Kansas Life & Health Insurance Guaranty Association

Covered Contracts

(1) This act shall provide coverage to the persons specified in subsection (a) for policies or contracts of direct, nongroup life insurance, health insurance or annuities and supplemental contracts or unallocated annuity contracts covering individuals participating in a governmental deferred compensation plan established under section 457 of the U.S. internal revenue code pursuant to K.S.A. 74-49b08 through 74-49b14, and amendments thereto, whether or not a resident, or the beneficiaries of each such individual if deceased, and for certificates under direct group policies and contracts issued by member insurers, except as limited by this act. (2) As used in this act, health insurer includes health maintenance organization subscriber contracts and certificates.

Non-Covered Contracts

Except for subsection (p), the association shall not provide coverage for: (1) Any portion of a policy or contract not guaranteed by the member insurer, or under which the risk is borne by the policyholder or contract holder; (2) any policy or contract of reinsurance, unless assumption certificates have been issued; (3) any portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (A) Averaged over the period of four years prior to the date on which the association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody’s corporate bond yield average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the association became obligated; and (B) on and after the date on which the association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody’s corporate bond yield average as most recently available; (4) any plan or program of an employer, association or similar entity to provide life, health or annuity benefits to its employees or members to the extent that such plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association or similar entity under: (A) A multiple employer welfare arrangement as defined in 29 u.S.C. § 1144; (B) a minimum premium group insurance plan; (C) a stop-loss group insurance plan; or (D) an administrative services only contract; (5) any portion of a policy or contract to the extent that it provides dividends or experience rating credits, voting rights or provides that any fees or allowances be paid to any person, including the policyholder or contract holder, in connection with the service to or administration of such policy or contract; (6) any policy or contract issued in this state by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue such policy or contract in this state; (7) any unallocated annuity contract, except as provided in K.S.A. 40-3003, and amendments thereto; (8) a portion of a policy or contract to the extent that the assessments required by K.S.A. 40-3009, and amendments thereto, with respect to the policy or contract are preempted by federal or state law; (9) an obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract holder or policyholder, including, without limitation: (A) Claims based on marketing materials; (B) claims based on side letters, riders or other documents that were issued by the member insurer without meeting applicable policy or contract form filling or approval requirements; (C) misrepresentations of or regarding policy or contract benefits; (D) extra contractual claims; or (E) a claim for penalties or consequential or incidental damages; (10) a contractual agreement that establishes the member insurer’s obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, and, in each case, is not an affiliate of the member insurer; (11) a policy or contract providing any hospital, medical, prescription drug or other healthcare benefits pursuant to part C or part D of subchapter XVIII, chapter 7 of title 42 of the United States code, commonly known as medicare part C and d, or subchapter xix, chapter 7 of title 42 of the United States code, commonly known as medicaid, or any regulations issued pursuant thereto; (12) (A) any portion of a policy or contract: (i) To the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract but which have not been credited to the policy or contract; or (ii) as to which the policyholder or contract holder’s rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this act, whichever is earlier. (B) If a policy’s or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this paragraph, the interest or change in value determined by using the procedures defined in the policy or contract shall be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and shall not be subject to forfeiture; or (13) structured settlement annuity benefits to which a payee or beneficiary has transferred such payee’s or beneficiary’s rights in a structured settlement factoring transaction, as defined in 26 U.S.C. § 5891(c)(3)(A), regardless of whether the transaction occurred before or after such section became effective.

Non-Resident Coverage

§40-3003(a)(2) Yes: (B) not residents, but only with respect to an annuity contract awarded pursuant to K.S.A. 60-3407 or 60-3409, and amendments thereto, an annuity contract for future economic loss procured pursuant to a settlement agreement in a medical malpractice liability action, as defined by K.S.A. 60-3401, and amendments thereto, or fixed-return accounts of the Kansas public employees deferred compensation plan under K.S.A. 74-49b08 through 74-49b14, and amendments thereto; or (C) not residents, but only under all of the following conditions: (i) The member insurers that issued such policies or contracts are domiciled in this state; (ii) the states in which such persons reside have one or more associations similar to the association created by this act; and (iii) the persons are not eligible for coverage by an association in any other state due to the fact that the insurer or health maintenance organization was not licensed in the state at the time specified in the state’s guaranty association law.

With respect to any one life, regardless of the number of policies or contracts: (A) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance; (B) for health insurance benefits: (i) $100,000 for coverages not defined as disability income insurance or health benefit plans or long-term care insurance including any net cash surrender and net cash withdrawal values; (ii) $300,000 for disability income insurance and $300,000 for long-term care insurance; (iii) $500,000 for health benefit plans; (C) $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; (D) with respect to each payee of a structured settlement annuity or beneficiary or beneficiaries of the payee if deceased, $250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values; (E) however, in no event shall the association be obligated to cover more than: (i) An aggregate of $300,000 in benefits with respect to any one life as provided in subparagraphs (a), (b), (c) and (d) except with respect to benefits for health benefit plans under subsection (q)(2)(B)(iii), in which case the aggregate liability of the association shall not exceed $500,000 with respect to any one individual; or (ii) with respect to one holder of multiple nongroup policies or contracts of life insurance, whether the policyholder or contract holder is an individual, firm, corporation or other person and whether the persons insured are officers, managers, employees or other persons, more than $5,000,000 in benefits, regardless of the number of policies and contracts held by the policyholder or contract holder; (F) the limitations set forth in this paragraph are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association’s obligations under this act may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights; (G) the guaranty association’s limits of liability with respect to the obligations of any impaired or insolvent insurer shall be the limits of liability in effect under this act on the date the guaranty association became liable for that impaired or insolvent insurer; (H) for purposes of this act, benefits provided by a long-term care rider to a life insurance policy or annuity contract shall be considered the same type of benefits as the base life insurance policy or annuity contract to which it relates; (I) in performing its obligations to provide coverage under this section, the association shall not be required to guarantee, assume, reinsure, reissue or perform, or cause to be guaranteed, assumed, reinsured, reissued or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract. The provisions of subsection (q) shall not apply to annuity contracts for future economic loss procured pursuant to a judgment or settlement agreement in a medical malpractice liability action.

Discretionary Triggers

§40-3008(a). If a member insurer is an impaired insurer.

Mandatory Triggers

§40-3008(b) If a member insurer is an insolvent insurer.

Foreign Triggers

No separate provision.

"Impaired Insurer"

“impaired insurer” means a member insurer that, after the effective date of this act, is not an insolvent insurer and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction;

"Insolvent Insurer"

“insolvent insurer” means a member insurer that, after the effective date of this act, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency;

"Member Insurer"

“member insurer” means any insurer or health maintenance organization licensed or holding a certificate of authority to transact in this state any kind of insurance or health maintenance organization business for which coverage is provided under K.S.A. 40-3003, and amendments thereto, and includes any insurer or health maintenance organization whose license or certificate of authority in this state may have been suspended, revoked, nonrenewed or voluntarily withdrawn, but does not include: (1) A hospital or medical service organization regardless of whether such hospital or medical service organization is organized for profit or not-for-profit; (2) a fraternal benefit society; (3) a mandatory state pooling plan; (4) a mutual assessment company or any entity that operates on an assessment basis; (5) an insurance exchange, except a reciprocal or interinsurance exchange governed by the provisions of article 16 of chapter 40 of the Kansas Statutes Annotated, and amendments thereto; (6) an organization that has a certificate or license limited to the issuance of charitable gift annuities; or (7) any entity similar to any of the organizations listed in paragraphs (1) through (6);

For purposes of administration and assessment, the association shall maintain three accounts: (1) Health account; (2) life insurance account; and (3) annuity account, excluding unallocated annuities.

Assessment Limits

The total of all assessments upon a member insurer for each account shall not in any one calendar year exceed 2% of such member insurer’s average premiums received in this state on the policies and contracts covered by the account during the three calendar years preceding the years in which the member insurer became an impaired or insolvent insurer.

Assessment Classes

There shall be two classes of assessments, as follows: (1) Class A assessments shall be made for the purpose of meeting administrative and legal costs and other expenses and examinations conducted under the authority of subsection (e) of K.S.A. 40-3012, and amendments thereto. Class A assessments may be made whether or not related to a particular impaired or insolvent insurer. (2) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the association under K.S.A. 40-3008, and amendments thereto, with regard to an impaired or an insolvent insurer. (2) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the association under K.S.A. 40-3008, and amendments thereto, with regard to an impaired or an insolvent insurer.

Guaranty Association excludes from coverage: any portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (A) Averaged over the period of four years prior to the date on which the association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody’s corporate bond yield average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the association became obligated; and (B) on and after the date on which the association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody’s corporate bond yield average as most recently available;

(a) Unless a longer period has been allowed by the commissioner, a member insurer shall at its option have the right to show a certificate of contribution as an asset in the form approved by the commissioner pursuant to K.S.A. 40-3009, and amendments thereto, at percentages of the original face amount approved by the commissioner, for calendar years as follows: (1) 100% for the calendar year of issuance; (2) 80% for the first calendar year after the year of issuance; (3) 60% for the second calendar year after the year of issuance; (4) 40% for the third calendar year after the year of issuance; (5) 20% for the fourth calendar year after the year of issuance. (b) The member insurer may offset the amount written off by it in a calendar year under subsection (a), against its premium tax liability to this state accrued with respect to business transacted in such year. (c) A member insurer that is exempt from taxes referenced in subsection (a) may recoup its assessments by a surcharge on its premiums in a sum reasonably calculated to recoup the assessments over a reasonable period of time, as approved by the commissioner. Amounts recouped shall not be considered premiums for any other purpose, including the computation of gross premium tax, the medical loss ratio, or agent commission. If a member insurer collects excess surcharges, the member insurer shall remit the excess amount to the association, and the excess amount shall be applied to reduce future assessments in the appropriate account. (d) Any sums acquired by refund, pursuant to K.S.A. 40-3009, and amendments thereto, from the association that have theretofore been written off by contributing member insurers and offset against premium taxes as provided in subsection (b), and are not then needed for purposes of this act, shall be paid by the association to the commissioner and the commissioner shall remit such moneys to the state treasurer in accordance with the provisions of K.S.A. 75-4215, and amendments thereto. Upon receipt of each such remittance, the state treasurer shall deposit the entire amount in the state treasury to the credit of the state general fund.

“premiums” means amounts received on covered policies or contracts less premiums, considerations and deposits returned thereon, and less dividends and experience credits thereon. Premiums does not include any amounts received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under K.S.A. 40-3003, and amendments thereto, except that assessable premiums shall not be reduced on accounts for K.S.A. 40-3008, and amendments thereto, relating to interest limitations and K.S.A. 40-3008, and amendments thereto, relating to limitations with respect to any one life and any one policyholder or contract holder. Premiums shall not include: (1) Any premiums on any unallocated annuity contract; or (2) any premiums in excess of $5,000,000 with respect to multiple nongroup policies of life insurance owned by one policyholder or contract holder, regardless of the number of policies or contracts held by the policyholder or contract holder and regardless of whether: (A) The policyholder is an individual, firm, corporation or other person; and (B) the persons insured are officers, managers, employees or other persons;

§40-3013a “Statement of existence of association not to be used to induce sales; description document, delivery to policyholder; disclaimer required; notice that policy is excluded from coverage under act” (a) No person, including an insurer, agent or affiliate of an insurer shall make, publish, disseminate, circulate or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in any newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the insurance guaranty association of this state for the purpose of sales, solicitation or inducement to purchase any form of insurance covered by the Kansas life and health insurance guaranty association act. This § shall not apply to the Kansas life and health insurance guaranty association or any other entity which does not sell or solicit insurance.