2020 Kansas Legislative Updates
With the 2020 Kansas Legislative Session officially complete, we wanted to provide members with a final report of the insurance-specific issues the KAIA Government Affairs Committee and the legislative team tracked closely. Before the pandemic shuttered the Legislature, this year was a very active one for the KAIA team in advocating on behalf of members. Below, we will also share a look at what issues we might face next year in Topeka in the 2021 session. Finally, we would like to express our thanks to the Government Affairs Committee for their continued leadership and guidance.
ROUND-UP OF 2020 INSURANCE BILLS
Below is a summary of the bills KAIA was tracking during the 2020 session:
SB402—KID Producer Licensure Bill
The Kansas Insurance Department introduced SB402, which would have updated producer licensing statutes pertaining to appointment, fees, licensing, renewal dates, continuing education, suspension, revocation, and denial of licensure and reinstatement. Among other things, SB402 would require a resident agent and business entity to submit a renewal application to the Insurance Commissioner and pay a biennial renewal application fee of $4. The bill would change the definition of the biennial due date to the last day of the birth month of an agent and the last day of the month of the initial licensure for a business. Further, the bill would increase the number of continuing education credit hours required for biennial license renewal from 12 to 24 for agents qualified for any combination of the following lines of authority: life, health, property, casualty, accident, and personal. Of the education credits, the bill would increase insurance ethics hours from one to three hours and would allow no more than six hours in insurance management. SB402 would remove the automatic appointment of affiliated agents for companies. If adopted, only individual agents and not agencies would be appointed by companies.
After months of negotiations and significant concessions by the Insurance Department, the KAIA Government Affairs Committee voted to remain neutral. KAIA efforts helped to eliminate approximately $100,000 in annual renewal fee increases, which on average, would have saved members over $300 annually. KAIA fought to ensure the final version of SB402 was balanced and, as a whole, provided benefit to most agents and brokers.
SB402 passed the Senate on a 32-6-1 vote. The House Insurance Committee heard it. However, due to the abbreviated session, the committee never acted on the bill. While there were conversations about including the provisions of SB402 in a Conference Committee Report during the Sine Die Session, that never happened, the bill will not become law in 2020. As this was the second year of the 2-year legislative cycle, the bill is dead and will have to be reintroduced for the 2021 session. The bill remains a significant priority for Commissioner Schmidt and the KID, so we will continue to meet with them and expect they will introduce similar legislation in January.
For an explanation of SB402, CLICK THIS LINK.
Sine Die Insurance Bill
When the Legislature adjourned earlier than normal, it failed to pass a few perfunctory and non-controversial insurance bills. The brief Sine Die Session created a package bill that addressed some of these unattended insurance issues. It rolled the insurance items into a package bill, HB2246, with things like an appropriation to the KU Cancer Center and the authorization for Wichita State University to bond a campus building. The insurance items included in HB2246 were the following:
1) authorizing the KID to approve the conversion plan of a reciprocal to a mutual insurance company;
2) allowing the KID flexibility in assessing certain penalties from excess lines;
3) updating the version of the risk-based capital instructions; and
4) updating the definition of long-term care insurance utilized by the KID in the long-term care insurance act.
Governor Kelly signed HB2246 into law on June 1. The brief to the bill can be found AT THIS LINK.
Healthcare and Business Liability Protection
In the Special Session, the Legislature passed HB2016, a bill similar to the one Governor Kelly vetoed that included items related to emergency orders and the oversight of CARES Act funding. Legislative leaders worked with the Administration to craft a bill that she would sign. The Governor signed the bill into law on June 8. Additionally, the bill would create the COVID-19 Response and Reopening for Business Liability Protection Act that provides some immunity from liability related to COVID-19 for healthcare providers and businesses. Those provisions include:
- Healthcare Provider Immunity. The bill states that a healthcare provider is immune from civil liability for damages, administrative fines, or penalties for acts, omissions, healthcare decisions, or the rendering of or the failure to render healthcare services, including services that are altered, delayed, or withheld, as a direct response to any COVID-19 state of disaster emergency under the KEMA. The immunity would not apply to in cases of gross negligence or willful, wanton, or reckless conduct. Nor would the immunity extend to services not related to COVID-19 that were not altered or delayed.
- Business Liability. The bill states that a person conducting business in Kansas shall be immune from liability in a civil action for a COVID-19 claim if such person was acting pursuant to and in substantial compliance with public health directives applicable to the activity giving rise to the cause of action when the cause of action accrued. This section would expire on January 26, 2021, and the bill would state this provision would apply retroactively to any cause of action accruing on or after March 12, 2020.
- Product Liability. The bill states that a person who designs, manufactures, labels, sells, distributes, provides, or donates a qualified product in response to the COVID-19 public health emergency shall be immune from liability in a civil action alleging a product liability claim involving the product if any of the above actions were taken at the specific request of or in response to a written order or other directive finding a public need for a qualified product, issued by the Governor, Adjutant General, or Division of Emergency Management. The damages are not occasioned by willful, wanton, or reckless disregard of a known, substantial, and unnecessary risk that the product would cause serious injury to others. The bill would state this provision would apply retroactively to any cause of action accruing on or after March 12, 2020.
2021 Legislative Outlook
The 2021 edition of the Legislature will look different than this one. All 125 House seats and 40 Senate seats are up for re-election this year. With retirements and election losses, the Legislature generally experiences about 25% turnover. The KAIA will inform and educate candidates and incoming new legislators about the issues that are important to independent agents and the clients you represent. These efforts will include Kansas Insurance
Agents PAC (KIAPAC) campaign contributions that will help elect legislators to understand and support agents and small businesses. As with the 2020 legislative session, we anticipate a busy year for the insurance industry in 2021. It's never too early to start thinking about the issues the KAIA will be facing next session. The landscape will evolve over the summer and fall, but we anticipate seeing the following issues in 2021.
KID Producer Licensure Bill
While it won’t be called SB402 next year, we fully expect the KID to pursue similar, if not the same, legislation in the 2021 session. The Commissioner has stated the producer licensure updates and changes are a top priority of the Department. The KAIA will remain in contact with the KID about this important issue.
COVID-19 & Workers Compensation
In the wake of the pandemic, efforts have been made to make coronavirus compensable in the workers' compensation system (WC). While WC laws provide compensation for “occupational diseases” that arise out of and in the course of employment, many state statutes, including Kansas, exclude “ordinary diseases of life” (e.g., the common cold or flu). States are taking action to extend WC coverage to include first responders and health care workers impacted by COVID-19. In fact, Governor Kelly issued a temporary Executive Order extending coverage to this group.
Other states, however, are enacting permanent and broader application of coverage. A common approach is to amend state policy so that COVID-19 infections in certain workers are presumed to be work-related and covered under workers' compensation. This presumption places the burden on the employer and insurer to prove that the infection was not work-related, making it easier for those workers to file successful claims. Some employers and insurers have raised concerns that these presumption policies will increase insurance costs for employers when they are already facing significant financial challenges. In Kansas, SB1 was introduced in the Special Session and would have amended our WC laws to make it presumed that COVID-19 was contracted at work and, therefore, eligible for coverage. That bill died at the close of the Special Session, but we expect a similar effort will be made next session.
As you will recall, the Kansas Supreme Court struck down the statutory cap on non-economic damages in personal injury cases. In its decision on Hilburn v. Enerpipe, a trucking accident case, the Court ruled that the cap violates the right to trial by jury in Section 5 of the Kansas Constitution Bill of Rights. The business community, including the KAIA, actively considered potential legislative remedies to the Hilburn decision. At this point, however, no clear statutory fix has surfaced, and many have resisted pursuing a state constitutional amendment. In lieu of a direct fix, the business community has worked on legislation to make the pursuit of lawsuits less enticing for plaintiffs’ attorneys. Look for legislation next year that will include
- a cap on attorneys' fees;
- additional limitations and notification requirements on attorneys' advertisements; and
- a prohibition on third-party funded lawsuits.
This was an Insurance Department bill the Legislature didn't act on in 2020. This bill would give the KID insurance fraud division law enforcement powers, including, among other things, arming fraud investigators, allowing fraud investigators to conduct search and seizures and make arrests. The KAIA legislative team raised concerns when first briefed on the bill by the Department. However, KAIA did not take an official position because it never appeared there was enough support to pass it. Apparently, the KID's primary reason for introducing the bill was because recently merged Securities Division investigators have law enforcement powers, and the KID felt insurance investigators should have the same. The Government Affairs Committee believes securities and insurance are different and should not be treated the same. There is no reason to give insurance investigators these broad and potentially dangerous powers. If the KID reintroduces this bill in the next session, the Government Affairs Committee and the legislative team will likely recommend KAIA oppose it.
This bill was introduced but didn't pass out of committee. The bill would have amended three statutes that require insurance companies to notify insureds if a company denies renewal. One of the statues it would have amended is KSA 40-2,121 that applies to commercial and professional property and casualty insurance. The current statute requires 60 days' notice of nonrenewal if the company denies renewal of the existing policy or substitution of similar coverage. The bill would have given companies the option of sending a renewal notice. Instead of a nonrenewal notice, that, in a conspicuous place and written in plain language, clearly indicates each change to the policy being made on renewal. The bill was effectively blocked by the KID because it would have amended applied to mandatory personal automobile liability insurance and potentially conflicted with other statutes restricting nonrenewal of automobile liability policies. Those concerns don't apply to KSA 40-2,121. The KAIA supported this bill. The legislative team recommends the bill be reintroduced by KAIA next session as it applies to KSA 40-2,121, but with one change. The bill should also require all nonrenewal or renewal notices to be sent to agents and insureds. Currently, that's not required, and some companies don't do it.
Now that the Kansas Legislature has adjourned, election season is in full swing. KAIA is the trusted voice for Kansas insurance agents and brokers—always working with lawmakers on policies affecting the insurance industry and our small business clients. Effective advocacy does not begin and end according to legislative sessions. Effective advocacy is rooted in relationship and requires investment in mutual understanding and support. Our voice as independent insurance agent advocates is amplified by our political giving through KIAPAC.
From taxes to tort reform, the Kansas Legislature considers bills that impact independent agents and their businesses each year. KIAPAC is a critical part of the association's efforts to build relationships with Kansas elected officials and to keep members of the Legislature informed about issues impacting small businesses and the independent agent system. As we enter our membership renewal process, please make sure your agency contributes a minimum contribution of $100 to KIAPAC so that our advocacy remains strong and effective for Kansas insurance agents.
Last week Governor Kelly vetoed HB2054, which amended law related to the Governor’s authority to extend COVID-related declaration of emergency. In a release, the Governor asserted HB2054 “includes provisions that will damage Kansas’ ability to respond to COVID-19 and all future disasters.” Kelly then called the Legislature back for a Special Session on June 3, saying, “I’m calling on the Legislature to come back and put a carefully crafted, bipartisan bill on my desk that will provide the resources Kansans need, in a timely manner. We must stop putting Kansans at risk.” The Legislature met for two days and passed new, negotiated legislation that the Governor indicated she would sign.
Large bipartisan majorities in the House and Senate passed out HB2016, which would create and amend law regarding the governmental response to the coronavirus disease 2019 (COVID-19) 2020 pandemic in Kansas. The bill's main provisions impact the expenditure of federal stimulus dollars, the Governor’s executive authority relating to emergency declarations, and liability protections for healthcare providers and businesses. The main sections of the bill are the following:
- The bill would appropriate the Coronavirus Relief Fund (CRF) in the Governor's Office to provide relief for the effects of coronavirus in the state of Kansas in both fiscal years (FY) 2020 and FY 2021. Expenditures or transfers from the CRF would require an affirmative vote of the Governor and a majority of the State Finance Council (SFC). The bill would also permit the SFC to continue approving such requests during the Legislative Session.
- The bill would create a new section of law ratifying and continuing from March 12, 2020, through September 15, 2020, the COVID-19-related state of disaster emergency declared by the Governor on March 12, 2020, and subsequently ratified in other declarations. The bill would also prohibit the Governor from proclaiming any new COVID-19-related state of disaster emergency during 2020 unless the Governor makes specific application to the SFC. An affirmative vote approves such action of at least six legislative members of the SFC.
- The bill would create a section of law effective on and after September 15, 2020, applicable during any state of disaster emergency declared under KEMA, prohibiting the Governor from ordering the closure or cessation of any business or commercial activity (for-profit or not-for-profit) for more than 15 days.
- Allow the Board of County Commissioners of any county to issue an order relating to public health that contains provisions less stringent than the provisions of a statewide executive order issued by the Governor if they follow certain guidelines.
- The bill would create a section of law providing that no executive order issued by the Governor pursuant to KEMA that has the effect of closing public or private school attendance centers in Kansas would be effective unless and until the State Board of Education affirms the order by the adoption of a resolution by a majority of the SBE's members.
- The bill would create the COVID-19 Response and Re-opening for Business Liability Protection Act that provides some immunity from liability related to COVID-19 for healthcare providers and businesses.
The bill now awaits the signature of the Governor. We expect her to swiftly take action and sign the measure upon receiving the bill. The full Legislature considered no other bills during the brief two-day Special Session. However, the Senate Tax and Education Committees did meet and pass out similar bills passed in the Sine Die Session. The Governor vetoed those bills citing concerns over the cost to local units of government and the impact on the state's shaky budget outlook.
The conclusion of the 2020 regular legislative session and the special session, campaign season will kick into high gear. The filing deadline for elected office concluded on June 1. The filings for United States Senate, United States House of Representatives, Kansas Senate, Kansas House of Representatives, State Board of Education, and numerous judgeships and district attorney positions can be found at this link.
Politicos across the state are still analyzing the filings; however, the University of Kansas Political Science professor Patrick Miller created a reasonably good analysis of some of the more interesting races in the Kansas Senate and House. His article (or tweets) can be found at this link.
The DDM team will continue to monitor all races and help answer any questions you may have as we go through what seems to be shaping up to be an unprecedented election season during unprecedented times.
SPARK Committee Meets
On June 2, Governor Laura Kelly’s Strengthening People and Revitalizing Kansas (SPARK) Taskforce Executive Committee reviewed and approved a proposal to distribute $400 million to local governments to help address the health and economic challenges inflicted by COVID-19.
This is the first action of the SPARK Taskforce. Governor Kelly charged with distributing over a billion dollars in federal funds Kansas received under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The SPARK group proposed a three-phased approach to allocating the funds. The first round will focus on providing relief to county governments that had not already received funding under the CARES Act. Johnson and Sedgwick Counties have already received funds because they have populations over 500,000.
Under the SPARK proposal, each county would receive funds based on the following formula:
- Population: All counties are guaranteed to receive at least $194 per person. This is the same amount awarded to Johnson and Sedgwick residents previously.
- Impact Fund: Counties will receive additional dollars based on their COVID-19 case rates and unemployment rates. The purpose of the Impact Fund is to provide additional dollars to those counties hit hardest by the virus. Johnson and Sedgwick counties will receive funds through this fund as well.
Fifty percent of each county's share will be for reimbursement of COVID-19 related expenses, and the remaining 50 percent will be direct aid for eligible expenditures under the CARES Act. To receive its funds, counties will be required to pass a resolution affirming they will allocate the funding consistent with the CARES Act and to share and allocate funds to educational and municipal entities within their counties
Under this proposal, there will be two additional funding rounds later this year. Public and private entities will be eligible for funding in the later rounds, which will focus on strategic investments and revitalizing the state's economy. However, with the enactment of HB2016, which provides for legislative involvement in the distribution of CARES Act funds, it will be interesting to see how the process may evolve. We will keep you up-to-date on any changes.
May 21, 2020 was designated as Sine Die, the official end of the 2020 legislative session. The 2020 legislative session will be remembered as the session that COVID cut short and left the state with substantial budgetary holes and affronts to the balance of powers between the Executive Branch and Legislative Branch in times of state and national emergencies.
In the days leading up to May 21, 2020, legislative committees worked frantically to craft compromises to address a litany of issues pending when the outbreak of COVID 19 forced an early first adjournment. Key issues surrounding a state response to COVID, the budget, education, financial institutions, taxes, and executive and legislative branch roles were discussed. Attorney General Derek Schmidt repeatedly called upon the legislature to craft a measured response to assure the Governor's Emergency Orders were validated, and future emergency actions were done in a manner to avoid litigation. (See http://ag.ks.gov/media-center/ag-opinions)
These significant issues were all brought to closure, at least for the 2020 legislative year, on May 21, 2020. Given the pending $1.25B 2021 budgetary shortfall and passage of HB 2054 - predicted to be vetoed by the Governor - many are predicting the Governor may call a special session.
The irony of this final week of the session was the legislative criticism of the Governor and executive powers. At the same time, Governor Kelly was being praised by President Donald Trump for her management of COVID in Kansas and, in particular, beef packing plants. (See Whitehouse.gov and http://www.cjonline.com/news/20200520/kansas-coronavirus-update-gov-laura-kelly-meets-with-trump-thanks-him-for-help-with-meat-packing-plants )
Coronavirus Relief Funds and the Emergency Orders-Senate Substitute for House Bill 2054
Given that the legislature elected to meet for one day on Sine Die to complete pending business, both the House and Senate were hesitant to go on “general orders” where debate is broad, and bills are subject to amendment. To avoid lengthy discussions and to limit issues, the legislature used the procedural tool of a conference committee to merge bills into final compromises. A conference committee report may not be amended and is subject to a yes/no vote of each body.
COVID FUNDS: After hours of discussion, the Senate and House conferees adopted Senate Substitute for House Bill 2054, which contained some of the most controversial provisions of the session. The bill reversed the legislature's prior authorization of the Governor to approve expenditures of federal funds. The legislature assumed control over federal COVID funds and their distribution. Many in the legislature justified the move because the Legislative branch has the power of the purse. Some feel the Governor may veto the bill because this provision was added.
AUTHORITY: The bill was designed to limit the scope and time of emergency orders. Another provision would limit the Governor’s authority to close businesses for 15 days. Approval of the State Finance council would be required to extend closure orders for specific periods not to exceed 30 days. The bill also included provisions to ratify existing and future orders. The bill also allows county commissioners to issue public health orders that are less restrictive than a statewide executive order.
LIABILITY PROTECTION: The bill outlines liability protection for healthcare providers and businesses. It also addresses product liability protection for products created in response to COVID-19.
OTHER ITEMS: The bill contains a litany of issues raised during the COVID outbreak. Such as notarization of documents, adult care homes inspections, use of telemedicine, flexibility in hospital and medical care facilities admissions and licensing; temporary licensing of healthcare providers; court video conferencing; technical amendments to definitions of critical access hospitals; and temporary modifications to unemployment compensation laws.
A conference committee of House and Senate budget committee members sent a report to their respective chambers that included a few insurance-related items. Initially, the Senate negotiators pushed to include SB402, the Kansas Insurance Department’s producer licensure bill. That bill included increased CE’s, changes in the agent appointment process, and changes in fees. The KAIA was neutral on that bill after months of negotiations with the KID. In the end, the conference committee did not include the provisions of SB402. The insurance items were paired with things like an appropriation to the KU Cancer Center and the authorization for Wichita State University to bond a campus building. Insurance items:
- authorizing the KID to approve the conversion plan of a reciprocal to a mutual insurance company;
- allowing the KID flexibility in assessing certain penalties from excess lines;
- updating the version of the risk-based capital instructions;
- updating the definition of long-term care insurance utilized by the KID in the long-term care insurance act.
The final Conference Committee Report was in HB2246. The bill now heads to Governor Kelly for her consideration. She can choose to sign, allow to become law without signature, or veto. Given the contents of the bill, we expect that the Governor will not veto it. The brief to the bill can be found here.
Both the Senate and the House of Representatives passed Senate Substitute for HB 2702 on sine die. HB 2702 was essentially the "tax bill" for the 2020 legislative session. Likely the most politically significant piece of legislation included in the conference committee report was the contents of Senate Bill 294. The language of SB 294 eliminates the so-called "property tax lid" and establishes new notice and public hearing requirements for certain taxing subdivisions before property tax increases above a revenue-neutral rate. The bill does not apply to school districts or any taxing subdivisions receiving less than $5,000 annually in property taxes. Under the language of the legislation, the current tax lid, which limits the local municipalities' ability to increase property tax rates, is replaced by taxpayer notice and municipal body vote requirements. The bill would require governing bodies to notify county clerks of their intent to exceed revenue-neutral rates. County clerks subsequently would be required to notify each taxpayer with property in the taxing subdivisions of public hearings regarding the intent to increase rates. This provision will become effective for the 2021 tax year.
HB 2702 also included other policy provisions related to the COVID-19 pandemic. First, the bill suspends penalties and interest for late property tax payments through August 20, 2020, in response to the COVID-19 pandemic. Additionally, the bill extends the deadline for payment of income taxes from April 15, 2020, to July 15, 2020, and eliminates any penalties and interest for payments made by the July 15, 2020 deadline.
The bill also prohibits an increase in the appraised valuation of real property solely as a result of normal repair, replacement, or maintenance of existing property improvements. Finally, the bill would allow a county to allow partial payments and set up payment plans with property owners who are delinquent in paying their property taxes.
The legislature also passed Senate Substitute for HB 2619. The bill establishes the Kansas Economic Recovery Loan Deposit Program (Program) by amending law governing linked deposit programs and related investment procedures. The bill permits the net income received from the qualified agricultural real estate and single-family residence loans to be deducted from net income by a bank; to the extent that interest is included in the Kansas Corporate Income Tax. This provision becomes effective on January 1, 2022. The bill also has a provision authorizes Kansas Credit Unions to expand their field of membership from 1M to 2.M people.
This week the Legislative Coordinating Council (LCC) unanimously approved the return of the full legislature on May 21, indefinitely. Meaning, the legislature will have one day to conduct any business. The LCC, comprised of House and Senate leadership, bickered about returning sooner to give lawmakers more time to deal with a host of issues in light of the COVID-19 pandemic. In the end, however, House leadership and the Democrat leadership won the day and repelled an effort by the Senate leadership team to return sooner. Republicans in both chambers have indicated a need to take up a variety of matters that require attention before the end of the fiscal year. Also, they have stated that they want to pursue legislation providing for COVID-related liability protections for businesses and health care providers, property tax relief, and imposing restrictions and oversight on the Governor’s emergency powers.
Committees to Meet Next Week
In a release from Thurs., May 7, Senate Republican leadership announced they have called back at least four legislative committees to begin meeting as early as next week. Senate President Susan Wagle (R-Wichita) directed the chairs of the Judiciary, Commerce, Tax and Financial Institutions committees to begin work as soon as possible. It is unclear what measures these committees will take. Still, you can expect their focus to be on the policy matters mentioned previously: liability protections, property tax relief, and imposing legislative checks on the Governor’s authority and ability to spend federal stimulus dollars. The Senate committees will be meeting in-person in the Kansas statehouse.
Governor Creates Recovery Office
Governor Laura Kelly announced the creation of the Kansas COVID-19 Recovery Office this week. In a release, the administration stated, “As part of her continued commitment to protecting the health and safety of Kansans and the state’s economy, Governor Laura Kelly today announced the appointment of two individuals who will head the team charged with leading Kansas forward in recovery from the far-reaching effects of COVID-19.”
Kelly selected Cheryl Harrison-Lee as the Recovery Office’s executive director and Lyle Butler as the Chair.
Harrison-Lee has more than 30 years of experience in strategic leadership positions in a variety of corporate, entrepreneurial, private, and public environments. Previously, she served in leadership roles for several cities to include Gardner, Kansas; Orlando, Florida; and Daytona Beach, Florida. Last year, Governor Kelly appointed Harrison-Lee to serve on the Kansas Board of Regents.
Butler recently retired from his position as the President and CEO of the Manhattan Area Chamber of Commerce, a position he held since July 2000. He has also served as the Chamber President and CEO in Dodge City, Kansas, and Greeley, Colorado.
The press release says that Kelly will soon announce the remaining members of the recovery team, which will include involvement from members of the Kansas Legislature.
It is unclear at this time what role the Recovery Office will have. We anticipate the office will assist the administration in vetting policy responses to the pandemic and provide feedback and insight on how best to distribute any discretionary stimulus dollars.
The legislative session is in a fluid state as they wind up their work for the week. Next week is the last full week of regular committee work, so committees are working hard to get any bills worked and ready for their respective full body to consider before March 25. However, with the discussion and implementation of social isolation due to the coronavirus, COVID-19, legislative leaders, and the governor are considering options to ensure that a budget gets passed and approved should the legislature need to adjourn early.
Both the Senate Ways and Means Committee and the House Appropriations Committee passed their budget out for full floor action. As of this report, the full House appears to be planning to hear their budget on the House floor this afternoon. It appears the Senate will hear their budget early next week. The budget is the one piece of business that must be accomplished every legislative session; therefore, both chambers of the legislature would like to be prepared to pass a basic budget in a timely manner.
The legislative standoff regarding Medicaid Expansion and the Constitutional Amendment dealing with abortion are still at the forefront of the legislative session. State government's essential function, as it deals with the economic and health effects of the coronavirus pandemic, has added a new layer of intrigue to the discussion of all bills due to the uncertainty of when or how the session will wrap up.
Insurance policy and legislation were quiet this week. Looking ahead to next week, however, the House Insurance Committee will hear SB402 on Mon., March 16. As you will recall, this is the Kansas Insurance Department bill that updates producer licensing statutes pertaining to appointment, fees, licensing, renewal dates, continuing education, suspension, revocation, and denial of licensure and reinstatement. After months of negotiations with the Insurance Department, KAIA testified as neutral on the bill in the Senate and will do the same in the House committee.
We will see how the legislature responds to COVID-19, but it is becoming more apparent that opportunities to pass policy beyond the budget are in question before they break.
The legislature was on break the beginning of the week after last week's rush to meet turn around deadlines. The legislature worked two days this week. Both the House and Senate continued to work through the tedious details of the budget. Given that passage of the budget is the ONLY item that the legislature MUST do, its movement to completion opens the door for adjournment. Although the budget is moving, the full Senate Ways and Means Committee and the full House Appropriations committee have several subcommittee budgets to analyze over the next few weeks. Each committee will then consider the passage of a budget to their respective full chambers. As the media has reported, yesterday Senate Republicans had a contentious caucus meeting involving movement of bills that could be amended to bring Medicaid Expansion to the Senate floor. Calls for debate on Medicaid expansion and a Constitutional amendment to allow the legislature to regulate abortion loom over the building.
Notes and Quotes
As reported in the Topeka Capital-Journal, there was quite the dust-up in the Senate Republican caucus meeting on Thursday. Some members, including Senate President Susan Wagle (R-Wichita), expressed frustration with Senate Majority Leader Jim Denning (R-Overland Park) for his vocal support of Medicaid expansion. Denning joined Governor Laura Kelly in Wichita to push for Medicaid expansion over the legislative break. “For us, all of a sudden you changed direction,” Wagle, who is running for U.S. Senate, said. “You stood with the governor, and you carried the governor’s water on a bill she wanted. And now, we’re being put in a very bad situation in Sedgwick County.” Ethan Patterson, the chief of staff for Denning, said: "a small faction" of six or seven Senate Republicans was trying to block the legislative process. "If the caucus does decide Jim Denning is not the leader for them anymore, we know we’re on the right side of this issue — not only for our district but for the state — on what people want and what the masses want,” Patterson said. “So, we’re going to sleep easy — easy — tonight and moving forward.” The political drama is undoubtedly heating up here in Topeka.
Monday was the final day for nonexempt committees to meet before Turnaround day. So committees spent the day sending many bills to their respective chambers in advance of the deadline. The House churned through bills, mostly noncontroversial, on the floor all day on Tues. , Feb. 25 and Wed., Feb. 26, wrapping up their work late Wednesday afternoon. The Senate, meanwhile, worked through Thursday and gaveled out shortly after noon on Turnaround day. The legislature takes a brief break and returns to the second half action on Wed., Mar. 4. While the 2020 headline issues—Medicaid expansion, Constitutional Amendment on Abortion, taxes—remain, the legislature did make some progress on noteworthy legislation this week.
The Senate sent to the House a gaming bill that would allow for sports wagering in Kansas. The bill backed by the four state-owned casinos would allow for betting on professional and college sports and horse racing. Unlike other versions floating around the statehouse, this bill would restrict the placement of bets to the casinos and over the internet. The bill does not permit other locations to participate, such as horse and dog racetracks and stores where you play the Kansas Lottery. The bill levies a 10% tax on internet bets and a 7.5% tax on bets made in-person at one of the casinos. The state would collect about $10 million in new revenue in the first year, according to estimates.
Also, this week the Senate passed out a much-discussed property tax bill. SB294, effective in 2021, would eliminate the so-called “property tax lid” and establish new notice and public hearing requirements for specific taxing subdivisions before property tax increases above a revenue-neutral rate. The bill would not apply to school districts or any taxing subdivisions receiving less than $5,000 annually in property taxes. So, if enacted, the current tax lid, which limits the local municipalities’ ability to increase property tax rates, would be replaced by taxpayer notice and municipal body vote requirements. The bill would require governing bodies to notify county clerks of their intent to exceed revenue-neutral rates. County clerks subsequently would be required to notify each taxpayer with property in the taxing subdivisions of public hearings regarding the intent to increase rates. Following the hearings, the bill requires a majority vote of the governing body to increase rates above the revenue-neutral rate. It passed the Senate on a 39-0 vote.
Finally, the House put a stake in the heart of the Governor’s plan to refinance the state employee pension system. Kelly’s plan to refinance the state’s retirement system would initially raise a few hundred million dollars but would result in a roughly $4.4 billion hit to the fund’s long-term liability. Met with opposition by Republican leaders and other stakeholders, the House gutted the plan this week but retained the portion of the measure that makes a $268 million payment to the fund for previous shortfalls. What’s the practical effect? The Governor’s budget recommendation, which relied upon the pension re-amortization, took a hit. That likely means proposed spending in the Governor’s budget will bite into reserves more than initially planned.
The Senate on Thurs., Feb. 27, sent to the House the Kansas Insurance Department’s bill dealing with producer licensure statutes. SB402 passed on a 32-6-1 vote and now heads to House Insurance Committee for consideration. As you will recall, the bill updates producer licensing statutes pertaining to appointments, fees, licensing, renewal dates, continuing education, suspension, revocation and denial of licensure and reinstatement. After months of negotiations with the insurance department, KAIA testified as neutral on the bill.
Among other things, SB402 would require a resident agent and business entity to submit a renewal application to the Insurance Commissioner and pay a biennial renewal application fee of $4. The bill would change the definition of the biennial due date to the last day of the birth month of an agent and the last day of the month of the initial licensure for a business. Further, the bill would increase the number of continuing education credit hours required for biennial license renewal from 12 to 24 for agents qualified for any combination of the following lines of authority: life, health, property, casualty, accident, and personal. Of the education credits, the bill would increase the hours of insurance ethics from one to three hours and would require that no more than six hours would be in insurance management. SB402 would remove the automatic appointment of affiliated agents for companies. If adopted, companies can appoint individual agents but not agencies.
For an explanation of SB402, CLICK THIS LINK.
In other news, SB323 appears dead for the session. If you recall, the bill will amend current law related to altering the terms of an insurance policy not considered a denial of renewal of the policy if the insured is provided with proper notice. KAIA testified in opposition to the bill brought forward by State Farm. SB323 provides, instead of sending a notice of non-renewal when a policy is changed, a company may send a copy of the renewal policy or make it available electronically, in accord with the notice requirements of the statutes. There is no requirement the company identifies what changes they are making. Not only were there concerns from other carriers about the notice standards outlined in the bill, but the Insurance Department also expressed concern that bill could lead to insurers reducing or eliminating coverage without the consent of the policyholder. Due to expressed concerns, State Farm decided to pull the bill from consideration.
As we plod to the Turnaround deadline, the House and Senate remained relatively quiet. The two chambers moved a handful of noncontroversial bills across the rotunda as the controversy surrounding Medicaid expansion and the constitutional amendment on abortion continued to choke movement of significant pieces of legislation. Meanwhile, committees worked furiously to move bills out of committee ahead of Mon., Feb. 24, their last day to meet before Turnaround.
The logjam created by the politics of the abortion amendment and Medicaid expansion continued this week. The Medicaid expansion bill stalled in the Senate committee. The committee made a handful of amendments, which expansion proponents contend may kill the effort, then failed to advance the new version of SB252. An amendment to impose a “participation” requirement on the newly covered beneficiaries. Different than a work requirement, this amendment would require a beneficiary in the expanded population to work, volunteer, or go to school.
Additionally, there was an amendment that allowed providers to invoke a conscientious objection to performing abortions. Finally, there was an amendment that would delay enactment of expansion until after the Supreme Court of the United States rules on the pending case challenging the Affordable Care Act and until after the people of Kansas vote to pass a constitutional amendment. After some fiery debate, the bill did not move out of the committee on two attempts. It remains alive in committee where we expect they will take it up on Mon., Feb 24.
All House and Senate sub-budget committees met through this week and continued to pass their recommendations for government agency budgets to the full committees for their consideration. Seemingly, most committees are only making minor changes and not additional money above what the Governor included in her recommended budget. Many of the sub-committees are suggesting that significant changes be delayed until omnibus budget discussions begin in late April.
Again, the committees’ final day to meet will be Mon., Feb. 24. The House and Senate will be on the floor all day on at least Tues., Feb. 25 and Wed., Feb. 26, in advance of Turnaround day on Thurs., Feb. 27. The legislature will take a long weekend and return to second half action on March 4.
The Senate FI&I Committee heard two bills this week of interest to the Kansas Association of Insurance Agents (KAIA.)
First, SB323 would amend current law related to altering the terms of an insurance policy not considered a denial of renewal of the policy if the insured is provided proper notice. KAIA testified in opposition to the bill brought forward by State Farm. SB 323 provides, instead of sending a notice of non-renewal when a policy is changed, a company may send a copy of the renewal policy or make it available electronically, in accord with the notice requirements of the statutes. There is no requirement the company identifies what changes they are making.
Further, assuming a company does send the altered policies to the agent, if SB 323 is enacted, it will create an enormous burden and enormous errors and omissions (E&O) exposure for agents. An agent would have to determine changes in policy without the benefit of input from the company that made the changes. Comparing policies to determine coverage differences can be very difficult and time-consuming. If an uncovered loss occurs because an agent failed to identify a change in coverage, the agent may be subject to an E&O claim.
The original draft of this bill required the companies to identify and describe changes in renewal policies, which KAIA testified that we would support that version. State Farm, in their testimony, offered an amendment that would require companies to do just that. If the committee amends the bill to include that requirement, KAIA will change its position from opposition to support. American Family Insurance and The American Property Casualty Insurance Association testified in support of the measure. The Kansas Insurance Department (KID) was neutral but expressed concern that the provisions would erode renewal protections in current law. The committee plans to work the bill on Mon., Feb. 24.
Next, the Senate committee heard SB402, which updates producer licensing statutes pertaining to appointment, fees, licensing, renewal dates, continuing education, suspension, revocation, and denial of licensure and reinstatement. After months of negotiations with KID, KAIA testified as neutral on the bill.
SB402 would require a resident agent and business entity to submit a renewal application to the Insurance Commissioner and pay a biennial renewal application fee of $4. The bill would change the definition of the biennial due date to the last day of the birth month of an agent and the last day of the month of the initial licensure for a business. Further, the bill would increase the number of continuing education credit hours required for biennial license renewal from 12 to 24 for agents qualified for any combination of the following lines of authority: life, health, property, casualty, accident, and personal. Of the education credits, the bill would increase the hours of insurance ethics from one to three hours and would require that no more than six hours would be in insurance management.
While the additional CE requirements come at an additional cost, in both time and money, KAIA agreed not to oppose the bill because KID made concessions in other areas. For example, lowering the newly created license renewal fee to $4 biennially from what the KID initially proposed. Also, these changes will allow agents to use the National Insurance Producer Registry (NIPR) to renew their out-of-state and Kansas licenses. Currently, Kansas agents can use NIPR to renew their out-of-state licenses but must renew their Kansas licenses through KID. Streamlining this procedure will benefit both KID and agents.
SB402 would remove the automatic appointment of affiliated agents for companies. If adopted, only individual agents and not agencies will be appointed by companies. This change will remove burdensome reporting requirements for agencies when there are staff changes.
In addition to the insurance department, the Kansas Association of Professional Insurance Agents, State Farm, the National Association of Insurance and Financial Advisors of Kansas, and Advisors Excel testified in support of the bill. We expect the committee to work the bill on Mon., Feb. 24.
The fallout from the House's failure to pass Senate Concurrent Resolution 1613, the resolution authorizing a vote on the abortion amendment, took form this week. As expected, the Senate Public Health and Welfare Committee delayed efforts to pass the Medicaid expansion bill. Committee Chair Gene Suellentrop (R-Wichita) announced on Mon., Feb 10, that SB 252 and Medicaid expansion more broadly needed further study. Continuing, he announced that the committee would not actively work or mark-up the bill until further notice.
Additionally, House committees rebuffed a couple of Executive Reorganization Orders (EROs) proposed by Governor Kelly. The House Energy and Appropriations Committees both made negative recommendations on two EROs. A move viewed by many insiders as retribution against Governor Kelly for her efforts in working against the abortion amendment. One ERO would have moved the Energy Office from the Kansas Corporation Commission to the Governor's administration. The other was the high-profile proposal to reorganize various agencies into the singular Department of Human Services. We expect some legislation to move, but Medicaid expansion and measures supported by the Governor will likely sideline until an abortion resolution gains enough votes in the House.
While Medicaid expansion flounders in uncertainty, the House and Senate tax committees moved out some noteworthy tax bills this week. The House committee kicked out a pair of tax bills related to individual income taxes. One proposal would decouple Kansas law from the federal tax allowing individuals to itemize their deductions even if they choose the federal standard deduction. The federal Tax Cuts and Jobs Act increased the standard deduction to $24,000. Many individuals and small businesses chose the standard deduction, which requires them to take the much lower state standard deduction. As a result of the federal change, Kansas coffers have seen about $60 million in new revenue annually as many taxpayers were caught in the middle and are now paying more in state taxes. It's not certain if or when the full House will take up this bill dealing with the so-called revenue windfall.
Meanwhile, the Senate committee passed out a property tax bill that may signal an end to the property tax lid. The bill would require local taxing entities to provide more public disclosure but, in return, the much-publicized property tax lid. Many municipalities question whether the bill represents a “jump out of the frying pan and into the fire" scenario. The tax lid generally requires, with certain exceptions, voters to approve property tax increases higher than the rate of inflation from the previous year. The replacing policy would require local taxing entities to calculate a certified property tax rate annually and prohibit the governing body from levying a tax rate above the certified rate unless the body adopts an ordinance or resolution to do so. The governing body would be required to notify taxpayers of their intent to exceed the certified tax rate by publishing in the local paper of record and by notifying affected taxpayers by mail or electronic means.
This week marked the deadline for individuals and non-exempt committees to introduce bills. We saw a flurry of bills hit the calendar by Friday. Many of these bills may not stand much of a chance to see the light of day. The last day for committees to meet looms on Mon., Feb. 24, followed by Turnaround Day on Thurs., Feb. 27. Committees have a little over a week to get work done on non-exempt bills. As such, committee schedules are jam-packed next week. Due to the logjam created by the politics of the abortion amendment and Medicaid expansion, many of the newly introduced bills are likely to die on the vine.
Other Notes and Quotes
On Mon., Feb 10, Senate leaders sent out separate emails to their colleagues explaining their position on Medicaid expansion following the demise on Friday of the constitutional amendment resolution related to abortion. After the abortion resolution failed in the House, Senate President Susan Wagle removed 13 bills, some of which could have been amendable to Medicaid expansion, from the Senate calendar, and placed them back in committee. She said, “Without the 'Value Them Both' amendment, there will be no 90/10 funding match when it comes to abortion. Kansas taxpayers will instead foot the bill for all Medicaid abortions, in their entirety."
Meanwhile, Senate Majority Leader Denning responded, “The bipartisan work over the interim was tireless and it disrespectful to blatantly disrupt the legislative process and threaten fellow legislators for personal political gain." Denning went on to say, “The constitutional amendment and Medicaid should not be married together and sold as a single issue." But, while Denning and others may not want the two issues to be connected, they most certainly are in the eyes of those who support the constitutional amendment.
The House Insurance Committee held hearings on a bill that would expand the coverage of mental health disorders. The bill was met by resistance by members of the business and insurance community who are concerned about the impacts that such mandates have on the cost of health insurance coverage. HB 2459 would create the Kristi L. Bennett Mental Health Parity Act, which would require health insurers to expand coverage of treatment of mental illness and substance use disorder. For patients who have substance use disorder, are afflicted with suicidal ideation, or are actively suicidal, the bill would require health insurers to provide coverage. Coverage would be required without the imposition of prior authorization, concurrent review or retrospective review, or other forms of utilization review for the first 14 days of medically necessary inpatient and 180 days of medically necessary outpatient treatment and services provided in-network. Committee Chair Jene Vickery (R-Louisburg) has indicated he may appoint a subcommittee to study the bill further.
The Senate Financial Institutions Committee was a tad more active on insurance matters this week. Many of the bills were noncontroversial in nature. But SB 352 grabbed our attention and that of several property and casualty carriers. SB 352 would enact the Peer-to-Peer Vehicle Sharing Program Act. The bill outlines, among other things, liability insurance and licensing requirements for drivers participating in and companies providing a peer-to-peer vehicle sharing program. What is a peer-to-peer vehicle sharing program? Think of Airbnb or Vrbo for your car and not your home or condo. As the popularity of these programs is growing, states have wrestled with the appropriate way to provide liability coverage and licensing. Also, car rental companies have a concern that peer-to-peer programs don't have to abide by the same set of rules. This bill was introduced by Enterprise and is a modified version of the National Council of Insurance Legislators' (NCOIL) model bill. Several carriers were neutral or opposed and expressed a desire for the committee to change the bill to look more like the NCOIL model. If this bill gets worked, we expect a version more closely aligned with the national model will move.
The fourth week of the session turned out to be unique yet similar to the previous weeks. February in Topeka started with a much-ballyhooed Super Bowl win by the local favorite, Kansas City Chiefs, including closing the Legislature on Wed., Jan 5, to allow fans to attend the Super Bowl parade. We also saw much the same as in January: a complete focus on the resolution authorizing a public vote on the Constitutional Amendment related to abortion.
As you will recall, last week Senate Concurrent Resolution 1613 was sent to the House on a 28-12 vote. On Thurs., Jan 6, the full House took up the effort on that measure, which would allow future legislatures - if approved by voters in August - to pass laws regulating the practice of abortion. The preliminary vote fell four votes short of the 84 required votes needed to pass a resolution to amend the Kansas Constitution. The Governor, legislative leaders, and advocates on both sides spent Thursday night twisting arms and using political levers to get or keep votes on Friday morning's Final Action vote. As of this report, the House was still on a "call of the House," and a final vote has not been recorded. If the amendment resolution fails, you can expect Republican legislative leaders to come down with a heavy hand on those who opposed, including measures they support. We expect leaders to do everything in the political and procedural power to block Medicaid expansion until the Constitutional Amendment resolution passes.
Speaking of Medicaid expansion, this week the Senate Public Health and Welfare Committee invited Attorney General Schmidt to provide his insight on the ongoing litigation surrounding the Affordable Care Act (ACA) and the timeline of when the U.S. Supreme Court (SCOTUS) might take up the case. The Attorney General did not have clear guidance on when and how a SCOTUS ruling, which may strike down the ACA, could impact the passage of Medicaid expansion as envisioned in Senate Bill 252. It seemed clear that Committee Chair Gene Suellentrop (R-Wichita) wanted his committee to hear about the potential that the ACA - the federal mechanism authorizing Medicaid expansion - could be struck down. Schmidt was asked about amendments to state plans, including restrictions on abortion or work requirements, were authorizes. He didn't definitively opine. The committee will continue discussions and consider action on SB 252 on Mon., Jan. 10 and Tues., Jan 11—unless plans change if the House fails to pass the abortion resolution.
The Department of Revenue released January tax receipts early this week. January revenues totaled $723 million, which were 8.7%, or $58 million, above estimates. That total is also $80 million over collections in January of last year. To date, revenues are $256 million, or 6.4%, above tax receipts at this point in the last fiscal year. Individual income tax receipts continue to outpace estimates. Certainly, the strong economy is impacting income. Still, the House Taxation Committee heard again that the Federal Tax Cuts and Jobs Act provided Kansas government coffers with a windfall. Kansas law requires taxpayers to take the state standard deduction if they choose to take the higher federal standard deduction that was passed in the Trump tax cuts. The Kansas standard deduction is much lower than the federal level and has resulted in about $60 million more in income taxes, the Kansas Department of Revenue reported. There is a litany of bills addressing taxes, and specifically, this issue introduced and being considered. Look for the issue of taxes to pick up some steam in the next couple of weeks.
Other Notes and Quotes
While the Legislature was closed on Wed., Jan 5, to celebrate the Kansas City Chiefs Super Bowl win, Gov. Laura Kelly did not shut down state government. She did say; however, she was pleased on Sunday to hear that the Chiefs "are my state's team," a reference to President Donald Trump's congratulatory Tweet where he incorrectly referenced that the Chiefs are a Kansas team. In that Tweet, Trump announced, “Congratulations to the Kansas Chiefs on a great game, and a fantastic comeback, under immense pressure. You represented the Great State of Kansas and, in fact, the entire USA, so very well. Our Country is PROUD OF YOU!" A prolific Tweeter, we here in Kansas think this might be President Trump's greatest tweet to date.
The Kansas Insurance Department introduced their bill that they view as modernization of producer licensure laws and the appointment process. KAIA has negotiated diligently with the Department on their plan that would, among many things, increase continuing education requirements, create an agency renewal requirement and fee, and eliminate automatic appointments in agencies. The final bill and language are not complete as of the date of this report.
KAIA is monitoring several bills, two of which had hearings this week:
- On Mon., Jan. 3, the House Insurance Committee held a hearing on HB2480. The bill would amend the definition of long-term care insurance. Current law defines long-term care insurance to mean any insurance policy primarily advertised, marketed, offered or designed to provide coverage for not less than 12 consecutive months. HB 2480 would remove the requirement that the policy would have to be for 12 consecutive months or more.
- On Thurs., Jan. 6, the Senate Financial Institutions and Insurance Committee heard Kansas Insurance Department's bill, SB291. The bill would allow the Insurance Commissioner to conduct investigations and examinations with regards to the insurance code. The Commissioner could appoint investigators to conduct anti-fraud investigations, subpoena witnesses, and compel them to testify, require documents, and order depositions. The bill describes actions that could be taken if a person refuses to obey a subpoena or refuses to testify, including a civil penalty up to $2,000 for each violation. SB 291 would add insurance investigators and special investigators appointed by the Insurance Commissioner to the definition of a police officer under the Kansas Law Enforcement Training Act. An investigator appointed by the Commissioner would have the authority to make arrests, serve subpoenas, conduct searches, and seizures, store evidence, and carry firearms while conducting investigations of anti-fraud.
- Next Thurs., Jan 13, the Senate FI&I Committee will hear SB323. The bill brought by State Farm would amend current statutes related to altering the terms of insurance policy not considered a denial of renewal of the policy if the insured is provided proper notice. KAIA will formally be opposing this bill in testimony. However, we are aware that State Farm will present an amendment for consideration by the committee. If the amendment were adopted, KAIA would support the measure.
In its third week, the 2020 edition of the Legislative Session took form with committee activity and substantive action on the Senate floor. Again, this week the Kansas Constitutional Amendment related to the regulation of abortion and the bill authorizing Medicaid expansion in Kansas were at the forefront. The full Senate considered the resolution authorizing an August vote on a constitutional amendment, which would allow future legislatures to pass laws regulating the practice of abortion. After hours of debate on Wed., Jan. 29, the Senate passed Resolution No. 1613 with a 28-12 vote. The resolution, which was amended on the Senate floor, was forwarded to the House for their consideration. We expect the House to take up that measure sometime next week. Many observers believe that progress on other legislative issues, particularly Medicaid expansion, hinges on the passage of the abortion resolution in the House. So, the passage of the amendment resolution, which Governor Kelly decried on Thurs., Jan. 30, in the Senate may break the logjam on other pieces of legislation.
Speaking of Medicaid expansion, the Senate Public Health and Welfare Committee continued hearings on Senate Bill 252, this week. As you will recall, the committee heard from proponents of Medicaid expansion and the bill last week. This week neutral and opponent conferees testified before the committee. Following several days of hearings, many observers expect the Senate committee will take up the bill next week. The key to the bill's prospects is whether amendments related to restrictions on abortion or work requirements derail or propel the bill.
Governor Kelly and Department of Transportation Secretary Julie Lorenz announced their vision for a new comprehensive Transportation Plan. The plan, dubbed FORWARD, was introduced in the House Appropriations Committee. Unlike previous 10-year transportation plans, the administration envisions their FORWARD proposal to be less rigid and feature a rolling construction and maintenance program that is more reactive to the evolving needs of the transportation infrastructure.
According to Secretary Lorenz, "FORWARD will provide the flexibility to address challenges and opportunity faster - giving KDOT the opportunity to partner with communities and solve problems from the ground up." More details, including long-term cost projections, are to follow.
Other Notes and Quotes
The Governor's Council on Tax Reform released its first report during the 2020 Legislative Session. The report featured some familiar items that have been part of the Governor's public agenda including, the tax on digital goods, a refundable income tax credit for sales tax on food, and funding the Local Ad Valorem Tax Reduction Fund. It also included some interesting—and likely controversial—policy suggestions, like vertical equity.
The report said, "Vertical equity promotes proportional or progressive taxes where tax as a share of income increases [and] as income increases those with greater ability should pay more."
We don't expect a measure like vertical equity to gain any traction in the Republican-controlled legislature. Still, it will be interesting to see what political hay is made of this recommendation.
This past week was quiet regarding bills that directly impact agents. However, the House and Senate Insurance Committees did hold hearings on a few bills affecting companies and health insurance. The Senate Financial Institutions and Insurance Committee held hearings on SB281 and SB282. SB281 would establish the Healthcare Price Disclosure Act, which would require healthcare professionals and healthcare facilities to make available to the public, upon request, the direct pay price for common services. SB282 will create the Patient's Right-to-Know Act, which would require a healthcare provider to give a patient or patient's agent, upon request, an estimate of the charge for service, diagnostic test, procedure, or course of treatment if the charge exceeds the minimum cost. Members of the healthcare provider community expressed concern about compliance. The committee also heard a bill brought by the Kansas Association of Property & Casualty Insurance Companies. The bill, SB 304, would allow an insurance reciprocal to convert to a Kansas mutual insurance company.
The House Insurance Committee held hearings on HB2478, a bill updating certain definitions and requirements of the third-party administrators' act, and HB2479, which would codify the NAIC corporate governance model regulation into statute.
The House Commerce, Labor and Economic Development Committee held hearing on an interesting bill that could have implications for school district liability insurance. HB 2507 would exempt any business that accepts a secondary student in a work-based learning program from certain claims arising from a student's negligent act as a result of participating in the program at the business or work site. Except for incidents arising from gross negligence or willful misconduct, a student's school district would be solely responsible for civil liability for these claims. The bill would allow school districts to purchase insurance contracts to insure against liability claims.
The House Insurance Committee will hold a hearing on HB2480, a bill that would make some updates and changes to the long-term care insurance statutes. The House committee will also hold a hearing on HB2459, which makes substantive changes to the act governing insurance coverage of mental illness and substance abuse disorders. The bill would have the effect of increasing/creating new health coverage mandates. We expect the business community and health insurance carriers to express concern about this bill.
On Wed., Feb. 5, the Senate Financial Institutions and Insurance Committee will have a hearing on SB 291, a bill that would authorize subpoena and investigative powers for the commissioner of insurance and certain law enforcement powers for insurance investigators in pursuance of insurance fraud violations. Additionally, the committee will hold a hearing on SB303, which would require fingerprinting of Kansas Insurance Department employees. The Department brought this bill to the legislature for consideration.
After taking a day off to observe Martin Luther King, Jr. Day, the pace of work in the legislature picked up this week. The statehouse this week was full of advocates on both sides of the debate on the constitutional amendment on abortion and Medicaid expansion. Noncontroversial and perfunctory committee hearings and work whirred along in the background. But the abortion amendment and Medicaid expansion were front and center. Both the House and Senate committees held hearings. They quickly passed out like versions of a resolution authorizing an August vote on a constitutional amendment, which would allow the legislature to pass laws regulating the practice of abortion. Those resolutions, in response to a 2019 Supreme Court decision ruling Kansas abortion laws unconstitutional, appear to be fast-tracked. Medicaid expansion, however, could be a different story.
The Senate Public Health & Welfare Committee began hearings on a bill designed to expand Medicaid coverage as envisioned in the Affordable Care Act. The bill is the result of negotiations between Governor Kelly and Republican Senate Majority Leader Jim Denning and has 22 co-sponsors, 11 Republicans and 11 Democrats. The measure would expand Medicaid to about 130,000 people who don't have health insurance and who earn less than 138% of the national poverty level. In his testimony, Senator Denning urged the committee to keep the bi-partisan proposal clean of any amendments such as work requirements and prohibitions on abortion. However, many believe the committee is likely to consider amendments when they mark-up the bill before sending it to the full Senate. Proponents of the bill testified this week, and opponents will testify next week.
Republican legislative leaders and other stakeholders continued to condemn Governor Kelly's plan to re-amortize KPERS. Kelly's plan to refinance the state's retirement system would initially raise a few hundred million dollars but would result in a roughly $4.4 billion hit to the fund's long-term liability. The proposal designed to help pay for the administration's planned budget increases appears to be dead on arrival. Additionally, Republicans have pushed back against Governor Kelly's plan to tax digital goods (imposing a tax on media goods such as music, video, and books that are downloaded electronically). This proposal projects to generate over $22 million in revenue and, in part, supports the Governor's recommended budget. It will be interesting to see how the budget shapes up if Republicans successfully block KPERS re-amortization and the adoption of a new tax on digital goods.
Finally, House Republican leaders unveiled their plan to "Make Kansas Work." They claim the five-part proposal will help build the workforce, spur rural economic development and health care access, and promote homeownership. The five parts of the plan are:
- Rural Hospital Innovation Act. A $30 million public-private grant program designed to fund innovative programs at hospitals in the state's rural counties.
- Targeted Employment Act. A proposal that would give tax credits to businesses that contract with integrated workshops that employ people with disabilities.
- The Kansas Promise Act. A bill that would provide last-dollar tuition support for students seeking a certificate in an approved high-need technical program at a two-year college or technical school. The recipient would have to work or perform community service and would be required to stay in Kansas for two years.
- First-time Homebuyers Program. Like a 529 College savings program, this measure would allow parents and grandparents to create tax-deductible savings accounts for their children to buy homes in Kansas.
- Social Security Exemption. A bill that would raise the current $75,000 exemption from state income tax to $100,000 for Social Security recipients to keep those recipients working while avoiding state income taxes on their Social Security benefits.
Other Notes and Quotes
The Kansas Supreme Court this week dismissed a lawsuit brought by six Kansas judges, which sought to order the legislature to put millions of dollars into additional judicial branch funding. The dismissal removes a major burr from the legislature's saddle, many of whom swiftly and harshly criticized the lawsuit when it was filed. Legislative leaders were vocal in their frustration that judges would file a lawsuit challenging the legislature's role as the appropriating branch, particularly considering the recent Court directed K-12 finance settlement.
Chief Justice Marla Luckert said, “We have the utmost respect for our state's republican form of government under which three coequal branches of government each perform the unique functions entrusted to them by our carefully calibrated constitutional structure."
In response to the dismissal, Speaker of the House Ron Ryckman proclaimed, “I appreciate the court's recognition of separation of powers and their renewed commitment to open communication."
For the most part, all was quiet on the insurance front this week. The House Insurance Committee did hold a hearing on HB2053 on Wed., Jan. 22. HB 2053 would amend the definition of short-term, limited-duration health plans to mean plans with a policy period of less than 12 months with extensions up to a maximum policy period of 36 months. The bill would also require insurance companies that issue short-term, limited-duration health insurance policies to disclose information to consumers regarding the Affordable Care Act requirements concerning preexisting conditions and minimum essential coverage.
We anticipate the Kansas Insurance Department bills related to producer licensure, the appointment process, and fees to be introduced sometime next week. Hearings on those bills could be scheduled for the first week of February.
The 2020 Legislative Session kicked off Mon. Jan. 13, with not much fanfare in Governor Kelly's second year. Unlike the pomp and circumstance of last year's Inauguration week festivities, the week was relatively quiet as legislators settled back into their offices and routine. Most legislative committees were introductory and informative if they met at all. There will still be a significant amount of informational hearings over the next couple weeks, but hearings on specific legislation will begin in earnest in the next week.
On Wed. Jan 15, Governor Kelly offered her "State of the State" address. In her speech, Kelly touted the successes of her first term, most notably the settlement of the K-12 school finance case. But she also broadly laid out her 2020 policy priorities. The Governor urged passage of Medicaid expansion, calling upon the legislature to move quickly on the bipartisan plan supported by her and Senate Majority Leader Jim Denning (R-Overland Park). She also announced she would be pursuing tax policy that she says would help with Kansans' food and property expenses. First, her Administration would offer legislation implementing a refundable sales tax credit on food purchases. Second, her budget recommendation would put money back into the Local Ad Valorem Tax Relief Fund (LAVTRF) to assist local governments to keep property taxes lower.
Further, the Governor promised to put forth a new comprehensive transportation plan which relies upon transportation department money, indicating she plans to continue to curb transfers from the "bank of KDOT" to the State's general fund. Finally, the speech generally focused on her pledge to stabilize the budget and avoided some hot button issues like the constitutional amendment on abortion. Following the speech, attention quickly turned to her budget recommendation, which was released the following morning.
Budget Director Larry Campbell unveiled the Governor's $7.85 billion budget to a joint meeting of the House Appropriations Committee and Senate Ways and Means Committee on Thurs. Jan 16. The highlights of the budget included:
1) spending $17.5 million in FY21 and $35 million in FY22 on Medicaid expansion;
2) the re-amortization of KPERS;
3) dedicating $53.2 million to implement a refundable food sales tax credit;
4) transferring $54 million from the state general fund to the LAVTRF;
5) a state employee pay raise of 2.5%;
6) an uptick in spending on public safety and corrections;
7) nearly $22 million in enhancements to human services such as child protection and Family First Prevention services;
8) a minor increase in higher education spending.
The Administration claims that the budget is structurally balanced. That is, spending does not outpace revenue, and the out-year projected ending balances remain above the statutorily required 7.5% ending balance. However, critics have immediately pounced on the budget's reliance upon the re-amortization of the state employee pension plan, KPERS, over 25 years. The proposal to refinance KPERS an additional ten years will provide the state about $130 million in revenue this year and next. The money comes at a huge cost in the long-term. Stretching out the payment of actuarial shortfalls to KPERS will end up costing the state an estimated additional $4.4 billion. Republican leaders blasted this proposal and virtually signaled it is dead on arrival.
Both the House Appropriations Committee and the Senate Ways and Means Committee began meeting this week to review the Governor's proposed budget as well as the financial profile of the state. You can find the Governor's entire budget recommendation at this link.
The legislature will begin in its work on legislation and the budget. Committees will be holding substantive hearings on actual legislation in the coming week. Specific to the budget, it will be interesting to see how budget committees contend with Kelly's budget recommendation. Legislative leadership was more than skeptical of Governor Kelly's budget recommendation, particularly drawing a bright line on their opposition to the Administration's proposal to re-amortize KPERS—a budget maneuver Kelly opposed in the past.
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