 amends KRS 304.2-350 to clarify that compelled testimony is protected from criminal prosecution only. Section 7 amends KRS 304.3-150 to correct a cite to another statute. Section 8 amends KRS 304.4-010 to make fees for copies comply with the Open Records Act and to accommodate fees for electronic filings. Section 9 amends KRS 304.9-105 to remove conflict with KRS 304.9-230 and to acknowledge federal law changes for Farm Credit System. Section 10 amends KRS 304.9-150 to clarify payments for applications and appointments. Section 11 amends KRS 304.9-170 to expand exemption from examination to include loss of license for failure to maintain financial responsibility. Section 12 amends KRS 304.9-220 to clarify payments for applications and appointments. Section 13 amends KRS 304.9-230 to clarify that limited licenses cover vehicles for physical damage only. Section 14 amends KRS 304.9-270 to clarify payments for applications and appointments and to clarify insurers may seek reimbursement from agents for these fees. Section 15 amends KRS 304.13-320 to correct terminology for advisory organization. Section 16 amends KRS 304.14-130 to restore grounds for form disapproval for cancer policies, etc., inadvertently removed by 96 HB 343. Section 17 amends KRS 304.16-200 to raise from $2,000 to $10,000 limits on life insurance available upon leaving group life policy. Section 18 amends KRS 304.17-030 to clarify definition of unmarried dependent children. Section 19 amends KRS 304.17-060 to restore incontestable periods for cancer policies, etc., inadvertently removed by 96 HB 343. Section 20 amends KRS 304.17-130 to increase from $1,000 to $5,000 amount insurer can pay for beneficiary not competent to give valid release. Section 21 amends KRS 304.17-310 to clarify definition of unmarried dependent children. Section 22 amends KRS 304.18-127 to correct misspelling of "actively." Section 23 amends KRS 304.20-040 to make more workable the period in which a party has to confirm attendance at the hearing that party requested. Section 24 amends KRS 304.24-040 to correct a cite to another statute. Section 25 amends KRS 304.29-261 to remove the conflict with fees in KRS 304.4-010. Section 26 amends KRS 304.30-040 to make the period for review of filing consistent with other filings. Section 27 amends KRS 304.37-110 to correct a typographical error. Section 28 amends KRS 304.38-090 to make HMO filing date consistent with filings of other insurers. Section 29 amends KRS 304.43-030 to make the period for review of filing consistent with other filings. Section 30 amends KRS 304.44-010 to correct grammar in "mine subsidence" definition. Section 31 amends KRS 304.44-030 to raise from $50,000 to $100,000 per structure limits on coverage for mine subsidence. Section 32 amends KRS 304.44-050 to raise from $50,000 to $100,000 per structure limits on coverage for mine subsidence. Section 33 amends KRS 56.080 to allow State Risk to cover full replacement value of state’s property. Section 34 creates a new section of KRS 304 Subtitle 14 to clarify that policies and claim-related information shall be written in the English language. Section 35 repeals KRS 304.3-245 (closed claim reports) and KRS 304.39-350 (reports on total payments for personal injury accidents). HOUSE BILL 539, LIABILITY INSURANCE - FOR KENTUCKY NATIONAL GUARD: This bill allows the purchase of liability insurance for the protection of members of the National Guard called to state active duty. Contact: State Risk Division, (502) 564-6055 HOUSE BILL 614, AGENT CONTINUING EDUCATION: This bill amends KRS 304.9-295 to exempt non-resident licensees who have met the requirements of their state of domicile and to exempt persons maintaining licenses for the sole purpose of receiving renewals or deferred commission. The bill also deletes exemption provided to persons holding licenses prior to July 1, 1998. In addition, the bill requires that twelve (12) of the twenty-four (24) hours must be classroom hours. Contact: Agent Licensing Division, (502) 564-6144 HOUSE BILL 618, HEALTH INSURANCE FOR CANCER DRUGS: This bill mandates all health benefit plans to cover cancer drugs which are approved by the FDA and have no contraindications for that use. The Commissioner shall appoint a panel of medical experts to review off-label uses and make recommendations for use. Contact: Life and Health Division, (502) 564-6088 HOUSE BILL 648, INSURANCE PREMIUM TAX: Section 1 amends KRS 136.320 to reduce the rate imposed against taxable capital from $0.70 per $100 to $0.01 per $100 over six (6) years, and to impose a premium tax beginning in 2000 at a rate of $0.38 per $100, phasing up over a six-year period to $1.50 per $100. Section 2 amends KRS 136.330 to reduce the premium tax over a six-year period from $1.90 per $100 to $1.50 per $100, and to exclude annuities from tax base beginning in the year 2000. Section 3 creates a new section of KRS Chapter 136 to require companies to make an irrevocable election to be taxed under KRS 136.320 or KRS 136.330. Section 4 amends KRS 136.377 to delete redundant language. Section 5 amends KRS 304.42-130 to allow the tax imposed by KRS 136.320 to be offset against any assessment paid by the company to the Life and Health Insurance Guaranty Association. Contact: Legal Division, (502) 564-6032 HOUSE BILL 650, AUTO INSURANCE - FAILURE TO HAVE: This bill, among other things, amends KRS 304.39-080 and 304.39-090 to provide that any owner of a motor vehicle who fails to maintain auto insurance on the vehicle will have the registration of that vehicle revoked. Contact: Property and Casualty Division, (502) 564-6046 HOUSE BILL 684, LIFE AND HEALTH GUARANTY ASSOCIATION: This bill amends KRS 304 Subtitle 42 to make it conform more closely with the amendments to the NAIC Model Act adopted by the NAIC in 1997. The substantive changes include:  making benefits paid under structured settlement annuities to the contract payee rather than the contract owner;  imposing a limitation on duplicate coverage;  establishing an aggregate of $300,000 limit with respect to any one life for death, health, and annuity benefits; and  establishing an aggregate of $1,000,000 limit with respect to any one owner of multiple nongroup policies of life insurance. Contact: Kentucky Life and Health Guaranty Association, (502) 895-5915. HOUSE BILL 690, LIABILITY INSURANCE - FOR HEALTH CARE WORKERS IN JUVENILE JUSTICE: This bill authorizes the purchase of liability insurance for health care professionals working for the Department of Juvenile Justice. Contact: State Risk Division, (502) 564-6055 HOUSE BILL 708, ELECTRONIC SIGNATURES: This bill defines acceptable "electronic signatures" and "electronic records." If parties to a transaction, filing, or communication mutually agree, this act provides that the use of electronic records and signatures is acceptable as a "writing" for legal purposes. Contact: Legal Division, (502) 564-6032 HOUSE BILL 742, KEMI: This bill clarifies most of the Kentucky Employees Mutual Insurance Authority Board’s responsibilities as a public entity and removes the Commissioner of Insurance from Board membership. Contact: Property and Casualty Division, (502) 564-6046 HOUSE BILL 786, MUTUAL INSURANCE HOLDING COMPANY: This bill sets out the process, the policyholder protections, and the standards by which a mutual insurance company can be transformed into a stock company. Contact: Legal Division, (502) 564-6032 HOUSE BILL 864, WOMEN’S HEALTH INITIATIVE: This bill mandates certain benefits for health insurance policies:  breast reconstruction surgery following mastectomy if policy covers mastectomies;  diagnosis and treatment for endometriosis and endometriatis if policy covers hysterectomies; and  bone density testing for women age thirty-five (35) or older when indicated by provider. Policies cannot be cancelled or denied and claims cannot be denied because a person is a victim of domestic violence. Contact: Life and Health Division, (502) 564-6088 HOUSE BILL 880, UNCLAIMED WORKERS’ COMPENSATION FUNDS: This bill provides that unclaimed refunds of the Special Fund assessments collected by carriers shall become the property of the Funding Commission after a reasonable attempt has been made to return the unclaimed refunds to the insured employer. After the refunds have been held by the Commission for two (2) years, they shall be irrevocably credited to the Benefit Reserve Fund. Contact: Property and Casualty Division, (502) 564-6046 HOUSE JOINT RESOLUTION 60, STUDY OF CREDIT LIFE AND CREDIT HEALTH INSURANCE: This resolution directs the Department to conduct a study of credit life and credit health insurance. It also directs the establishment of a 12-member Task Force which shall consist of representatives from various groups: consumers, bankers, finance companies, automobile dealers, retailers, agents, insurers, trial attorneys, and the Department of Financial Institutions. Contact: Commissioner’s Office, (502) 564-6026