IV. State Case Studies

Kansas

Kansas established its Health Care Stabilization Fund (HCSF) in 1976 under the Health Care Provider Insurance Availability Act, a law designed to enhance the availability and affordability of medical professional liability coverage.[1] The fund is mandatory for defined health care providers and provides coverage for judgments over $200,000 per occurrence / $600,000 aggregate up to one of three limits; health care providers are able to select the upper bound of their fund coverage from options of $100,000/$300,000; $300,000/$900,000; and $800,000/$2,400,000. Despite this flexibility, however, most providers opt for the highest limit.[2]

Kansas's fund also provides its participants with "tail" coverage: a health care provider who complies with the Health Care Stabilization Fund before leaving the state or retiring is eligible for continuing coverage for claims made for services rendered while the provider was in compliance with the fund law.[3] This coverage is available without additional surcharges to providers who comply with the fund for five or more years; providers who participate in the fund for a shorter length of time can still obtain the tail coverage for an added surcharge.

According to Robert Hayes, the 2005 Executive Director of the Kansas Health Care Stabilization Fund, the fund's Board of Governors is provided with one introductory report and one full report from its actuaries each year regarding the fund's needed level of reserves. The Board of Governors sets the fund surcharges for the year to meet this obligation based on the actuary's recommendation, but is not required to follow it exactly.[4] Presently, the fund has an unassigned loss reserve, or positive fund balance. Although other elements of state government have on occasion sought to divert PCF monies to other state funds, the Board of Governors has successfully argued against this action.[5] According to Hayes, preventing diversion of PCF funds was made easier by the fact that no state general revenue has ever been lent or given to the PCF, as well as the provision in the statute creating the fund that its monies be held in trust and accounted for separately than the state's other funds.[6]

Kansas varies the surcharges assessed to providers based on their assignments to one of 21 "class groups," classifications made based on the provider's specialty, whether or not he performs surgery, and other similar factors. In April 2005, the Board announced that Fund surcharges would increase for the first time in four years; increases ranged from 5 to 25 percent, depending on the provider's classification, with an average increase of 15 percent.[7]

Because of the Kansas City Metropolitan Area, which crosses the state line between Kansas and Missouri, the HCSF faces the issue of providing coverage for physicians who reside in Kansas but are licensed and practice in Missouri.[8] In 2000, the HCSF began levying an additional 20 percent surcharge on such these providers. It based this decision on independent actuarial recommendation: "Internal Tillinghast studies show that Missouri medical malpractice costs are approximately 20 percent higher than Kansas medical malpractice costs. Based on this data, it would seem reasonable to apply a higher level of surcharges to Kansas residents who practice in Missouri."[9] The fund also cited an increasing number of Missouri cases, greater average loss payments in Missouri (36 percent higher in 1999), and differences in Missouri's legal climate as justifications for this decision.[10] The surcharge has increased, for 2009, the surcharge is 25%.[11]

[1] Kansas Health Care Stabilization Fund Website., hcsf.org http://www.hcsf.org/faq_p_1.htm#History.

[2] Kansas Health Care Stabilization Fund Website, http://www.hcsf.org/faq_p_2.htm.

[3] Kansas Health Care Stabilization Fund Website, http://www.hcsf.org/faq_p_3.htm#Obtain%20Continuing%20Coverage.

[4] Telephone Interview with Robert Hayes, Executive Director, Kansas Health Care Stabilization Fund (June 9, 2005).

[5] Id.

[6] Id.

[7] Kansas Health Care Stabilization Fund, Focus on the Health Care Stabilization Fund, Kansas Health Care Stabilization Fund Newsletter, Vol. X, Issue 2 (April 2005) http://www.hcsf.org/newsletters/April2005/

April%202005%20newslletter.pdf.

[8] Hayes Phone Interview.

[9] Kansas Health Care Stabilization Fund Website, http://www.hcsf.org/faq_p_1.htm#Definition.

[10] Id.

[11] Kansas Health Care Stabilization Fund Website, http://www.hcsf.org/Non-resident%20Information/NonResident%20Brochure%20FY2008%20v3.pdf