Like ACS Engine, this provider allows you to upgrade the Kubernetes version running on your cluster. However, there are restrictions about what versions you can upgrade to from your current version. You can only upgrade one minor version at a time. Those restrictions are outlined in this ACS Engine doc.
Basically, if you have acs-engine installed, you can run
acs-engine orchestrators --orchestrator Kubernetes --version 1.8.13where 1.8.13 can be replaced by the version you are currently on. The listed versions are allowed for upgrading. This Terraform provider will also quickly give you an error if you give an invalid version and run terraform plan or terraform apply.
To change the Kubernetes version, you just need to change the value of kubernetes_version to an allowed value.
kubernetes_version = "1.8.13"
kubernetes_version = "1.9.8"
You can still add a value for kubernetes_version even if you did not specify this before, since the resource has a default version. At the time of writing this, it is 1.8.13.
Running terraform plan should show that only a change needs to be made to the resource, instead of recreating the resource. You can now run terraform apply to apply the update to your cluster. Upgrading can take some time, especially relative to creating and scaling.