STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 89-5839

) AMERIMED INSURANCE PLAN, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled case on February 28, 1990, at Tallahassee, Florida.

APPEARANCES

For Petitioner: Michael C. Godwin, Esquire

412 Larson Building

Tallahassee, Florida 32399-0300

For Respondent: Bruce Culpepper, Esquire

Post Office Box 10095 Tallahassee, Florida 32302

STATEMENT OF THE ISSUES

Whether Respondent violated various provisions of Chapter 641, Florida Statutes, as more specifically alleged in Order to Show Cause dated September 29, 1989.

PRELIMINARY STATEMENT

By Order to Show Cause dated September 29, 1990, the Office of the Treasurer, Department of Insurance, seeks to revoke, suspend or otherwise discipline the certificate issued to Amerimed Insurance Plan (Amerimed), Respondent. As grounds therefor, it is alleged questions have arisen regarding ownership the of the plan, Articles of Incorporation have been changed without submitting proposed changes to the Department for approval, the composition of the Board of Directors is not in conformity with statutory requirements, Amerimed has never issued a policy or commenced business, and Amerimed has no working capital with which to meet the requirements that working capital be sufficient to carry all acquisition costs and operating expenses for a period of at least three months.

At the commencement of the hearing, the parties stipulated to findings 1-6 below. Thereafter, Petitioner called one witness and submitted 7 exhibits; and Respondent called two witnesses and submitted 19 exhibits, some of which

duplicated the 7 submitted by Petitioner. All exhibits were admitted into evidence.

The parties were given 10 days following the filing of the transcript to submit proposed findings of fact. The transcript was filed March 8, 1990.

Although proposed recommended orders were not timely filed until March 19, they have been considered. Treatment accorded proposed findings is contained in the Appendix attached hereto and made a part hereof.

FINDINGS OF FACT

1. Amerimed Insurance Plan, Inc. (Amerimed), is a licensed health care services plan, domiciled in the State of Florida and subject to the jurisdiction and regulation of the Florida Department of Insurance (Department) pursuant to Chapter 461, Part I, Florida Statutes.

   
   

2. The Notice to Show Cause was initiated following the filing of Amerimed's Annual Statement, the March 31, 1989 quarterly statement and other information.

   
   

3. Section 641.01, Florida Statutes, states five or more persons may form a corporation for the purpose of establishing, maintaining and operating a nonprofit health care services plan in the State of Florida.

   
   

4. Although Amerimed was incorporated on November 22, 1977, its annual statements since that date indicate the plan has never written a policy or contract of health care services and, therefore, has never commenced business within the meaning of s. 641.01, Florida Statutes. In fact, the plan has never written a policy or contract to provide health services.

   
   

5. The majority of the existing directors of Amerimed are not representatives of the general public as required by s. 641.02, Florida Statutes.

   
   

6. Amerimed has, over the past twelve years, amended its Articles of Incorporation without first having submitted these amendments to the Department for approval as required by s. 641.05, Florida Statutes.

   
   

7. Amerimed has on file with the Department a Certificate of Deposit for

   $125,000, in trust, held by the Department for the protection of policy holders and/or subscribers which deposit may not be used as working capital to operate the plan.

   
   

8. The only income reported by Amerimed is the interest on the Certificate of Deposit in the approximate amount of $1000 per month. Amerimed has no salaried employees, and such records as are maintained by Amerimed are maintained at the offices of Melvin S. Jacobson who is the beneficial owner of the Certificate of Deposit held by the Department.

   
   

9. Although s. 641.01, Florida Statutes, authorizes the formation of a nonprofit corporation to sell health insurance plans, and Jacobson testified the corporation is owned by the Board of Directors, it is clear that Jacobson, as President, Chairman of the Board and the source of the $125,000 Certificate of Deposit, controls Amerimed with his power to appoint and dismiss directors.

10. As a nonprofit corporation, Amerimed was incorporated in 1977 as Sunshine State Health Care, changed its name to Medical Centers in 1981, and in 1984 the name was changed to Amerimed Insurance Plan, Inc.

    
    

11. Amerimed Health Centers, Inc., a corporation formed to operate walk-in medical facilities, had common directors with Amerimed until 1986 when the former commenced liquidation. Jacobson was President and Chairman of the Board of Amerimed Health Centers at the time of its liquidation and the sale of its assets which were completed in 1988 when Amerimed Health Centers, Inc., was involuntarily dissolved. From this dissolution, Amerimed remained with Jacobson as President and Chairman of the Board and other directors named by Jacobson.

    
    

12. A former shareholder of Amerimed Health Plans, Inc., contended that he owned a part of Amerimed; in correspondence to the Department in 1984 it was alleged that Amerimed was a wholly owned subsidiary of Amerimed Health Plans, Inc.; and the issuance of 100 shares of stock to Jacobson clearly raised the question of the ownership of Amerimed.

    
    

13. Amerimed is the only health insurance plan incorporated in Florida under Part 1 of Chapter 641, Florida Statutes. In 1985, the Legislature abolished the authority of the Department to issue a certificate of authority to operate a nonprofit health care services plan pursuant to this part. (s. 641.155, Florida Statutes 1989).

    
    

14. In 1986, the Department brought charges similar, if not identical, to the charges brought in these proceedings. Department officials thereafter conferred with Jacobson in an attempt to settle the dispute. Pursuant to those negotiations, the Department agreed to allow Jacobson several months to locate a buyer of this "nonprofit" corporation who could meet the Department's financial requirements. Jacobson, on the other hand, agreed to surrender his certificate on its expiration date, if he could not find a qualified buyer (Exhibit 7).

    
    

15. No qualified buyer was found, yet Jacobson filed his application for renewal of Amerimed's certificate in 1987 and, since the issuing of a renewal certificate is a ministerial act, the Department renewed Amerimed's certification.

    
    

16. In 1988, Amerimed located a prospective buyer and issued 100 shares of stock to Jacobson with which to transfer ownership of Amerimed. This buyer could not meet the Department's requirements for qualification, and Amerimed now contends the stock was never delivered to Jacobson, and Amerimed remains a nonstock, nonprofit corporation. Nevertheless, Jacobson is still looking for a purchaser of Amerimed to whom he can sell the certificate for $50,000-$75,000 to recompense him for the time and expense he has incurred in Amerimed.

    
    

17. Respondent contends that it has sufficient working capital to cover acquisition costs and operating expenses for at least three months. The only capital available for this purpose is the interest on the Certificate of Deposit which Respondent contends is adequate since there are presently no operating expenses or acquisition costs. However, the sale of one policy would result in Respondent not meeting the financial requirements for health insurance plans and put Amerimed in further violation of statutory provisions.

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

19. Section 641.01, Florida Statutes, provides in pertinent part: Any five or more persons may form a corpora-

    tion for the purpose of establishing, main-

    taining, and operating a nonprofit health care services plan in this state, whereby medical, surgical, hospital, or other health care services related to the treatment or prevention of sickness or injury may be provided by the corporation or by physicians, surgeons, hospitals, or other providers of such services to members of the public who become subscribers under a contract with the corporation. (emphasis added).

    
    

20. Section 641.12, Florida Statutes (1989), provides:

    
    

    Whenever the department has reason to believe that any health care services plan is being operated for profit or fraudulently conducted, or is not complying with this code, it is authorized to suspend or revoke the certifi- cate of authority; and it may at any time institute proceedings relating to the dissolution of the plan.

    
    

21. Section 641.02(2), Florida Statutes, provides:

    
    

    The directors of every health care services plan shall include members of the general public, physicians contracting with the plan, and administrators of hospitals contracting with the plan. At least a majority of the directors of every such plan shall be repre- sentatives of the general public and not of the health or insurance industries.

    
    

22. Section 641.05 requires health care services plans to obtain Department authority before amending its charter or certificate of incorporation, its bylaws, the terms and provisions of contracts executed or to be executed with hospitals or physicians, and the terms and conditions of contracts issued or proposed to be issued to subscribers.

    
    

23. Subsection (5) thereof provides:

    
    

    The department shall not renew a certificate of authority unless it is satisfied that the amount of money held by the plan for working capital is sufficient to carry all acquisition costs and operating expenses for at least

    3 months from date of renewal.

24. Although Amerimed was organized for the apparent purpose of operating a health services plan, it has never commenced operations, although it has been licensed to do so since 1977. This violates the purpose of the license, to operate a health insurance plan.

    
    

25. Respondent's contention that Amerimed has adequate working capital to cover a minimum of 3 months operating expenses from date of renewal is without merit. Respondent's working capital is sufficient only to keep Respondent solvent so long as no operations are conducted. The requirement of operating capital imposed by s. 641.04(5), above-quoted, certainly is for operating an authorized health service plan, and Respondent is at present legally authorized to sell health service plans. Similarly, Respondent's argument that such a determination can be made by the Department only within the three months following the renewal of the certificate is without merit. This is tantamount to saying adequate working capital to cover the plan's liabilities and potential liabilities need be maintained only during the three months immediately following the certificate's renewal, while for the remainder of the year the Department is powerless to stop Respondent from selling policies without adequate financial reserves to protect the public.

    
    

26. The actions of Jacobson in attempting to "sell" Amerimed's certificate to operate as a nonprofit health service plan is in derogation of the requirement that the plan not be operated for profit. It is clear that the primary, if not sole, reason for retaining the certificate issued to Amerimed is to "sell" the certificate to some entity who can qualify financially to operate the plan.

    
    

27. Respondent's argument that, because the Department has failed to take action to revoke Respondent's certificate for the past 12 years with knowledge of its inadequate financing estops the Department from now proceeding, is without merit. Respondent clearly has not changed its position based upon reliance of Petitioner's failure to take action to revoke its certificate. Respondent is still looking for a qualified buyer.

    
    

28. Since this is a license revocation proceeding, the burden is on Petitioner to prove the grounds for revocation by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987). Petitioner has here met that burden.

    
    

29. From the foregoing, it is concluded that Amerimed is in violation of the provisions of Chapter 641, Part I, Florida Statutes, requiring prior approval by the department before changes can be made to the Articles of Incorporation and bylaws, in having an improperly constituted board of directors, and in not having sufficient working capital to cover 3 month's operating expenses.

RECOMMENDATION

It is recommended that the certificate of Amerimed Insurance Plan, Inc., to operate a nonprofit health service plan pursuant to Chapter 641, Part I, Florida Statutes, be revoked.

ENTERED this 23rd day of March 1990, in Tallahassee, Florida.

K. N. AYERS Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

FILED with the Clerk of the Division of Administrative Hearings this 23rd day of March 1990.

APPENDIX

Treatment Accorded Respondent's Proposed Findings:

1. Included in H.O. #1.

2. Included in H.O. #13.

3. Accepted.

4. Included in H.O. #10.

5. Included in H.O. #6.

6. Accepted.

7. Included in H.O. #10 and #15.

8. Accepted in part only. So far as this record shows (Tr. p. 97), three proffered members of the board of directors consist of a man owning a video training company, a realtor, and a man who was in real estate, but is now buying a clothing business. No evidence was submitted that the board included "physicians contracting with the plan, and administrators or trustees of hospitals contracting with the plan. No evidence was presented that Amerimed ever entered into such contracts so as to qualify the physicians and/or hospital administrators presently on the board of directors as board members.

9. Accepted only insofar as consistent with H.O. #7-#11 and #16, otherwise rejected.

10. Rejected insofar as reissuance of the certificate is classified as giving Amerimed a "clean bill of health."

11. Accepted insofar as included in H.O. #7 and #8.

12. Accepted insofar as finding the Department withheld disciplinary proceedings to allow Jacobson to find a qualified transferee.

13. Accepted. The Department renewed Amerimed's certificate as a ministerial act which they could refuse to do only upon showing grounds for revocation.

14. Rejected insofar as in conflict with H.O. #14.

15. Rejected insofar as inconsistent with H.O. #15, otherwise accepted.

Treatment Accorded petitioner's Proposed Findings:

1. Included in H.O. #1.

2. Included in H.O. #2.

3. Rejected as opinion. Potentially Amerimed constituted a danger to the public because its certificate authorized the sale of health insurance policies to the public.

4. Included in H.O. #4.

5. Accepted.

6. Included in H.O. #6.

7-8. Included in H.O. #12.

9. Included in H.O. #7.

10-11. Included in H.O. #8.

12. Accepted

COPIES FURNISHED:

Michael C. Godwin, Esquire Department of Insurance

412 Larson Building Tallahassee, Florida 32399-0300

Bruce Culpepper, Esquire Post Office Box 10095 Tallahassee, Florida 32302

Don Dowdell General Counsel

Department of Insurance and Treasurer

The Capitol, Plaza Level Tallahassee, Florida 32399-0300

Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Docket for Case No: 89-005839

Orders for Case No: 89-005839