STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

)

a Delaware corporation; UNITED ) DENTAL PLAN OF SOUTH FLORIDA, INC.,)

a Florida corporation; ALBERT ) LORING, Chairman of the Board, ) UNITED DENTAL PLAN OF AMERICA and )

individually; BOB ROSE a/k/a ) ROBERT ROSENFELD, President ) UNITED DENTAL PLAN OF AMERICA )

and individually; and CATHERINE ) ANN SPENSER, as Director UNITED ) DENTAL PLAN OF AMERICA and )

individually, WHITEMARK ) CORPORATION, a Utah corporation, ) as parent of UNITED DENTAL PLAN ) OF AMERICA; AAFP, INC. d/b/a )

AMDENT, a New York corporation; ) JOHN C. SPARKS, PHILLIP YOUNG, ) PAUL & CAROL SHELDON, WILLIAM C. ) STINNETT, RICHARD A. GILBERT, ) JEAN JOSEPH, MAX MERRIMAN, NICK ) VIRENZA, MARGO GOLD, CHARLES N. )

BASH, STEVE DANTE, and all other ) persons who are marketing and/or ) soliciting the UNITED DENTAL PLAN ) OF AMERICA, )

)

Respondents. )

)

RECOMMENDED ORDER

On March 22, 1993, a formal administrative hearing was held in this case in Tallahassee, Florida, before J. Lawrence Johnston, Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Alan J. Leifer, Esquire

Division of Legal Services

412 Larson Building

Tallahassee, Florida 32399-0300

For UDP: Robert L. Shevin, Esquire Richard B. Simring, Esquire Stroock & Stroock & Lavan

3300 First Union Financial Center

200 South Biscayne Boulevard Miami, Florida 33131

STATEMENT OF THE ISSUES

The issues in this case are framed by the Notice of Intent to Issue an Order to Cease and Desist, filed by the Florida Insurance Commissioner on August 18, 1992, Dept. of Insurance Case No. 92-CA-058EMM, as modified by the parties' Joint Prehearing Stipulation, filed on March 18, 1993.

The Cease and Desist Order alleges in Count I essentially that the United Dental Program of America (UDP) 2/ is a dental service plan that has been operating in Florida, through one or more of the named (and unnamed) individual respondents, without the authorizations required by Chapter 637, Part III, Fla. Stat. (1991). Count II alleges essentially that, in so operating, UDP and one or more of the other respondents were guilty of various deceptive acts or practices prohibited by either Chapter 637, Part III, or by Chapter 624, Fla.

Stat. (1991). In the parties' Joint Prehearing Stipulation, the Department of Insurance dropped all of the alleged deceptive acts or practices except the allegation that sales solicitation materials falsely guaranteed savings of 60 percent or more under the UDP product. Count III alleges essentially that UDP has been transacting insurance in Florida, through one or more of the named (and unnamed) individual respondents, without the authorizations required by Chapter 624, Fla. Stat. (1991). The Cease and Desist Order also seeks an administrative penalty against UDP in an amount not to exceed $1,000 per violation, and an administrative penalty of $10,000 against each of the other respondents for each dental service plan contract or insurance contract offered or effectuated in Florida.

PRELIMINARY STATEMENT

On or about October 7, 1992, a request for formal administrative proceedings under Section 120.57(1), Fla. Stat. (1991), was made by attorney Joseph P. Cillo, Jr., on behalf of all of the named respondents to the Cease and Desist Order. (He naturally could not have made, and did not make, the request on behalf of the unnamed "respondents," and the Department has no jurisdiction over them, whoever they may be.) The matter was referred to the Division of Administrative Hearings on October 14, 1992. Only the Department responded to the Initial Order, and final hearing was scheduled for March 22, 1993, in accordance with the Department's request.

On or about March 5, 1993, the law firm of Stroock & Stroock & Lavan made an appearance for UDP only. On March 18, 1993, a "Joint Prehearing Stipulation" was filed. Only the Department and UDP participated in it, and only they signed it.

At the final hearing on March 22, 1993, only the Department and UDP appeared. Neither Mr. Cillo nor anyone else appeared on behalf of the other named respondents.

At the final hearing, the parties had Joint Exhibits A through G admitted in evidence. Then the Department called three witnesses and had one Department Exhibit admitted in evidence. UDP also called two witnesses and had UDP Exhibits 1 and 2 admitted in evidence.

At the end of the hearing, the Department ordered the preparation of a transcript, which was filed March 25, 1993. Both the Department and UDP filed proposed recommended orders. Explicit rulings on the proposed findings of fact contained in the proposed recommended orders filed by the Department and UDP may be found in the attached Appendix to Recommended Order, Case No. 92-6192.

FINDINGS OF FACT

1. At the time the Florida Insurance Commissioner filed the Notice of Intent to Issue an Order to Cease and Desist in this case, UDP was incorporated in the State of Delaware as United Dental Plan of America, Inc. On December 23, 1992, UDP filed a name change with the Secretary of State of Delaware, and the company has since been incorporated as United Dental Program of America, Inc. Before and after the name change, the company has been referred to as UDP, and the acronym "UDP," when used in this Recommended Order, may refer to the company either before or after the name change.

   
   

2. The Department and UDP stipulated that, prior to August 18, 1992, Bob Rose, a/k/a Robert Rosenfeld, by a nationally accessible electronic telephone system, recorded a message of solicitation to subscribers, UDP sales associates, and potential sales associates, which was directed, in part, to Florida residents. They also stipulated that respondents Paul Sheldon, William C. Stinnett, Phillip Young, Richard A. Gilbert, John C. Sparks, Jean Joseph and Nick Virenza, a/k/a Nick Verrengia were UDP sales associates who sold UDP memberships in Florida prior to August 18, 1992.

   
   

3. The individual named respondents did not enter into the stipulation referred to in the preceding paragraph. However, the UDP stipulation is viewed as evidence on which the findings in the preceding paragraph can be based.

   
   

4. Prior to August 18, 1992, without Department approval, UDP sales associates in Florida, including the named respondents referred to in Finding 2, were active in selling subscriptions to UDP's Dental Program to Florida residents, and held meetings for the purpose of selling the Dental Program and recruiting sales associates. There are 1,981 subscribers in the State of Florida.

   
   

5. There was no evidence as to which of the 1,981 subscriptions sold in the State of Florida were sold by which of the individuals identified in Finding 2.

6. UDP is not, and has never been, licensed under the Florida Insurance Code.

   
   

7. UDP sells an annual membership to its subscribers. There is an individual membership costing $85 a year and a family membership costing $150 a year. If UDP resumes operations in Florida, the annual fees will be $140 for senior couples, $155 for other couples, $170 for families, $80 for senior individuals, and $95 for other individuals.

   
   

8. Subscribers are given a one year membership card. For one year from the subscription date, the subscriber receives an annual no-cost dental checkup and x-rays pursuant the UDP subscriber and provider agreements. Subscribers are provided a list of dentists in their geographic area (and elsewhere, if requested) (a "dental directory") who have entered into an agreement with UDP to be on the list.

   
   

9. By agreeing with UDP to be on the list, dentists agree that, if they accept a subscriber who has not yet had his or her annual checkup and x-rays, they will do the checkup and x-rays at no cost. They also agree to charge the subscriber for other dental services performed during the subscription year in accordance with a schedule of presumptively reduced fees or, if a procedure is not scheduled, for a 25 percent discount from their usual and customary fees. UDP marketing materials assert that the scheduled fees are lower than the "typical costs."

   
   

10. If participating dentists accept subscribers, they agree to abide by the agreement with UDP described in the preceding paragraph. The participating dentists are not obligated to accept subscribers as patients. They have "the right within the framework of professional ethics to reject any patient seeking [their] professional services." The contractual documentation does not further clarify whether, once a participating dentist begins a procedure for a subscriber, the dentist is obligated to complete it or whether, once a procedure is completed for a patient, the dentist is required to accept the patient if the patient returns for additional procedures or services.

    
    

11. Notwithstanding the unclear contractual provisions, UDP professes a desire to effectuate an understanding with participating dentists that they will accept UDP patients "on an equal basis" with their other patients. It is not clear how UDP would propose to reach or enforce this understanding.

    
    

12. Subscribers are free to use, or attempt to use, any dentist on the list, or directory, and are free to change dentists as often as they choose. (They also remain free to use any dentist not on the list, or directory, under any financial arrangements to which the patient and dentist might agree, but they would not be entitled to benefits under the UDP program.) Except for the annual checkup and x-rays, they are obligated to pay the discounted fees directly to the dentist. Under the UDP program, they expect, and are entitled to, no payment from UDP, either to them or to the dentist.

    
    

13. Dentists who agree to participate in the UDP program are also free to maintain their own private practice and to participate in any other dental insurance or plan or program that they wish. Under the UDP program, they expect, and are entitled to, no payment of any kind from UDP. If they perform the free annual checkup and x-rays for a subscriber, they receive no payment from any source for those services. If they perform no other services for a subscriber, the dentists have no recourse against either the patient or UDP. If they perform other services for a subscriber, they are entitled to look only to

    the subscriber for payment, and only in accordance with the UDP fee schedule, or

    25 percent discount, whichever applies. UDP is not liable to the dentists for payment of any part of a subscriber's fees. If the subscriber does not pay, the dentists have no claim against UDP.

    
    

14. Under the UDP program, the dentists who agree to participate in the UDP program are solely responsible for dental advice and treatment. UDP has no control over the dentist's practice, rates charged (except insofar as the UDP fee schedule applies, or 25 percent UDP discount is necessary), the dentist- patient relationship, or the dentist's personnel or facilities.

    
    

15. UDP and the dentists who agree to participate in the UDP program also agree that the dentists will maintain malpractice insurance coverage for their practices in an amount not less than $300,000 per incident. The dentists must provide UDP with a copy of the malpractice insurance.

    
    

16. There was evidence that an early brochure developed by UDP before 1992 contained an untrue guarantee of savings of at least 60 percent. But there was no evidence on which a finding of fact can be based that UDP, through any representative, whether or not named as a respondent to this proceeding, ever delivered a copy of the brochure, or made the misrepresentation, to anyone, much less someone in Florida. In addition, other information also was developed contemporaneously from which it could be determined that savings of at least 60 percent were not guaranteed.

    
    

17. The Department first notified UDP that the Department believed UDP and the other named respondents were in violation of the Florida Insurance Code by letter dated March 5, 1992. Between March 5, and August 18, 1992, UDP and the Department engaged in numerous informal telephone and written communications through which UDP attempted in good faith to persuade the Department that UDP was not subject to regulation under either Chapter 637, 624 or 626 and that UDP was not in violation. It was not established how many, if any, of the 1,981 subscriptions UDP sold in Florida occurred after March 5, 1992. According to the Joint Stipulation between the Department and UDP, none of the subscriptions were sold after August 18, 1992, the date of the Cease and Desist Order issued against UDP and the other named respondents. There was no evidence contrary to this stipulation.

    
    

    CONCLUSIONS OF LAW

    
    

18. Section 637.407(1), Fla. Stat. (1991), provides in pertinent part: "No corporation subject to the provisions of this part [III of Chapter 637] shall issue contracts to subscribers for dental services pursuant to a dental service plan until the department has, by formal license, authorized it to do so." Section 637.415(1), Fla. Stat. (1991), provides in pertinent part:

    
    

    1. [N]o person shall, unless licensed and appointed therefor:

       
       

       1. Solicit contracts or certificates for dental services or procure applications therefore;

       2. Receive or issue a receipt in this state for any money on account of or for any dental service plan corporation, or . . . for money from a third party to be transmitted to any dental servce plan corporation, for a contract or certificate providing dental services or

          benefits or for the renewal thereof; or

       3. In any way, directly or indirectly, make or cause to be made, or attempt to make or cause

          to be made, any contract or certificate for dental services on account of any dental service plan corporation.

          
          

19. Section 637.401(1), Fla. Stat. (1991), defines "dental service plan" as "a plan or other arrangement pursuant to which dental services are provided in whole or in part through a dental service plan corporation, whereby dentists participating in the plan provide dental services to those members of the public who become subscribers to the plan under a contract with such corporation." (It does not mean "any policy of insurance which includes dental benefits which is issued by an insurer licensed under chapter 627 or part I of chapter 641.")

    
    

20. It is concluded that, from the plain meaning of the language, UDP meets the definition of "dental service plan." It is a corporation, which offers a plan or arrangement, through which dental services are provided, by dentists participating in the plan, to members of the public who become subscribers to the plan.

    
    

21. Contrary to UDP's argument, it is of little moment that the statutory definition uses the words "are provided," instead of "are provided or arranged," since the concept of a "plan" is itself described by the statute's language as an "arrangement pursuant to which dental services are provided." (Emphasis added.)

    
    

22. Also, contrary to UDP's argument, at least the annual checkup and x- rays are dental services provided pursuant to the UDP plan. It is concluded that dental services provided by dentists participating in the UDP plan also are provided as a result of the presumptive discount represented by the scheduled or reduced fee, pursuant to the UDP arrangement.

    
    

23. UDP also argues that many of the reasons for the regulation of dental service plans reflected in Part III of Chapter 637 do not apply in the case of UDP and that this confirms the intent of the legislature, notwithstanding what is concluded to be the plain meaning of the statutory definition, not to extend Part III regulation to UDP. Clearly, by virtue of the specifics of the UDP arrangements, some of the matters to be regulated under Part III of Chapter 637, as reflected in the statutes, either are not implicated at all by the UDP arrangements, or are implicated to a much lesser extent than by one of the more typical prepaid dental plans. But other matters regulated under Part III of Chapter 637, as reflected in the statutes, do come into play with UDP.

24. Section 637.407(2)(d)-(f), (3)(a)2.-3., and (5) Fla. Stat. (1991),

reflects a legislative concern that the subscription documents clearly inform the subscriber what the subscriber gets for what they pay. For example, before paying the annual membership fee, the subscribers should be made to clearly understand that, under their contracts with UDP, participating dentists have "the right within the framework of professional ethics to reject any patient seeking [their] professional services." Obviously, if each and every "participating" dentist exercised this right as to a subscriber, the subscriber would get nothing for the membership fee. If a significant number of those on the list exercised this right, the value of the UDP membership to the subscriber would be affected. Also, the contractual documentation does not further clarify whether, once a participating dentist begins a procedure for a subscriber, the dentist is obligated to complete it or whether, once a procedure is completed

for a patient, the dentist is required to accept the patient if the patient returns for additional procedures or services. According to the contractual provisions, the participating dentists are limited only by "the framework of professional ethics." UDP professes a desire to effectuate an understanding with participating dentists that they will accept UDP patients "on an equal basis" with their other patients, but it is not clear how UDP would reach or enforce this understanding.

25. Section 637.407(2)(g)and (3)(a)1., 6. and 7., Fla. Stat. (1991), reflects a legislative concern that a dental service plan is managed in such a way such that subscribers in fact get the benefits for which they contract and pay.

1. As UDP points out, there is less (perhaps no) concern in an arrangement like UDP for the actuarial soundness of the rates charged. But Section 637.407(3)(a)3., Fla. Stat. (1991), reflects a legislative concern that rates charged be "fair and reasonable." It cannot be said that there could not be valid legislative concern for the fairness and reasonableness of the membership fees charged by an arrangement like UDP, in comparison with the actual benefits to the subscriber.

   
   

2. Section 637.407(5), Fla. Stat. (1991), provides: "Each dental service plan corporation shall establish procedures for review and mediation of complaints of subscribers concerning the quality of care rendered by a participating dentist, complaints of subscribers or participating dentists concerning the benefits or the operations of the plan, and complaints of the corporation concerning any element of its relationship with a participating dentist. Such procedures shall be subject to the approval of the department." It also provides: "Subscribers and participating dentists shall be made aware of the review mechanism adopted by the dental service plan corporation and shall be informed as to how to submit a complaint for review." These, too, are valid legislative concerns in the context of an arrangement like UDP.

   
   

3. If the evidence had established that the $100,000 working capital requirement under Section 637.407(4), Fla. Stat. (1991), is unreasonably high in the context of an arrangement like UDP, it might have indicated legislative intent not to apply Part III of Chapter 637 to arrangements like UDP. But the evidence did not establish this fact. Nor did it establish that the reinsurance option in the statute would not be a reasonable alternative for arrangements like UDP.

   
   

4. In Professional Lens Plan, Inc., v. Dept. of Ins., 387 So. 2d 548 (Fla. 1st DCA 1980), it was held that an arrangement between optometrists and Professional Lens Plan (PLP) to permit the optometrists' patients to buy contact lenses through the plan at reduced prices was not subject to regulation under Part I of Chapter 637, Fla. Stat. (1979). UDP argues that the Professional Lens Plan decision requires a holding that UDP is not a dental service plan. But the rationale for the Professional Lens Plan holding was that PLP was not an "optometric service plan" because it did not "bind itself in any way to provide 'optometric service or care' to the public, so as to bring it within the purview of this statute;" rather, its "role [was] to provide services to the optometrist, consisting of the furnishing of forms, renewal and re-examination notices, and like administrative functions." Id., at 551. The nature of the UDP arrangement is materially different from the PLP arrangement, and the question whether UDP is subject to regulation under Part III of Chapter 637 is not controlled by the Professional Lens Plan decision.

5. As for the individual respondents named in Finding 2, as stated in Conclusion of Law 18, Section 637.415(1), Fla. Stat. (1991), requires dental service plan corporation sales associates or representatives to be licensed. Since UDP was required to be licensed as a dental service plan corporation, they are required to be licensed sales associates or representatives.

   
   

6. Section 637.402, Fla. Stat. (1991), provides: "Except as provided in this part, dental service plan corporations shall be governed by the provisions of this part and shall be exempt from all other provisions of the Florida Insurance Code." Since it is concluded that UDP is subject to regulation as a dental service plan corporation, it need not be determined whether it is subject to regulation under Chapters 624 or 626 of the Florida Statutes.

   
   

7. Section 637.415(3), Fla. Stat. (1991), provides: "No person holding a license or appointment required by the provisions of this part shall violate the provisions of part X of chapter 626, Unfair Insurance Trade Practices." Since there was no evidence on which a finding can be made that UDP, through any representative, whether or not named as a respondent to this proceeding, ever delivered a copy of the brochure containing the false guarantee of savings of at least 60 percent, or made the misrepresentation, to anyone, much less someone in Florida, it need not be determined whether such a statement would have been a violation of any of the provisions of part X of chapter 626, Unfair Insurance Trade Practices, or whether Section 637.415(3) applies to persons who should be licensed but are not.

   
   

8. Section 637.423, Fla. Stat. (1991), authorizes the assessment of an administrative penalty against UDP not exceeding $1,000 per violation. The Department seeks the maximum penalty. The parties stipulated that there were 1,981 violations. (There was no evidence to establish that there were any more than that.) Under Section 637.423, these violations could support a statutory maximum administrative penalty of $1,981,000. But it was not established how many of those violations, if any, occurred after March 5, 1992, the date on or about which the Department first notified UDP that the Department believed UDP was in violation. It was found, based on Joint Stipulation between the Department and UDP, that none of the violations occurred after August 18, 1992, the date of the Cease and Desist Order. There was no evidence contrary to this stipulation. In addition, the evidence reveals that, between March 5, and August 18, 1992, UDP and the Department were engaged numerous informal telephone and written communications through which UDP attempted in good faith to persuade the Department that UDP was not subject to regulation under either Chapter 637, 624 or 626 and that UDP was not in violation.

   
   

9. While Section 637.423, provides for the assessment of administrative penalties against unlicensed corporations for not complying with Part III of Chapter 637, there is no corresponding provision in Part III, Chapter 637, for the assessment of administrative penalties against unlicensed individuals who do not comply with Part III of Chapter 637. As to the named individual respondents, the Department seeks the maximum penalty, in amounts up to $10,000 per violation, under Section 626.910, Fla. Stat. (1991).

   
   

10. Part III of Chapter 637, Fla. Stat. (1991), is "chapter specific." See Section 637.402, Fla. Stat. (1991). In other words, corporations and individuals regulated under Part III of Chapter 637 are subject to the

    provisions of other chapters of the Florida Insurance Code, such as Chapter 626, only as specifically provided in Part III, Chapter 637. Section 637.415(4) and (5), Fla. Stat. (1991), provides in pertinent part:

    1. Sales representatives of dental service plan corporations shall be licensed, appointed, renewed, continued, reinstated, or terminated as prescribed in chapter 626 for insurance representatives in general . . ..

       
       

    2. The grounds and procedures for refusal, suspension, or revocation of a license or appointment issued to any employee or representative of a dental service plan corporation shall be as set forth in ss. 626.611-626.691."

(Emphasis added.) It is concluded that these provisions are sufficient to subject licensed dental service plan sales representatives to the full gamut of licensure regulation prescribed in chapter 626 for insurance representatives in general, including the provision in Section 626.681 for the assessment of an administrative fine against an individual licensee found to have violated the provisions of the Insurance Code in lieu of revocation, suspension or refusal to renew or continue a license. But, unlike Section 637.423, they do not provide for the assessment of administrative fines against persons who are not licensed, but should be, such as the individual named respondents. Section 626.910, Fla. Stat. (1991), does not apply to Part III of Chapter 637.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Insurance Commissioner enter a final order: (1) finding that United Dental Program, Inc. (UDP) is a dental service plan corporation subject to regulation under Part III, Chapter 637, Fla. Stat. (1991); (2) finding that individuals who represent UDP are subject to regulation under Section 637.415, Fla. Stat. (1991); (3) finding that UDP and some of its representatives sold 1,981 subscriptions in Florida without having the authorization required under Part III, Chapter 637, Fla. Stat. (1991); (4) requiring UDP and the individual respondents named in Finding 2 to cease and desist from operating the UDP dental service plan corporation in Florida without having the authorizations required under Part III, Chapter 637, Fla. Stat. (1991); and (5) assessing against UDP an administrative penalty in the amount of $5,000.

RECOMMENDED this 23rd day of April, 1993, in Tallahassee, Florida.

J. LAWRENCE JOHNSTON Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of April, 1993.

ENDNOTES

1/ The caption reflects that the entity against which this action originally was brought was the United Dental Plan of America, Inc. (UDP). Since the initation of this action, UDP filed a name change with the Secretary of State of Delaware, and the company changed its name to United Dental Program of America, Inc. The parties have stipulated that both entities are the same for purposes of this proceeding. See Joint Prehearing Stipulation.

2/ See previous footnote.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-6192

To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact:

Petitioner's Proposed Findings of Fact.

1. Rejected as being conclusion of law.

2.-3. Rejected in part as being conclusion of law; to the extent legislative intent, not proven or supported by evidence in the record.

1. See 3.-4. Also, argument and irrelevant.

2. See 1.

3. Accepted and incorporated to the extent not subordinate or unnecessary.

4. See 1.

5. First sentence, accepted but argument, subordinate and unnecessary. Rest, rejected as conclusion of law.

6. First sentence, rejected as conclusion of law. Second sentence, accepted but subordinate and unnecessary.

7. Accepted but subordinate and unnecessary.

8. See 1.

9. Last sentence, accepted and incorporated. Rest, rejected as argument and conclusion of law.

10. See 1.

14.-15. Rejected as argument, and as not proven. 16.-23. Accepted and incorporated.

24.-27 Accepted and incorporated to the extent not subordinate or unnecessary.

1. Cumulative.

2. Accepted but subordinate and unnecessary. 30.-32. Accepted and incorporated.

1. Subordinate to arguments and conclusions of law, and unnecessary.

2. Accepted and incorporated.

3. First sentence, accepted and incorporated. Second sentence, accepted but subordinate and unnecessary. (Other documentation further limits the dentists' fees.)

UDP's Proposed Findings of Fact.

1. Rejected as being conclusion of law.

2. Accepted and incorporated to the extent not conclusion of law or unnecessary.

3. Irrelevant.

4. Accepted but unnecessary.

5.-9. Unnecessary. Also in part subordinate and in part argument. 10.-11. Accepted but subordinate and unnecessary.

12.-19. Accepted and incorporated to the extent not subordinate or unnecessary.

20.-25. Conclusions of law and unnecessary.

26. Rejected in part as contrary to facts found and in part as conclusion of law.

27.-28. Rejected as contrary to the evidence, and also as argument and as subordinate.

29.-30. Rejected as argument and as subordinate.

31.-35. Rejected in large part as being argument and as unnecessary.

Accepted and incorporated in part to the extent that they reflected the findings as to the nature and specifics of the UDP arrangements.

36.-37. Rejected in part in that the testimony was that more that one was similar to UDP. Otherwise, generally accepted but subordinate and unnecessary.

38.-40. Generally accepted but conclusion of law, subordinate and unnecessary.

1. First sentence, accepted but conclusion of law, subordinate and unnecessary. Second sentence: accepted in part (it was a conclusion of law), but conclusion of law, subordinate and unnecessary; rejected in part (no supporting evidence) as contrary to the evidence and to the facts found.

2. Last sentence, rejected as contrary to the evidence and to the facts found. The rest is accepted but subordinate and unnecessary.

3. First clause, accepted and incorporated; second sentence, rejected as contrary to the evidence and to facts found.

4. Rejected in part as contrary to facts found and to the greater weight of the evidence. (The annual fee is a "rate" that would be subject to approval.) Otherwise, accepted and incorporated to the extent not conclusion of law, subordinate or unnecessary.

5. Rejected in part as contrary to facts found and to the greater weight of the evidence. (The annual fee is a "rate" that would have to be fair and reasonable.) Otherwise, accepted and incorporated to the extent not conclusion of law, subordinate or unnecessary.

6. "Virtually no" capital requirements, rejected as argument. Some capital would be required but the requirements would be relatively small. Otherwise, rejected as conclusion of law.

7. Rejected in part as contrary to facts found and to the greater weight of the evidence, and in part as conclusion of law.

COPIES FURNISHED:

Alan J. Leifer, Esquire Division of Legal Services

412 Larson Building Tallahassee, Florida 32399-0300

Robert L. Shevin, Esquire Richard B. Simring, Esquire Stroock & Stroock & Lavan

3300 First Union Financial Center

200 South Biscayne Boulevard Miami, Florida 33131

Joseph P. Cillo, Jr., Esquire Joseph P. Cillo & Associates, P.A. 777 South Harbour Island Boulevard Suite 200

Tampa, Florida 33602

Honorable Tom Gallagher State Treasurer and

Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

Bill O'Neil, Esquire General Counsel Department of Insurance

and Treasurer The Capitol, PL-11

Tallahassee, Florida 32399-0300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the Department of Insurance written exceptions to this Recommended Order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should consult with the Department of Insurance concerning its rules on the deadline for filing exceptions to this Recommended Order.

=================================================================

AGENCY FINAL ORDER

=================================================================

OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE

IN THE MATTER OF:

DOAH NO. 92-6192

UNITED DENTAL PLAN OF FLORIDA, a CASE NO. 92-CA-058EMM

Delaware corporation; UNITED

DENTAL PLAN OF SOUTH FLORIDA, INC.,

a Florida Corporation; ALBERT LORING, Chairman of the Board, UNITED DENTAL

PLAN OF AMERICA and individually; BOB ROSE a/k/a ROBERT ROSENFELD, President,

UNITED DENTAL PLAN OF AMERICA and

individually; and CATHERINE ANN SPENSER, as Director UNITED DENTAL PLAN and individually; WHITEMARK CORPORATION, [l8- a Utah corporation, as parent of UNITED DENTAL PLAN OF AMERICA;

AAFP, INC., d/b/a AMDENT, a New York Corporation; JOHN C. SPARKS, PHILLIP YOUNG, PAUL & CAROL SHELDON, WILLIAM C. STINNET, RICHARD A. GILBERT,

JEAN JOSEPH, MAX MERRIMAN, NICK VIRENZA, MARGO GOLD, CHARLES N. BASH, STEVE DANTE,

and all other persons who are marketing and/

or soliciting the UNITED DENTAL PLAN OF AMERICA,

/

FINAL ORDER

THIS CAUSE came before the undersigned Treasurer and Insurance Commissioner of Insurance of the State of Florida, for consideration and

final agency action. On August 18, 1992 a Notice of Intent to Issue an Order to Cease and Desist was filed against the Respondents, including UNITED DENTAL PLAN OF AMERICA, now known as, UNITED DENTAL PROGRAM OF AMERICA (Hereinafter "UPD"),

charging them with various violations of the Insurance Code and Rules of the Department of Insurance. The Respondent timely filed a request for a formal proceeding pursuant to Section 120.57(1), Florida Statues.

Pursuant to notice, the matter was heard before J. Lawrence Johnston, Hearing Officer for the Division of Administrative Hearings, on March 22, 1993.

After consideration of the evidence, argument and testimony presented at hearing, and subsequent written submissions by the parties, the hearing officer issued his Recommended Order (attached hereto as Exhibit A). The hearing officer recommended that a Final Order be issued: (1) finding that United Dental Program, Inc. (UDP) is a dental service plan corporation subject to regulation under Part III, Chapter 637, Florida Statutes; (2) finding that individuals who represent UDP are subject to regulation under Section 637.415, Florida Statutes; (3) finding that UDP and some of its representatives sold 1,981 subscriptions in Florida without having the authorization required under Part III, Chapter 637, Florida Statutes; (4) requiring UDP and the individual respondents named in Finding 2 to cease and desist from operating the UDP dental service plan corporation in Florida without having the authorizations required under Part III, Chapter 637, Florida Statutes; and (5) assessing against UDP an administrative penalty in the sum of $5,000.00.

The Respondent timely filed fourteen exceptions to the hearing officer's Recommended Order which have been considered and addressed herein. The Petitioner timely filed one exception to the hearing officer's Recommended Order which has been considered and addressed herein.

RULINGS ON RESPONDENT'S EXCEPTIONS

1. The Respondent excepts to the Hearing Officer's Finding of Fact 10, which states in pertinent part that "[t]he contractual documentation does not further clarify whether, once a participating dentist begins a procedure for a subscriber, the dentist is obligated to complete it or whether, once a procedure is completed for a patient, the dentist is required to accept the patient if the patient returns for additional procedures or services." Finding of Fact 11, also excepted to by Respondent, states: "Notwithstanding the unclear contractual provisions, UDP professes a desire to effectuate an understanding with participating dentists that they will accept UDP patients `on an equal basis' with other patients. It is not clear how UDP would propose to reach or enforce this understanding."

   
   

   Respondent asserts that Paragraph 2 of the Dental Directory Listing Agreement (Joint Exhibit B) clearly refutes the hearing officer's findings. However, this vague provision merely paraphrases a canon of ethics among dentists. The hearing officer found, based upon the contents within the four corners of the document, the contractual documentation did not further clarify

   the rights and responsibilities of the parties. Nothing in Paragraph 2 of the Dental Directory Listing Agreement refutes the hearing officer's findings, either clearly or otherwise.

   
   

   Respondent also asserts the hearing officer was in error because the dentists are regulated internally by their professional ethics and externally by the Department of Professional Regulation, which comports with UDP's concept of "non-interference". Respondent further states that "the intent and purpose of UDP is to provide low-cost, high quality dental care to millions of Americans (and Floridians) within the existing professional framework." While a laudatory goal, the Department asked only that Respondent comply with the existing statutory framework regarding licensure. In Paragraphs 12, 13, 14 and 15, not excepted to by Respondent, the hearing officer concedes the concept of "non- interference", however, at bottom this matter involves whether or not Respondent's activities require licensure, not about the regulation of dentists. In any event, the overall "non-interference" concept of the program is precisely the perceived harm to the public the Department is attempting to prevent by requiring the licensure of the Respondent and its agents and should not be used as a justification to thwart attempts to oversee these activities. Therefore, as the hearing officer's finding was based upon competent substantial evidence the Respondent's exceptions to Finding of Fact #10 and #11 are hereby REJECTED.

   
   

2. The Respondent excepts to Conclusion of Law # 20, which states: "It is concluded that from the plain meaning of the language UDP meets the definition of `dental service plan'." UDP also excepts to Conclusion of Law #21, 22, and 23, essentially on the same grounds. That is, the essence of Respondent's exceptions is that it is not a dental service plan and since it is not a dental service plan section 637.401, Florida Statutes, does not apply to Respondent and therefore, the Department has no jurisdiction to regulate UDP.

   
   

   Section 637.401, Florida Statutes, provides:

   
   

   "Dental service plan" or "plan" means a plan or other arrangement pursuant to which dental services are provided in

   whole or in part through a dental service

   plan corporation, whereby dentists participating in the plan provide dental services to those members of the public who become subscribers

   to the plan under a contract with such corporation. Such terms do not include any policy of insurance which includes dental benefits which is issued

   by an insurer licensed under chapter 627 or part I of chapter 641.

   
   

   Contrary to Respondent's protestations the hearing officer properly concluded in Conclusion of Law 20 that from the plain meaning of the language of the statute, UDP meets the definition of "dental service plan" and thereby it's activities require licensure. Simply put by the hearing officer, UDP is a corporation, which offers a plan, or other arrangement, pursuant to which dental services are provided, by dentists participating in the plan, to members of the public who become subscribers to the plan. It is not the hearing officer's emphasis that is misplaced, as asserted by Respondent, it is the emphasis of the Respondent that is misplaced.

   
   

   It is clear that once the hearing officer found that UDP met the definition of a dental service plan, as defined in section 637.401, Florida Statutes,

   Conclusion of Law 21, 22 and 23 flowed from this premise. While Respondent files exceptions to the aforementioned Conclusions of Law, Conclusion of Law #20, 21, 22 and 23, Respondent's only real exception is its insistence that it does not meet the definition of a dental service plan and therefore should remain an unregulated entity. There was no need, as Respondent asserts, to "convert UDP into a dental service plan". UDP was, without any necessity for conversion, a dental service plan simply trying to avoid the licensure requirements imposed by section 637.407, Florida Statutes. The real issue is not, as Respondent frames it, "whether pursuant to Chapter 637, Part III, the Department of Insurance has jurisdiction to regulate the concerns raised by the sale of UDP's Dental Directory". The real issue is whether the Department has the authority to regulate the activities of UDP, which it clearly does.

   Therefore, Respondent's exceptions to Conclusions of Law #20, 21, 22 and 23 are hereby REJECTED.

   
   

3. The Respondent excepts to Conclusions of Law # 24 and #25, which discuss sections 637.407(2)(d)-(f), 637.407(3)(a)2.-3, 637.407(5), 637.407(2)(g), 637.407(3)(a)1., 637.407(6) and 637.407(7), Florida Statutes. As pointed out by the hearing officer, these statutes reflect a legislative concern regarding the rights and responsibilities of all parties, including subscribers, in dental service plan agreements. The hearing officer concluded, as a matter of law, the legislature intended to address the problems raised by the vague and unenforceable provisions of the UDP contracts. The evidence presented at the hearing showed the pamphlets and contracts being utilized were either unclear or did not address, certain rights of the subscribers if a problem arose with their treatment by dentists under the plan. If those problems could not be resolved by an enforceable contract provision against UDP patterned after the language of the statute, the subscribers would not get the benefits for which they contracted and paid. Therefore, contrary to the argument of the Respondent, much more is being provided than a list of dentists to subscribers. The subscribers pay a fee in order to receive various dental services performed at a discount. UDP has the obligation to manage the service plan corporation effectively to facilitate the performance of these services. The legislature intended dental service plan corporation operations and personnel to conform to the guidelines as set forth in the statute and the hearing officer found, based upon the evidence at the hearing, that the UDP documentation did not specify what management safeguards were in place.

   
   

   Based upon the foregoing, Respondent's exceptions to Conclusions of Law #

   24 and 25 are hereby REJECTED.

   
   

4. The Respondent excepts to Conclusion of Law # 26, which states in pertinent part: "Section 637.407(3)(a)3., Fla. Stat. (1991), reflects a legislative concern that rates charged be `fair and reasonable.'" The hearing officer concluded it could not be said there could not be valid legislative concern for the fairness and reasonableness of the membership fees charged by UDP. Whether the charge by UDP to subscribers is called a fee or a rate is an argument based upon semantics. There is no distinction between a rate or fee in the statute and the Respondent produced no evidence at the hearing indicating such a distinction. The statute expressly deals with rates charged to subscribers and mandates they be fair and reasonable. The hearing officer properly concluded the legislature intended that the rates charged subscribers be fair and reasonable. The Respondent's exception to Conclusion of Law # 26 is hereby REJECTED.

5. The Respondent excepts to Conclusion of Law 27, which states in pertinent part: The provisions of Section 637.407(5) "... are valid legislative concerns in the context of an arrangement like UDP." The Department does not have to wait until there is actual harm to subscribers in order to prevent UDP from operating a dental service plan in Florida without being authorized to do so. The review procedure should be approved by the Department prior to the operation of the plan. The hearing officer properly concluded the legislature intended a mediation procedure be in place. To wait until there had been actual harm to the subscribers to set up a review procedure would be to ignore the express language of the statute.

   
   

   Based on the foregoing, Respondent's exception to Conclusion of Law # 27 is hereby REJECTED.

   
   

6. The Respondent excepts to Conclusion of Law # 28, which states in pertinent part: "If the evidence had established that the $100,000.00 working capital requirement under Section 637.407(4), Florida Statutes, is unreasonably high in the context of an arrangement like UDP, it might have indicated legislative intent not to apply Part III of Chapter 637 to arrangements like UDP. But the evidence did not establish this fact. Nor did it establish that the reinsurance option in the statute would not be a reasonable alternative for arrangements like UDP." The hearing officer considered the testimony cited by the Respondent and obviously held it was insufficient, as a matter of law, to support a finding the working capital requirement cited was unreasonably high so as to exempt the Respondent from complying with Chapter 637. In addition, the testimony cited does not even address any reinsurance option. The assertion that membership fees might be higher is speculative and is not a basis upon which to avoid licensure. To suggest the hearing officer erred in not finding UDP in need of any capital requirement because it has no financial fiduciary duty to either is not supported by any reference to the record.

   
   

   Based upon the foregoing Respondent's exception to Conclusion of Law # 28 is hereby REJECTED.

   
   

7. The Respondent excepts to Conclusion of Law # 29, which dismissed Respondent's argument, which is the exception made here by Respondent, that Professional Lena Plan, Inc. v. Department of Insurance, 387 So.2d 548 (Fla. 1st DCA 1980), required a finding that UDP is not a dental service plan. The hearing officer correctly concluded that the UDP arrangement was materially different from the PLP arrangement and that UDP was subject to regulation as a dental service plan. Therefore, the Respondent's exception to Conclusion of Law # 29 is hereby REJECTED.

   
   

8. The Respondent's exception to Conclusion of Law # 30, which found that UDP sales associates were required to be licensed pursuant to section 637.415(1) because UDP was required to be licensed as a dental service plan corporation is rejected for the same reasons given regarding UDP's requirement to be licensed. The hearing officer correctly found that since UDP is a dental service plan corporation subject to the provisions of Part III of Chapter #37, Section 637.415(1), Fla. Stat. (1991), expressly requires UDP sales associates or representatives to be licensed by the Department.

   
   

   The Respondent's exception to Conclusion of Law # 30 is hereby REJECTED.

   
   

9. The Respondent excepts to Conclusion of Law # 33, which states in pertinent part: Section 637.423 "authorizes assessment of an administrative penalty against UDP." The statute expressly provides:

   Whenever the department has reason to believe that the business of any corporation subject to the provisions of this cart is fraudulently

   conducted or that the corporation is not complying with the provisions of this part, the department may suspend or revoke the license granted thereto or may assess an administrative penalty not

   exceeding $1000 per violation against such corporation and may at any thereafter institute, because to be instituted, after due notice and an opportunity to be heard to the corporation, the necessary proceedings under the laws of the state relating to the dissolution of insurance companies. Any such dissolution or liquidation of a corporation subject to the provisions of this part shall be under the supervision of the department. (Emphasis supplied).

   
   

   The express language of the statute allows for an administrative penalty to any corporation subject to the provisions of this part and not complying with this part. Section 637.407(1), Florida Statutes, provides that: "No corporation subject to the provisions of this part shall issue contracts to subscribers for dental services pursuant to a dental service plan until the department has, by formal license, authorized it to do so." UDP was subject to the provisions of Chapter 637 and did not comply with the statute. It is therefore, subject to an administrative penalty. On this basis, UDP's argument that it is not subject to the provisions of Chapter 637, that an injury of some type was necessary is rejected and the notion that Department was somehow required to notify UDP that it faced a possible $1000 penalty for every subscription sold is also rejected.

   
   

   As has been stated throughout, UDP is subject to the provisions of Chapter 637. There is no injury requirement in the statute. Further, UDP did not notify the Department it had sold 1981 subscriptions in violation of Chapter 637. Based on the foregoing, the Respondent's exception to Conclusion of Law #

   33 is hereby REJECTED.

   
   

10. Finally, the Respondent takes exception to the Hearing Officer's recommendations that an order be entered:

    
    

    1. Finding United Dental Program, Inc. (UDP) is a dental service plan corporation subject to regulation under Part III, Chapter 637, Florida Statutes;

       
       

    2. Finding individuals who represent UDP are subject to regulation under Section 637.415, Florida Statutes;

       
       

    3. Finding UDP and some of its representatives sold 1,981 subscriptions in Florida without having the authorization required under Part III, Chapter 637, Florida Statutes;

       
       

    4. Requiring UDP and the individual respondents named in Finding 2 to cease and desist from operating the UDP dental service plan corporation in Florida without having the authorizations required under Part III, Chapter 637,

       Florida Statutes; and

       
       

    5. Assessing against UDP an administrative penalty in the sum of

    $5,000.00.

    As part of it's exception to an administrative penalty, Respondent asserts that it was engaged in good faith negotiations with the Department as to applicability of Part III, Chapter 637, Florida Statutes, regarding its activities and as a result the imposition of a penalty for activities prior to the entry of the Final Order would be unjust. However, it is a matter of public record that the Department entered an Immediate Final Order on August 18, 1992, finding that Respondent was subject to regulation as a dental service plan corporation and directing Respondent to cease and desist from further activity in this state as a dental service plan. This Order was not appealed or enjoined.

    
    

    It is also a matter of public record that-on November 20, 1992, in Case Number 92-4799, in the Circuit Court of the Second Judicial Circuit, in and for Leon County, Florida, an Order was entered enforcing the Department's Immediate Final Order dated August 10, 1992 and enjoining the activities of UDP. It is also a matter of public record that on March 1, 1993, in Case Number 92-479 in Leon County Circuit Court an Order was entered finding that Respondent was in violation of the Immediate Final Order and the Court's Order to cease and desist by soliciting business after November 20, 1992.

    
    

    Based on the foregoing, the recommendation of the hearing officer is accepted and Respondent's exceptions to the recommendation of the hearing officer are REJECTED.

    
    

    RULING ON PETITIONER'S EXCEPTION

    
    

11. The Petitioner excepts the administrative penalty of $5,000 recommended by the hearing officer. Petitioner correctly notes that "UDP illegally sold 1,981 contracts in Florida and in so doing, are (sic) immediately subject to penalties for all 1,981 violations." Further, the hearing officer found that: "Under Section 637.423, these violations could support a statutory maximum administrative penalty of $1,981,000". It is of small significance that there was no evidence as to how many of those violations, if any, occurred after March 5, 1992, the date on or about which the Department first notified UDP that the Department believed UDP was in violation. Nor it is significant that none of the violations occurred after August 18, 1992, the date of the Cease and Desist Order., What is significant is the 1981 statutory violations committed by UDP. Further, there is no willfulness requirement for the imposition of an administrative penalty.

It is well settled that pursuant to Section 120.57(1)(b)10, Florida Statutes, regulatory agencies have the authority to increase the penalty in a recommended order. See Criminal Justice Standards and Training Commission v. Bradley, 596 So.2d 661 (Fla. 1992). Enhancement of the administrative penalty against UDP in this case is justified. The record is clear that UDP unlawfully entered into 1,981 contracts. Pursuant to Section 637.423, Florida Statutes, the administrative penalty (at $1,000 per violation) could reach as high as

$1,981,000. An enhancement of the penalty in this case from $5,000 to $10,000 is easily justified. Accordingly, Petitioner's exceptions to Conclusions of Law #33 is ACCEPTED in part (as to increasing the penalty) and REJECTED in part (as to Petitioner's request for the maximum penalty).

Upon careful consideration of the balance of the record in this matter, the submissions of the parties, and being otherwise advised in the premises, it is

ORDERED:

1. The Findings of Fact of the hearing officer are adopted in full as the Department's Findings of Fact.

   
   

2. The Conclusions of Law of the hearing officer are adopted in full as the Department's Conclusions of Law.

   
   

3. The following hearing officer's recommendations are approved and accepted as the appropriate disposition of this case:

   
   

   1. Finding that United Dental Program, Inc. (UDP) is a dental service plan corporation subject to regulation under Part III, Chapter 637, Florida Statutes.

      
      

   2. Finding that individuals who represent UDP are subject to regulation under Section 637.415, Florida Statutes.

      
      

   3. Finding that UDP and some of its representatives sold 1,981 subscriptions in Florida without having the authorization required under Part III, Chapter 637, Florida Statutes.

      
      

   4. Requiring UDP and the individual respondents named in Finding 2 to cease and desist from operating the UDP dental service plan corporation in Florida without having the authorizations required under Part III, Chapter 637, Florida Statutes.

      
      

   5. Assessing against UDP an administrative penalty in the sum of

$10,000.00.

DONE and ORDERED this 22nd day of July, 1993.

Tom Gallager Treasurer and

Insurance Commissioner

COPIES FURNISHED:

J. Lawrence Johnston Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Robert L. Shevin, Esquire Richard B. Simring, Esquire Stroock & Stroock & Lavan

3300 First Union Financial Center

200 South Biscayne Blvd. Miami, Florida 33131

Alan J. Leifer, Esquire Division of Legal Services 612 Larson Building

Tallahassee, Florida 32399-0300

NOTICE OF RIGHTS

Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Florida Rules of Appellate Procedure. Review proceedings must be instituted by filing a petition or notice of appeal with the General Counsel, acting as the agency clerk, at 612 Larson Building, Tallahassee, Florida 32399- 0300, and a copy of the same and the filing fee with the appropriate District Court of Appeal within thirty (30) days of rendition of this Order.

Docket for Case No: 92-006192

Orders for Case No: 92-006192