BULLETIN 1998-5

Kansas Insurance Department,Kathleen Sebelius, Commissioner of Insurance

TO: All Companies Authorized To Transact Accident and Health Insurance In The State Of Kansas

SUBJECT: Health Insurance, Agent Sales Practices

DATE: February 12, 1998

It has come to the attention of the Kansas Insurance Department that some health insurance companies are indirectly attempting to deny coverage and services to applicants for group health insurance which must now be covered under the provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and amendments to the Kansas Insurance Code made by 1997 Senate Bill 204. These practices are designed to avoid the requirements of the guarantee issue of policies in the group market. Such activities will be considered an unfair trade practice as defined in K.S.A. 40-2209m(c)(1) and (2). The practices which have been reported to the Department include:

The reduction or denial of commissions to agents who make application for coverage on behalf of a group which has or is perceived to have members with preexisting medical conditions or other health risks.
Carriers making a record of agents and brokers that make applications for coverage on behalf of groups with members who have preexisting medical conditions or other health risks. These records could be the basis for retribution against the agent or broker.
Delaying action on a “poor risk” group for a rate quote. The carrier delays providing a rate quote in order to cause the applicant to seek coverage with another company. In other cases, the insurer may provide a quote but delay in issuing a policy to the group.
Delaying the processing of claims, untimely and incorrect billing procedures and delays in responding to inquiries from the group such as requests for information about the status of an employee. This practice is designed to discourage the client and their agent from seeking renewal coverage from the carrier.

This list illustrates some of the ways in which health insurers may try to discourage groups with perceived high risk of claims from obtaining coverage from the carrier. The practices are contrary to the guarantee issue provisions of HIPAA and state law. When such practices are brought to the attention of the Kansas Insurance Department, the carrier will be subject to the provisions of K.S.A. 40-2407, which provides for fines, penalties and orders from the Commissioner of Insurance to cease and desist such unfair practices.

If you have any questions or comments regarding this Bulletin, please contact the Accident and Health Division of the Kansas Insurance Department, 420 SW 9th Street, Topeka, Kansas 66612, (785) 296-7850.

Any questions regarding this Bulletin may be directed to the Kansas Insurance Department, Accident and Health Division, 420 SW 9th Street, Topeka, Kansas 66612, (785)296-7850 or You may send e-mail to rhuncker@ink.org.