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Kansas bill would require TPAs to keep separate fiduciary accounts and notify state of bankruptcy filings
Summary
House Bill 2,044 would require third-party administrators to maintain a separate fiduciary account for each payer, prohibit commingling of funds, and require immediate disclosure to the commissioner of bankruptcy filings under Chapter 11 or 9 of the U.S. Bankruptcy Code; proponents said Senate language clarified the timing of notice.
House Bill 2,044 would require third-party administrators (TPAs) to maintain a separate fiduciary account for each payer, prohibit commingling of funds between payers and other funds held by or collected on behalf of other payers, and require the administrator to disclose promptly to the Kansas Insurance Commissioner any bankruptcy petition filed by or on behalf of the administrator under Chapter 11 or Chapter 9 of the U.S. Bankruptcy Code.
At a Feb. 26 hearing of the Kansas Senate Committee on Financial Institutions and Insurance, committee staff said the House Committee on Insurance reported the bill out with no amendments and the House Committee of the Whole passed the House version on Feb. 7 by a vote of 105-9. Witnesses noted the Senate version (Senate Bill 21) had amended language to clarify the timing of a required notice about bankruptcy filings: the phrase “immediately” was replaced with language reading “at the time such filing is made.” A committee witness said that clarification was made in the Senate bill rather than the House bill under consideration.
Eric Turick (Kansas Department of Insurance) testified in support and reiterated that, if passed, individual clients’ funds held by a TPA would be required to be deposited in separate fiduciary accounts. Turick said the Senate version’s clarification on timing applies to the obligation to notify the department if a TPA files for bankruptcy.
There was no neutral or opponent testimony recorded at the hearing. The committee closed the hearing without a vote that day.
