Findings Of Fact In April 1987, the Department of Administration (DOA) submitted recommendations to the 1987 Florida Legislature which included proposed changes in the state employees group insurance program. Among the recommendations was a proposal that the Legislature authorize the Department to competitively bid health maintenance organization (HMO) participation in the state health program based on cost, service area, plan benefits, and accessibility. The stated objective of the recommendation was to encourage HMOs in a geographic location to structure their premiums to reflect actual cost experience and to provide the lowest possible cost for the state and state employees, while at the same time changing the current concept of the state's contribution to HMOs. It further stated that if the recommendation was approved, effective January 1, 1988, the Department would require the same state and employee contribution for every employee, regardless of whether participation was in the state plan or an HMO. If the individual employee elected to participate in an HMO under contract with the state which had a higher total premium than the state plan, the employee would be subject to paying the additional cost. It was thus envisaged by the Department that projected savings to the state and the majority of employees would be almost $6,000,000 annually which, if realized, would produce reduced monthly premiums which would benefit approximately 73 per cent of the 110,000 employees enrolled in the health program. At that time, the Department currently had sixty-four contracts with HMOs, covering employees in forty counties, and it was a further objective of the proposed legislation to reduce the number of HMOs which the state had to deal with in the program. (Testimony of Nye, Petitioner's Exhibit 47) At the time of the DOA legislative recommendation, existing state law provided that persons eligible to participate in the state group health insurance program could exercise an option to elect membership in any qualified HMO engaged in providing basic health services in the HMO service area where the employee resided, in lieu of participating in the state plan. Section 110.123(3)(d), Florida Statutes, Rule 22K-1.103(21), F.A.C. A "qualified" HMO was defined as an entity qualified under the federal Public Health Service Act, 42 U.S.C. 300e-9, or which was certified under Part II of Chapter 641, Florida Statutes, had entered into a contract with the state, and had achieved a designated level of participation by state employees. Rule 22K-1.103(21), F.A.C. By Chapter 87-156, Laws of Florida, effective October 1, 1987, Section 110.123(3)(d) was amended to add the following: (3) STATE GROUP INSURANCE PROGRAM.-- * * * (d) * * * 2. Effective January 1, 1988, the Department of Administration shall, by rule, contract with health maintenance organizations to participate in the state group health insurance plan through the competitive bid process based on cost, service area, plan benefits, and accessibility. Effective January 1, 1988, all employees participating in the state group health insurance plan, irrespective of whether or not the member participates in a health maintenance organization, shall be subject to the same total premium, regardless of the state or employee's share. Dennis Nye, the DOA Director of the Office of State Employees Insurance, administers the state health insurance program and was directly responsible for implementing the new legislation regarding contracts with HMOs. He determined that procurement of HMO contractual services is governed by Section 287.057, Florida Statutes. He further determined to obtain the contractual services through competitive sealed proposals. The request for proposals for health maintenance organization coverage was issued on July 31, 1987, as "Bid No. 88-05" with a contemplated date of award of contract on September 14, 1987, and an effective date of contract of January 1, 1988. (Testimony of Nye, Petitioner's Exhibit 1) Although only one request for proposals was issued for state wide HMO services, a stated objective of the RFP was to award a number of contracts to HMOs in individual service areas consisting of each county or contiguous groups of counties. (Petitioner's Exhibit 1) Section IX of the RFP states the following criteria for evaluation of the proposals: Premium Cost Extensiveness of Service Areas - by County and/or contiguous Counties. Note: The State's objective is to award no more than two contracts per services area; however, the awards will be based on the HMO's ability to respond to the needs of employees and on accessibility by employees. Plan Benefits as follows: Covered services Limitations and exclusions Copayments, deductibles and co-insurance features Range of providers including specialists and number of hospitals Out of service area coverage Grievance procedures Accessibi1ity as follows: Reciprocal agreements Provider locations Number of primary care physicians and specialists, in relation to membership Completeness of proposals The RFP did not provide information as to the relative importance of price and other evaluation criteria, as required by Section 287.012(11), F.S. Section VI of the RFP, concerning Required Benefits and Services, listed the minimum benefits that must be provided, and also required that a complete list of all other services intended to be provided for each service area be provided. Section X was a questionnaire with forty-nine questions for the proposers to answer, including questions regarding the proposer's license status, corporate structure, reserving practices, reinsurance contracts, service area, employee membership and staff, listing of hospitals and other care facilities, listing of participating physicians, utilization review, and other information regarding the proposer's case management, control mechanisms, statistical reporting, and the like. One of the questions directed each proposer to submit audited financial statements for the last two fiscal years, together with financial statements for the first quarter of 1987. Section XI dealt with cost proposals and provided a form for completion as to proposed premium rates. By an undated addendum to the RFP, a question 50 was added to the questionnaire to provide information concerning specified proposed services and co-payments or deductibles to be used in a brochure which would provide a comparison of benefits offered by the various HMOs. (Petitioner's Exhibit 1) The, pre-bid conference was held on August 12, 1987, attended by representatives of HMOs. The minutes of the conference reflect that Nye informed the participants that the two criteria of cost and benefits would be weighed on an equal basis. He also advised that the state would enter into a two year, non-experience rated contract, subject to renewal which would be tied to the Consumer Price Index for Medical Care Services. He explained that proposers should quote a specific rate for the first year of the contract, and a percentage increase or decrease for each of the following three years. However, he noted that the state would evaluate cost solely on the basis of the premium for the first year. He indicated that two HMOs per service area would be awarded contracts based on the receipt of the highest number of points as a result of the bid evaluation, and not based upon the type of HMO, such as an individual practice association (IPA) or staff model. In response to a question as to whether some factors would be weighed higher than others, his response was that benefits and cost would be weighed higher and that after the bidding process, "you can look at them." (Testimony of Nye, Petitioner's Exhibit 18) Three proposals for the Leon County service area were submitted to the state in response to the RFP by the August 28, 1987 deadline for submission of proposals. The three proposers were Capital Group Health Services of Florida, Inc., d/b/a Capital Health Plan (CHP), MetLife Health Care Network of Florida, Inc. (MetLife), and HealthPlan Southeast (HPSE), all of which were currently under state contract to provide health care services to state employees. (Petitioner's Exhibits 2-4) The evaluation of the proposals submitted by HMOs throughout the state for approximately seven service areas was initially accomplished by some fifteen employees in Nye's office. He was assisted in his selection by Marie Walker, state benefits analyst in his office. Nye and she decided which employees could best evaluate the proposals based on the established criteria, including familiarity with benefits and the request for proposal process. The employees selected for these duties had varying degrees of knowledge concerning health plan benefits, HMOs, and bid evaluations. None had any technical expertise in the health care field other than resolving questions concerning benefits under the state health care program. Three employees were designated to evaluate the proposals in each service area. Those designated to evaluate the proposals in the Leon County service area were Andrew W. Lewis, a state benefits analyst; Aviedell Holley, personnel technician II; and Jeffrey Griswold, research associate. These employees have had differing experience in various aspects of the state health insurance program. Only one of them had previous experience in evaluating proposals, but such experience did not involve HMOs. (Testimony of Nye, Walker [Petitioner's Exhibit 22], Holley [Petitioner's Exhibit 20], Lewis [Petitioner's Exhibit 21], Yates [Petitioner's Exhibit 19], Rowe [Petitioner's Exhibit 27], Griswold, Petitioner's Exhibit 26). After the proposals had been received, Nye had a meeting with the employees who were to evaluate them. At this time, he explained to them how to complete an evaluation form that he had designed which provided for the scoring of the five criteria stated in the request for proposals of premium costs, plan benefits, accessibility, extensiveness of service area, and completeness of proposal. The evaluators were instructed to score all criteria using a ten point system and then weight the various criteria according to a point system reflected on the evaluation form. The scoring method required the evaluators to use a certain degree of subjectivity in determining the award of points, and the results differed to some degree among the various evaluators in comparing the three proposals. The results of the evaluation ranked HPSE first, MetLife second, and CHP third in the scoring. (Testimony of Nye, Griswold, Holley [Petitioner's Exhibit 20], Lewis [Petitioner's Exhibit 21], Petitioner's Exhibits 5, 7, 26, 44). By memorandum, dated September 11, 1987, Nye informed Augustus Aikens, DOA General Counsel, of recommendations for awarding the state's HMO contracts. It was recommended that all three HMOs in the Leon County service area be awarded contracts because of the high number of state employees in the service area and because the point spread was very close. Aikens was unavailable at that time and William Frieder, a DOA senior attorney, was serving as Acting General Counsel. He reviewed the evaluation process and found that the evaluators had used inconsistent methods to score the proposals. He discussed the situation with DOA Secretary Adis Vila and, by memorandum of September 23, 1987, she directed Nye to "...continue the evaluation process to its conclusion by documenting each ranking and each score which contributed to the ranking in the most complete and the most objective fashion possible." She also expressed concern over the financial soundness of HMOs and asked him to keep that aspect of the evaluation in mind when making his final recommendation. (Testimony of Vila, Frieder [Respondent's Exhibit 8], Petitioner's Exhibits 9-10, Respondent's Exhibit 12). Nye proceeded to design another evaluation form which made it much simpler for the evaluators to score the proposals. It used a different method for awarding points based on premium costs and reduced the need to search the proposals for information; however, the same criteria as used in the first evaluation were the ones that were scored. As one evaluator put it, the second evaluation form focused on things one could count and was mechanical in nature, such as "bean counting." The three evaluators for the Leon County service area checked with one another and arrived at an identical number of points for each proposal. (Testimony of Nye, Griswold, Holley [Petitioner's Exhibit 20], Lewis [Petitioner's Exhibit 21], Petitioner's Exhibits 6, 26). After receiving Nye's memorandum of October 6 concerning recommended awards, Secretary Vila was concerned about Nye's comment that CHP should be retained as the only staff model in the area in order to meet federal requirements. She asked General Counsel Aikens about this matter, and he informed her that the federal requirement was not applicable because a state was not included within the definition of "employer" under the applicable federal law. This was an accurate statement. She also asked Nye if two HMOs could provide the necessary services in the Leon County service area and he told her that based on the proposals, HPSE and MetLife had indicated their ability to service the additional employees. (Testimony of Vila, Nye, Aikens, Petitioner's Exhibit 41, 45, Respondent's Exhibit 7). By letter of November 4, 1987, Secretary Vila advised John Hogan of CHP that, using the criteria of Section IX of the RFP, it was the intention to award contracts to HPSE and MetLife in the Leon County service area, and advised him of the right to contest the decision by filing a notice of protest pursuant to Section 120.53(5), Florida Statutes. By letter of November 13, 1987, to Nye, CHP filed its notice of protest, pointing out that the notification letter of November 4 had not been signed by Secretary Vila and made available to CHP until November 12, 1987. CHP subsequently filed its formal notice of protest and request for administrative hearing, dated November 23, 1987. Thereafter, on December 9, 1987, HPSE filed a petition to intervene which was granted by order dated December 11, 1987. (Testimony of Hogan, Petitioner's Exhibits 25, 28; Joint Exhibit 1 [Pre-hearing Stipulation]) By letters dated November 15, 1987, Secretary Vila advised HPSE and MetLife that their companies had been selected to provide HMO service to state employees. (Respondent's Composite Exhibit 13) The second or "final evaluation" of the proposals was solely based on the five criteria contained in the RFP, i.e., premium cost, extensiveness of service area, plan benefits, accessibility, and completeness of proposals. DOA initiated rulemaking under Chapter 120, F.S., in October 1987 to implement Chapter 87-156, Laws of Florida, which amended Section 110.23, F.S. Although Nye had overall responsibility for the rulemaking process, he delegated the actual work to William Seaton of his office. Mr. Seaton prepared two draft proposed amendments to Chapter 22K-1, F.A.C., which were thereafter approved by Nye and the Secretary of DOA. In response to a requirement of Chapter 87-156, it was proposed that the definition of "Qualified health maintenance organization," as set forth in Rule 22K-1.103(21) be amended to change subparagraph (b) therein from "Enters into contract with the State of Florida" to "Enters into contract with the State of Florida through the competitive bid process." The proposed rule amendments were noticed in the Florida Administrative Weekly on November 20, 1987. Seaton was not instructed to nor did he ever consider drafting more specific guidelines for the competitive bidding process with respect to HMOs. (Testimony of Nye, Aikens, Seaton [Petitioner's Exhibit 26], Petitioner's Exhibit 38, Respondent's Exhibit 10) The economic impact statement prepared in connection with the proposed rule stated that, other than costs associated with publication, printing, and distribution of the rile, there was no cost associated with the rule to persons directly affected. It further stated that the rule amendments did not affect competition in the open market for employment, and will have no impact on small business. (Petitioner's Exhibit 38)
The Issue The issue for determination is whether Petitioners’ Interim Rate Request (IRR) for an increase should be granted.
Findings Of Fact AHCA is the agency of state government responsible for the implementation and administration of the Medicaid Program in the State of Florida. AHCA is authorized to audit Medicaid Cost Reports submitted by Medicaid Providers participating in the Medicaid Program. Avante at Jacksonville and Avante at St. Cloud are licensed nursing homes in Florida that participate in the Medicaid Program as institutional Medicaid Providers. On May 23, 2007, Avante at Jacksonville entered into a settlement agreement with the representative of the estate of one of its former residents, D. P. The settlement agreement provided, among other things, that Avante at Jacksonville would pay $350,000.00 as settlement for all claims. Avante at Jacksonville paid the personal representative the sum of $350,000.00. By letter dated July 16, 2007, Avante at Jacksonville requested an IRR effective August 1, 2007, pursuant to the Plan Section IV J.2., for additional costs incurred from self-insured losses as a result of paying the $350,000.00 to settle the lawsuit. Avante at Jacksonville submitted supporting documentation, including a copy of the settlement agreement, and indicated, among other things, that the costs exceeded $5,000.00 and that the increase in cost was projected at $2.77/day, exceeding one percent of the current Medicaid per diem rate. At all times pertinent hereto, the policy held by Avante at Jacksonville was a commercial general and professional liability insurance policy. The policy had $10,000.00 per occurrence and $50,627.00 general aggregate liability limits. The policy was a typical insurance policy representative of what other facilities in the nursing home industry purchased in Florida. The policy limits were typical limits in the nursing home industry in Florida. By letter dated July 18, 2007, AHCA denied the IRR on the basis that the IRR failed to satisfy the requirements of Section IV J. of the Plan, necessary and proper for granting the request. Avante at Jacksonville contested the denial and timely requested a hearing. Subsequently, Avante at Jacksonville became concerned that, perhaps, the incorrect provision of the Plan had been cited in its IRR. As a result, a second IRR was submitted for the same costs. By letter dated October 22, 2007, Avante at Jacksonville made a second request for an IRR, this time pursuant to the Plan Section IV J.3., for the same additional costs incurred from the self-insured losses as a result of paying the $350,000.00 settlement. The same supporting documentation was included. Avante at Jacksonville was of the opinion that the Plan Section IV J.3. specifically dealt with the costs of general and professional liability insurance. By letter dated October 30, 2007, AHCA denied the second request for an IRR, indicating that the first request was denied based on “all sub-sections of Section IV J of the Plan”; that the second request failed to satisfy the requirements of the Plan Section IV J.3. and all sections and sub-sections of the Plan “necessary and proper for granting [the] request.” Avante at Jacksonville contested the denial and timely requested a hearing. On October 19, 2007, Avante at St. Cloud entered a settlement agreement with the personal representative of the estate of one of its former residents, G. M. The settlement agreement provided, among other things, that Avante at St. Cloud would pay $90,000.00 as settlement for all claims. Avante at St. Cloud paid the personal representative the sum of $90,000.00. By letter dated December 10, 2007, Avante at St. Cloud requested an IRR effective November 1, 2007, pursuant to the Plan Section IV J, for additional costs incurred as a result of paying the $90,000.00 to settle the lawsuit. Avante at St. Cloud submitted supporting documentation, including a copy of the settlement agreement, and indicated, among other things, that the increase in cost was projected at $2.02/day, exceeding one percent of the current Medicaid per diem rate. At all times pertinent hereto, the policy held by Avante at St. Cloud was a commercial general and professional liability insurance policy. The policy had $10,000.00 per occurrence and $50,000.00 general aggregate liability limits. The policy was a typical insurance policy representative of what other facilities in the nursing home industry purchased in Florida. The policy limits were typical limits in the nursing home industry in Florida. By letter dated December 12, 2007, AHCA denied the IRR on the basis that the IRR failed to satisfy the requirements of “Section IV J of the Plan necessary and proper for granting [the] request.” Avante at St. Cloud contested the denial and timely requested a hearing. Insurance Policies and the Nursing Home Industry in Florida Typically, nursing homes in Florida carry low limit general and professional liability insurance policies. The premiums of the policies exceed the policy limits. For example, the premium for a policy of Avante at Jacksonville to cover the $350,000.00 settlement would have been approximately $425,000.00 and for a policy of Avante at St. Cloud to cover the $90,000.00 settlement would have been approximately $200,000.00. Also, the policies have a funded reserve feature wherein, if the reserve is depleted through the payment of a claim, the nursing home is required to recapitalize the reserve or purchase a new policy. That is, if a policy paid a settlement up to the policy limits, the nursing home would have to recapitalize the policy for the amount of the claim paid under the policy and would have to fund the loss, which is the amount in excess of the policy limits, out-of-pocket. Florida’s Medicaid Reimbursement Plan for Nursing Homes The applicable version of the Plan is Version XXXI. AHCA has incorporated the Plan in Florida Administrative Code Rule 59G-6.010. AHCA uses the Plan in conjunction with the Provider Reimbursement Manual (CMS-PUB.15-1)3 to calculate reimbursement rates of nursing homes and long-term care facilities. The calculation of reimbursement rates uses a cost- based, prospective methodology, using the prior year’s costs to establish the current period per diem rates. Inflation factors, target ceilings, and limitations are applied to reach a per patient, per day per diem rate that is specific to each nursing home. Reimbursement rates for nursing homes and long-term care facilities are typically set semi-annually, effective on January 1 and July 1 of each year. The most recent Medicaid cost report is used to calculate a facility’s reimbursement rate and consists of various components, including operating costs, the direct patient care costs, the indirect patient care costs, and property costs. The Plan allows for the immediate inclusion of costs in the per diem rate to Medicaid Providers under very limited circumstances through the IRR process. The interim rate’s purpose is to compensate for the shortfalls of a prospective reimbursement system and to allow a Medicaid Provider to increase its rate for sudden, unforeseen, dramatic costs beyond the Provider’s control that are of an on-going nature. Importantly, the interim rate change adjusts the Medicaid Provider’s individual target rate ceiling to allow those costs to flow ultimately through to the per diem paid, which increases the amount of the Provider’s overall reimbursement. In order for a cost to qualify under an interim rate request, the cost must be an allowable cost and meet the criteria of Section IV J of the Plan. The Plan provides in pertinent part: IV. Standards * * * J. The following provisions apply to interim changes in component reimbursement rates, other than through the routine semi- annual rate setting process. * * * Interim rate changes reflecting increased costs occurring as a result of patient or operating changes shall be considered only if such changes were made to comply with existing State or Federal rules, laws, or standards, and if the change in cost to the provider is at least $5000 and would cause a change of 1 percent or more in the provider’s current total per diem rate. If new State or Federal laws, rules, regulations, licensure and certification requirements, or new interpretations of existing laws, rules, regulations, or licensure and certification requirements require providers to make changes that result in increased or decreased patient care, operating, or capital costs, requests for component interim rates shall be considered for each provider based on the budget submitted by the provider. All providers’ budgets submitted shall be reviewed by the Agency [AHCA] and shall be the basis for establishing reasonable cost parameters. In cases where new State or Federal requirements are imposed that affect all providers, appropriate adjustments shall be made to the class ceilings to account for changes in costs caused by the new requirements effective as of the date of the new requirements or implementation of the new requirements, whichever is later. Interim rate adjustments shall be granted to reflect increases in the cost of general or professional liability insurance for nursing homes if the change in cost to the provider is at least $5000 and would cause change of 1 percent or more in the provider’s current total per diem. CMS-PUB.15-1 provides in pertinent part: 2160. Losses Arising From Other Than Sale of Assets A. General.—A provider participating in the Medicare program is expected to follow sound and prudent management practices, including the maintenance of an adequate insurance program to protect itself against likely losses, particularly losses so great that the provider’s financial stability would be threatened. Where a provider chooses not to maintain adequate insurance protection against such losses, through the purchase of insurance, the maintenance of a self- insurance program described in §2161B, or other alternative programs described in §2162, it cannot expect the Medicare program to indemnify it for its failure to do so. Where a provider chooses not to file a claim for losses covered by insurance, the costs incurred by the provider as a result of such losses may not be included in allowable costs. * * * 2160.2 Liability Losses.—Liability damages paid by the provider, either imposed by law or assumed by contract, which should reasonably have been covered by liability insurance, are not allowable. Insurance against a provider’s liability for such payments to others would include, for example, automobile liability insurance; professional liability (malpractice, negligence, etc.); owners, landlord and tenants liability; and workers’ compensation. Any settlement negotiated by the provider or award resulting from a court or jury decision of damages paid by the provider in excess of the limits of the provider’s policy, as well as the reasonable cost of any legal assistance connected with the settlement or award are includable in allowable costs, provided the provider submits evidence to the satisfaction of the intermediary that the insurance coverage carried by the provider at the time of the loss reflected the decision of prudent management. Also, the reasonable cost of insurance protection, as well as any losses incurred because of the application of the customary deductible feature of the policy, are includable in allowable costs. As to whether a cost is allowable, the authority to which AHCA would look is first to the Plan, then to CMS-PUB.15- 1, and then to generally accepted accounting principles (GAAP). As to reimbursement issues, AHCA would look to the same sources in the same order for the answer. The insurance liability limit levels maintained by Avante at Jacksonville and Avante at St. Cloud reflect sound and prudent management practices. Claims that resulted in the settlements of Avante at Jacksonville and Avante at St. Cloud, i.e., wrongful death and/or negligence, are the type of claims covered under the general and professional liability policies carried by Avante at Jacksonville and Avante at St. Cloud. Avante at Jacksonville and Avante at St. Cloud both had a general and professional liability insurance policy in full force and effect at the time the wrongful death and/or negligence claims were made that resulted in the settlement agreements. Neither Avante at Jacksonville nor Avante at St. Cloud filed a claim with their insurance carrier, even though they could have, for the liability losses incurred as a result of the settlements. Avante at Jacksonville and Avante at St. Cloud both chose not to file a claim with their respective insurance carrier for the liability losses incurred as a result of the settlements. AHCA did not look beyond the Plan in making its determination that neither Avante at Jacksonville nor Avante at St. Cloud should be granted an IRR. Wesley Hagler, AHCA’s Regulatory Analyst Supervisor, testified as an expert in Medicaid cost reimbursement. He testified that settlement agreements are a one time cost and are not considered on-going operating costs for purposes of Section IV J.2. of the Plan. Mr. Hagler’s testimony is found to be credible. Mr. Hagler testified that settlement agreements and defense costs are not considered general and professional liability insurance for purposes of Section IV J.3. of the Plan. To the contrary, Stanley William Swindling, Jr., an expert in health care accounting and Medicare and Medicaid reimbursement, testified that general and professional liability insurance costs include premiums, settlements, losses, co-insurance, deductibles, and defense costs. Mr. Swindling’s testimony is found to be more credible than Mr. Hagler’s testimony, and, therefore, a finding of fact is made that general and professional liability insurance costs include premiums, settlements, losses, co-insurance, deductibles, and defense costs.4 Neither Avante at Jacksonville nor Avante at St. Cloud submitted any documentation with their IRRs to indicate a specific law, statute, or rule, either state or federal, with which they were required to comply, resulted in an increase in costs. Neither Avante at Jacksonville nor Avante at St. Cloud experienced an increase in the premiums for the general and professional liability insurance policies. Neither Avante at Jacksonville nor Avante at St. Cloud submitted documentation with its IRRs to indicate that the premiums of its general and professional liability insurance increased. Avante at Jacksonville and Avante at St. Cloud could only meet the $5,000.00 threshold and the one percent increase in total per diem under the Plan, Sections IV J.2. or J.3. by basing its calculations on the settlement costs. Looking to the Plan in conjunction with CMS-PUB.15-1 to determine reimbursement costs, CMS-PUB.15-1 at Section 2160A provides generally that, when a provider chooses not to file a claim for losses covered by insurance, the costs incurred by the provider, as a result of such losses, are not allowable costs; however, Section 2160.2 specifically includes settlement dollars in excess of the limits of the policy as allowable costs, provided the evidence submitted by the provider to the intermediary (AHCA) shows to the satisfaction of the intermediary that the insurance coverage at the time of the loss reflected the decision of prudent management. The policy coverage for Avante at Jacksonville and Avante at St. Cloud set the policy limits for each facility at $10,000.00 for each occurrence. Applying the specific section addressing settlement negotiations, the loss covered by insurance would have been $10,000.00 for each facility and the losses in excess of the policy limits--$340,000.00 for Avante at Jacksonville and $80,000.00 for Avante at St. Cloud—would have been allowable costs.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order denying the interim rate requests for an increase for Avante at Jacksonville and Avante at St. Cloud. DONE AND ENTERED this 18th day of September 2008, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of September, 2008. 1/ The corrected case-style.
The Issue Whether Mr. Wills is entitled to reimbursement from the State Group Health Insurance Plan for health services provided by an otolaryngologist and a speech pathologist for vocal therapy.
Findings Of Fact The State of Florida makes available to employees several health insurance programs. One of the options available to employees is the State of Florida Employees Group Health Self Insurance Plan. Employees may also enroll in a number of different health maintenance organizations depending upon the county in which the employee resides. The Employees Group Health Self Insurance Plan was established by the Legislature, and its benefits are described in the Benefit Document. The Plan as a whole is administered by Blue Cross-Blue Shield, which did not write the terms of the Plan. When an employee chooses to participate in the Plan, the State contributes to the employee's insurance cost by paying a portion of the premium for the employee in order to be covered by the Plan. Mr. Wills is employed by the State of Florida as the Chief Assistant Public Defender for the Seventeenth Judicial Circuit in Broward County, Florida. Mr. Wills is a Senior Trial Attorney in the Public Defender's Office and a senior administrator who needs his voice to carry on his professional duties. He was a member of the Plan at all times relevant to this proceeding. The case revolves around whether Mr. Wills is entitled to reimbursement for expenses he incurred when he was diagnosed in June 1990 as having a vocal chord lesion, also known as a contact ulcer or granuloma of the vocal fold, and participated in a course of medical treatment for this condition. For example, Mr. Wills would attempt to speak, but portions of words could not be heard. Mr. Wills ultimately was treated by Dr. W. Jarrard Goodwin. Dr. Goodwin is a specialist in diseases of the ear, nose and throat (i.e., an otolaryngologist), and teaches at the University of Miami School of Medicine. Dr. Goodwin was of the view that the lesion was caused by the mechanical banging together of the vocal chords, and that surgery was not an appropriate treatment for him. Instead, he prescribed an antibiotic and three weeks vocal rest. He had a second consultation with Mr. Wills on August 14, 1990, at which time Dr. Goodwin referred Mr. Wills to Donna S. Lundy, a speech pathologist in the Department of Otolaryngology at the University of Miami Medical School, for voice therapy. A contact ulcer or granuloma can result from the pitch of the voice being too high or too low, from speaking too loudly, or from not breathing from the diaphragm. All of these can be treated with behavioral voice therapy through exercises, either to raise or lower the pitch of the voice, or to breathe from the diaphragm and relax the vocal chords in order to decrease effort and strain near the lesion. Mr. Wills saw Ms. Lundy for sessions of vocal therapy at Dr. Goodwin's office on August 11, September 13, October 5, November 11, and December 27, 1990, and Mr. Willis practiced the exercises he was given between appointments. Even if Mr. Wills had had surgery, i.e., a stripping of the vocal chords, an alternative treatment for the contact granuloma, he still would have had vocal therapy following that surgery to modify his vocal habits to prevent a recurrence of the lesion. As a result of the vocal therapy, Mr. Wills' condition has improved, and he no longer suffers from the contact granuloma. Speech therapy treats abnormalities of speech production, language formulation and processing, such as articulation disorders, stuttering, language delay, and disorders of neuromuscular control. It is not the same as voice therapy. Five claims for health services were submitted on behalf of Mr. Wills by Donna S. Lundy, under procedure code 92507. Code 92507 on the approved fee schedule covers "Speech, Language or Hearing Therapy, with Continuing Medical Supervision, Individual." Dr. Goodwin, also submitted one claim under procedure code 92507 for services provided to Mr. Wills on August 14, 1990. All such claims were rejected by the Department. The State of Florida, Employees' Group Health Self Insurance Plan benefit document contains exclusions. The applicable exclusion, according to the Department, is Section VII(Q): VII. Exclusions The following exclusions shall apply under the plan: * * * * Q. Occupational, recreational, edu-cational, or speech therapy, orthoptics, biofeedback, contra-ceptives, telephone consultation, cardiac rehabilitation exercise programs, or visits for the purpose of exercise by bicycle, ergometer or treadmill. Benefit Document, page 46. There is no further explanation of the term "speech therapy" found in exclusion VII(Q) in any other portion of the Benefit Document. The approved fee schedule for the Group Health Self-Insurance Plan has a procedure code for "speech, language or hearing therapy, with continuing medical supervision, individual." That the approved fee schedule has such an entry at all is an indication that there are circumstances where speech language or hearing therapy is covered. Otherwise, the entry would be wholly inconsistent with the Department's position that Section VII(Q) flatly prohibits any payment for "speech therapy". Ms. Lundy is licensed speech-language pathologist in the State of Florida. Unless a person qualifies for licensure as a speech-language pathologist, a person may not describe him or herself using a number of terms. Among these forbidden terms are "speech pathologist", "speech therapist", "language pathologist", "voice therapist" and "voice pathologist". Section 468.1285(1)(b), Florida Statutes, (1990 Supp.). The Department relies upon the definition for the practice of speech-language pathology in the Professional Practice Act, Chapter 468, Part I, Florida Statutes (1990 Supp.), to argue that any services provided by a licensed speech-language pathologist must necessarily fall within the exclusion found in Section VII(Q) of the Benefit Document. The Department's argument that because the term "speech therapy" is not defined in the Benefit Document, it should determine the meaning of the term by looking to see how the term "speech-language pathology" is defined in Section 468.1125(7)(a), Florida Statutes (1990 Supp.), the professional practice act for speech-language pathology, is unpersuasive. There was no testimony that the Benefit Document was written with all definitions found in various professional practice acts in mind. There is certainly no proof that the Legislature crafted the miscellaneous professional practice acts in Chapter 468 with an eye towards using the definitions in those acts for determinations under the Employees' Group Health Self Insurance Plan. The Benefit Document and the professional practice acts have little or nothing to do with each other, and neither shed light upon terms used in the other.
Recommendation It is recommended that the Secretary of the Department of Administration enter a Final Order requiring the Division of Employees' State Insurance to pay all claims submitted by Donna S. Lundy and the claim of Dr. Goodwin which have been denied. The Benefit Document does not clearly exclude voice therapy for a contact granuloma, and in the absence of a clear exclusion, the law requires that those claims be paid. RECOMMENDED this 24th day of December, 1991, in Tallahassee, Florida. WILLIAM R. DORSEY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of December, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-5324 Rulings on findings proposed by the Department: Adopted in Finding 1. Adopted in Findings 2 and 3. Rejected as unnecessary. Adopted in Finding 3. Adopted in Finding 4. Discussed in Finding 5. Rejected as unnecessary. See, Conclusions of Law. Adopted in Finding 9. Adopted in Finding 10. Rejected. See, Conclusions of Law. Adopted in Finding 5. Rulings on findings proposed by Mr. Wills, treated as if the paragraphs had been numbered: Adopted in Finding 3. Adopted in Findings 3 and 4. Adopted in Finding 5. Adopted in Finding 7. Generally adopted in Finding 9. Generally adopted in Finding 5. Adopted in Findings 5 and 9. COPIES FURNISHED: Steven Michaelson, Esquire 9326 Northwest 18th Drive Plantation, FL 33322 John M. Carlson, Esquire Department of Administration 438 Carlton Building Tallahassee, FL 32399-1550 John A. Pieno Secretary Department of Administration 435 Carlton Building Tallahassee, FL 32399-1550 Augustus D. Aikens, Jr. General Counsel Department of Administration 435 Carlton Building Tallahassee, FL 32399-1550
The Issue The issue in this case is whether Respondent, Charles Steven Lieberman, committed the offenses alleged in an Administrative Complaint issued by Petitioner, the Department of Financial Services, on January 26, 2004, and, if so, what penalty should be imposed.
Findings Of Fact The Parties. Petitioner, the Department of Financial Services (hereinafter referred to as the "Department"), is the agency of the State of Florida charged with the responsibility for, among other things, the investigation and prosecution of complaints against individuals licensed to conduct insurance business in Florida. Ch. 626, Fla. Stat. (2004).1 Respondent, Charles Steven Lieberman, is currently, and was at all times pertinent to this matter, licensed in Florida as a resident Life & Variable Annuity (2-14); Life, Health & Variable Annuity (2-15); Life (2-16); Life & Health (2-18); and Health (2-40) Agent. (Stipulated Facts). The Department has jurisdiction over Mr. Lieberman's licenses and appointments pursuant to Chapter 626, Florida Statutes. (Stipulated Facts) Mr. Lieberman's license identification number is A155409. (Stipulated Facts). Mr. Lieberman graduated from Columbia University. From 1974 through 1992, Mr. Lieberman worked as a trader initially on the floor of the Chicago Board of Options Exchange, and later, the Chicago Mercantile Exchange. Mr. Lieberman has held his insurance licenses for ten years. This is the first administrative complaint issued against him. Mr. Lieberman's Business. Mr. Lieberman, at all times pertinent, served as president of Charles Lieberman, Inc. (Stipulated Facts). Mr. Lieberman, at all times pertinent, was the designated primary agent, as defined in Section 626.592, Florida Statutes, of Charles Lieberman, Inc. (Stipulated Facts). Charles Lieberman, Inc., at all times pertinent, owned and did business as "National Medical Services" and "The Insurance Center." (Stipulated Facts). Mr. Lieberman's "Medical Benefits Plan"/"Medical Savings Plan." Mr. Lieberman offers customers who are seeking medical insurance a plan which he calls a "Medical Benefits Plan" or "Medical Savings Plan" (hereinafter referred to as the "Lieberman Medical Benefits Plan"). The Lieberman Medical Benefits Plan consists of the following components (hereinafter referred collectively as the "Plan Products"): A hospital and surgery expense payment policy (hereinafter referred to as the "Hospital Insurance Plan"); A Catastrophe Major Medical Insurance Plan (hereinafter referred to as the "Major Medical Insurance Plan"); and A discount card titled "The Chamber Card" (hereinafter referred to as the "Chamber Card"), with a "Limited Product Warranty." None of the Plan Products included insurance coverage for physician office visits, a fact which Mr. Lieberman was fully aware of. The Hospital Insurance Plan. The Hospital Insurance Plan provides coverage for hospital and surgical expenses. It does not provide coverage for physician office visits. The Hospital Insurance Plan is a medical insurance plan offered by United American Insurance Company (hereinafter referred to as "United American"). Mr. Lieberman is an agent for United American. Petitioner's Exhibit 64 is a copy of the hospital and surgery expense policy that constitutes the Hospital Insurance Plan sold by Mr. Lieberman. (Stipulated Facts). Petitioner's Exhibit 65 is a copy of the Schedule of Benefits for the Hospital Insurance Plan. (Stipulated Facts). The Major Medical Insurance Plan. The Major Medical Insurance Plan provides coverage for major medical expenses in excess of $25,000.00. It does not provide coverage for physician office visits. The Major Medical Insurance Plan is also a medical insurance plan. It is offered by United States Life Insurance Company (hereinafter referred to as "U.S. Life"). In order to purchase a Major Medical Insurance Plan, customers are required to join one of many organizations which purchase Major Medical Insurance Plans through Seabury & Smith2, an organization which administers the sale of health insurance for U.S. Life. Customers, once they join such an organization, are then required to purchase the Major Medical Insurance Plan through the organization they joined. Mr. Lieberman is not an agent for U.S. Life or affiliated with Seabury & Smith. He does not, therefore, sell Major Medical Insurance Plans. Nor does he receive any compensation if any of his customers purchase a Major Medical Insurance Plan. Mr. Lieberman does, however, recommend the purchase of a Major Medical Insurance Plan as part of the Lieberman Medical Benefits Plan. In order to facilitate the purchase, Mr. Lieberman has his customers join the "American Contract Bridge League."3 His customers then purchase a Major Medical Insurance Plan directly based upon their League membership. Petitioner's Exhibit 63 is a copy of the Major Medical Insurance Plan which by Mr. Lieberman recommended that his customers purchase. (Stipulated Facts). The Chamber Card. In an effort to provide some relief for cost of physician office visits, which was not covered by the Hospital Insurance Plan or the Major Medical Insurance Plan, Mr. Lieberman sold his customers the Chamber Card. The Chamber Card, which is not insurance (Stipulated Facts), is a card which entitles the holder thereof to a discount4 for various medical services, including physician office visits. In an effort to enhance the discounts from the Chamber Card available to Mr. Lieberman's customers, Mr. Lieberman also provided what he termed a "Limited Product Warranty" which he offered through Charles Lieberman, Inc., d/b/a National Medical Services. This Limited Product Warranty is also not insurance. Pursuant to Mr. Lieberman's Limited Product Warranty, Mr. Lieberman purportedly agreed to provide reimbursement of the cost of any physician office visit in excess of $15.00, an amount which he referred to as a "copay," which was not paid for by the Chamber Card. The additional discounts were dependant, however, on Mr. Lieberman's ability to negotiate a reduction in the fees incurred by his customers directly from the physician.5 In describing the Chamber Card and the Limited Product Warranty sold by Mr. Lieberman, he used the acronyms "PPO" and "PHCS," and terms like "copay" and "claims" normally associated with the insurance industry. Customer W.E. (Count I of the Administrative Complaint). Prior to September 12, 2002, W.E. spoke with Mr. Lieberman by telephone. She explained to him that she was interested in purchasing health insurance, and before she could explain what she meant in any detail, he informed her that he could provide any health insurance she wanted as long as she did not have high blood pressure, which she did not. On September 12, 2002, W.E. met with Mr. Lieberman (Stipulated Facts) at his home to discuss purchasing health-care insurance. She explained to Mr. Lieberman that she wanted a health insurance plan similar to what she had had before she recently moved to Florida and that she wanted a plan with minimum co-payments. She also indicated that she wanted a basic insurance plan until she was able to find employment where her health insurance would be provided for her. W.E. did not specifically tell Mr. Lieberman that she wanted insurance that covered physician office visits.6 Rather, she reasonably assumed that by telling Mr. Lieberman that she wanted to purchase "health insurance" that, as an insurance agent, he would understand that she wanted coverage for physician office visits. Mr. Lieberman, rather than providing the insurance coverage which he knew or should have known W.E. was seeking, coverage which included physician office visits, suggested that she purchase the Lieberman Medical Benefits Plan. While Mr. Lieberman attempted to give some limited explanation of his plan to W.E., based upon the manner in which he explained his plan at hearing, it is understandable that W.E. did not understand what she was purchasing, or, more specifically, that the plan, while including some health care coverage, did not include coverage for physician office visits. On September 12, 2002, Mr. Lieberman sold or arranged for the sale of the Plan Products, as more fully described in Findings of Fact 9 through 25, to W.E.: W.E. signed an application for membership in the American Contract Bridge League (Stipulated Facts); W.E. wrote a check for her membership in the American Contract Bridge League (Stipulated Facts); W.E. signed an application and wrote checks for the Chamber Card and a United American Hospital Insurance Plan (Stipulated Facts); and W.E. signed an application for a Major Medical Insurance Plan from U.S. Life and wrote a check to Seabury & Smith. (Stipulated Facts). Mr. Lieberman knew or should have known that he was selling W.E. a product which she was not interested in purchasing and that he was not providing her with a significant part of the insurance coverage she was interested in purchasing, coverage of physician office visits. While Mr. Lieberman gave some limited explanation of what the Chamber Card was, he did not fully explain to W.E. that it was not an insurance program, plan, or policy; that it would not pay for physician office visits; or that it only provided some unspecified discount on the cost of physician office visits. W.E. did not understand what she was purchasing. She even believed incorrectly that she had not been provided any insurance at all by Mr. Lieberman. While this incorrect assumption was based in part upon comments she perceived were made by a Department investigator, her comments show that she was unknowledgeable about insurance and, therefore, placed her full reliance on upon Mr. Lieberman. Even though W.E. issued separate checks made payable to "A.C.B.L." (the American Contract Bridge League), Seabury & Smith (for the Major Medical Insurance Plan), United American (for the Hospital Insurance Plan), and National Medical Services (for the Chamber Card); signed an Acknowledgement & Disclaimer and an Acknowledgement & Disclosures (both of which are quoted, infra, in Finding of Fact 35); and signed a document titled "Medical Benefits Plan” which contained an acknowledgement (quoted, infra. In Finding of Fact 36), W.E., unlike Mr. Lieberman, did not understand that she was purchasing a product which she had not requested and did not want. The Acknowledgement & Disclaimer and Acknowledgement & Disclosures signed by W.E. provided the following: ACKNOWLEDGEMENT AND DISCLAIMER I understand that the US Life Catastrophic Insurance Policy is being purchased through the mail from Seabury & Smith (Group Insurance Plans), who are the brokers for that plan. Although I am purchasing other insurance from Charles Lieberman, I realize that Mr. Lieberman is in no way representing Seabury & Smith or US Life and that he is only making me aware that this plan is available. I acknowledge that it is my sole responsibility to review this plan and its features to determine suitability once the policy is received. Insured Date ACKNOWLEDGEMENT AND DISCLOSURES I hereby acknowledge that I am purchasing insurance that covers approximately 75% of the first $10,000 in the hospital then covers 100% hospitalization above $25,000. Although my PHCS PPO Access/Medical Savings Card (which is not insurance) will, in most cases, reduce this potential liability; through negotiated savings, it is not guaranteed to eliminate it in it [sic] entirety. INSURED DATE The foregoing Acknowledgement & Disclaimer and the Acknowledgement & Disclosures are misleading at best, and deceiving at worst. While the Acknowledgement & Disclosures includes the language "which is not insurance," that language is included after the terms "PHCS PPO Access/Medical Savings Card," terms which are not clearly identified or explained and are, along with other terminology used in the Disclosures (i.e., "PPO" and "copay") reasonably associated with health-care insurance. More importantly, the Acknowledgement & Disclaimer and the Acknowledgement & Disclosures do not explain that physician office visits are not being provided through health care insurance. Finally, W.E. was not given an opportunity by Mr. Lieberman to read the Acknowledgement & Disclaimer, the Acknowledgement & Disclosures, or any other documents shown to her by Mr. Lieberman. He simply placed most of the documents which she had to sign in front of her with only the part she was required to sign visible and told her to sign them, which she did. The following acknowledgment was also contained in a document titled "Medical Benefits Plan" which W.E. signed: By signing below, I agree that all information provided above is complete, accurate, and truthful. I recognize that because of the high cost of health insurance, National Medical Savings, plan administrator, has attempted to put together a "medical savings/benefit plan" which allows clients to purchase reasonably priced hospitalization insurance from well known a- rated insurance companies and combine it with a product which is not insurance to better suit the clients' needs. I understand that anything associated with the PPO repricing or copay rebates is part of the "medical savings plan" and is in no way to be considered as insurance, but rather as an affordable alternative to satisfy the need to reduce medical costs. Like the Acknowledgments quoted in Finding of Fact 35, this acknowledgement, which appears after a paragraph titled "Pre- Authorized Payment Plan" on the form, is misleading. It is not clear that it is referring to the Chamber Card, it contains terms normally associated with insurance coverage in spite of the disclaimer, and Mr. Lieberman gave W.E. no reasonable opportunity to read the disclaimer before having her sign it. After enrolling W.E. in the Lieberman Medical Benefits Plan, Mr. Lieberman mailed all the documents which W.E. had signed on September 12, 2002, to her. This was her first realistic opportunity to read the documents. After receiving the documents concerning the Lieberman Medical Benefits Plan, W.E. cancelled all of the Plan Products. Although there was some language in the Acknowledgement and Disclosures and the form titled "Medical Benefits Plan" signed by W.E. indicating that some part of the Lieberman Medical Benefits Plan was not insurance, due to the ambiguity of the language of the Acknowledgement and the disclaimer, the lack of opportunity that W.E. had to read the documents, the other language normally associated with insurance used in the documents, and the lack of coherent explanation provided by Mr. Lieberman, it is found that, as to W.E., Mr. Lieberman: Did not inform her that the Chamber Card was not an insurance program, plan, or policy; "Portrayed" the Chamber Card as an insurance program, plan, or policy; and Sold her products, none of which provided insurance coverage for the cost of physician office visits. Customer A.H. (Count II of the Administrative Complaint). Prior to April 11, 2003, Mr. Lieberman contacted and spoke to A.H. by telephone. A.H. told Mr. Lieberman that she was interested in purchasing health insurance, including insurance covering physician office visits, with co-pay, and hospitalization expenses, with a deductible. On April 11, 2003, A.H. met with Mr. Lieberman (Stipulated Facts) at his home to discuss purchasing health-care insurance. She again explained to Mr. Lieberman that she was interested in a policy that covered physician office visits, with a co-pay, and hospitalization expenses, with a deductible. Mr. Lieberman, rather than providing insurance coverage which he knew or should have known A.H. was seeking, coverage which included physician office visits, suggested that she purchase the Lieberman Medical Benefits Plan. While Mr. Lieberman attempted to give some limited explanation of his plan to A.H., based upon the manner in which he explained his plan at hearing, it is understandable that A.H. did not understand what she was purchasing, or, more specifically, that the plan, while including some health care coverage, did not include coverage for physician office visits. On April 11, 2003, Mr. Lieberman sold or arranged for the sale of the same Plan Products to A.H. that he had sold to W.E., described in Finding of Fact 30, supra. (Stipulated Facts). Mr. Lieberman knew or should have known that he was selling A.H. a product which she was not interested in purchasing and that he was not providing her with a significant part of the insurance coverage she was interested in purchasing, coverage of physician office visits. While Mr. Lieberman gave some limited explanation of what the Chamber Card was, he did not fully explain to A.H. that it was not an insurance program, plan, or policy; that it would not pay for physician office visits; or that it only provided some unspecified discount on the cost of physician office visits. Like W.E., A.H. signed the Acknowledgment and Disclaimer and the Acknowledgement and Disclosures quoted, supra, in Finding of Fact 35, and the disclaimer quoted, supra, in Finding of Fact 36. The Acknowledgements and the disclaimer were deficient for the same reasons described in Findings of Fact 35 and 36. Like W.E., even though A.H. issued separate checks made payable to "A.C.B.L." (the American Contract Bridge League), Seabury & Smith (for the Major Medical Insurance Plan), United American (for the Hospital Insurance Plan), and National Medical Services (for the Chamber Card); signed the Acknowledgement & Disclaimer and an Acknowledgement & Disclosures; and signed the disclaimer contained in a form titled "Medical Benefits Plan," A.H., unlike Mr. Lieberman, did not understand that she was purchasing a product which she had not requested and did not want. Having explained to Mr. Lieberman that she wanted a policy that covered physician office visits and not having been told that was not what she was purchasing, she simply relied upon Mr. Lieberman. After enrolling A.H. in the Lieberman Medical Benefits Plan, Mr. Lieberman mailed all the documents which A.H. had signed on April 11, 2003, to her. Some time after receiving the documents concerning the Lieberman Medical Benefits Plan, A.H. cancelled all of the Plan Products. Although there was some language in the Acknowledgement and Disclosures and the form titled "Medical Benefits Plan" signed by A.H. indicating that some part of the Lieberman Medical Benefits Plan was not insurance, due to the ambiguity of the language of the Acknowledgement and the Disclaimer, the other language normally associated with insurance used in the documents, and the lack of coherent explanation provided by Mr. Lieberman, it is found that, as to A.H., Mr. Lieberman: Did not inform her that the Chamber Card was not an insurance program, plan, or policy; "Portrayed" the Chamber Card as an insurance program, plan, or policy; and Sold her products, none of which provided insurance coverage for the cost of physician office visits. Customer R.G. (Count III of the Administrative Complaint). R.G. did not testify at the final hearing. The factual allegations of Count III of the Administrative Complaint were not proved. Customer J.E. (Count IV of the Administrative Complaint). Prior to January 17, 2003, J.E. spoke with Mr. Lieberman by telephone. J.E. explained to Mr. Lieberman that he was interested in purchasing health insurance to replace the Blue Cross/Blue Shield health-care insurance he currently had. On January 17, 2003, J.E. met with Mr. Lieberman (Stipulated Facts) at his home to discuss purchasing health-care insurance. He explained to Mr. Lieberman that he was interested in a policy to replace his current policy with Blue Cross/Blue Shield. J.E. specifically requested a policy that covered physician office visits. Mr. Lieberman, rather than providing insurance coverage which he knew or should have known J.E. was seeking, coverage which included physician office visits, suggested that he purchase the Lieberman Medical Benefits Plan. While Mr. Lieberman attempted to give some limited explanation of his plan to J.E., based upon the manner in which he explained his plan at hearing, it is understandable that J.E. did not understand what he was purchasing, or, more specifically, that the plan, while including some health care coverage, did not include coverage for physician office visits. On January 17, 2003, Mr. Lieberman sold or arranged for the sale to J.E. of the same Plan Products he sold to W.E. described in Finding of Fact 30, supra. (Stipulated Facts). Mr. Lieberman knew or should have known that he was selling J.E. a product which he was not interested in purchasing and that he was not providing him with a significant part of the insurance coverage he was interested in purchasing, coverage for physician office visits. While Mr. Lieberman gave some limited explanation of what the Chamber Card was, he did not fully explain to J.E. that it was not an insurance program, plan, or policy; that it would not pay for physician office visits; or that it only provided some unspecified discount on the costs of physician office visits. Like W.E. and A.H., J.E. also signed the Acknowledgment and Disclaimer and the Acknowledgement and Disclosures quoted, supra, in Finding of Fact 35, and the disclaimer quoted, supra, in Finding of Fact 36. The Acknowledgements and the disclaimer were deficient for the same reasons described in Findings of Fact 35 and 36. Like W.E. and A.H., even though J.E.. issued separate checks made payable to "A.C.B.L." (the American Contract Bridge League), Seabury & Smith (for the Major Medical Insurance Plan), United American (for the Hospital Insurance Plan), and National Medical Services (for the Chamber Card); signed the Acknowledgement & Disclaimer and an Acknowledgement & Disclosures; and signed the disclaimer contained in a form titled "Medical Benefits Plan," J.E., unlike Mr. Lieberman, did not understand that he was purchasing a product which he had not requested and did not want. Having explained to Mr. Lieberman that he wanted a policy that covered physician office visits and not having been told that was not what he was purchasing, he simply relied upon Mr. Lieberman. After enrolling J.E. in the Lieberman Medical Benefits Plan, Mr. Lieberman mailed all the documents which J.E. had signed on January 17, 2003, to him. Some time after receiving the documents concerning the Lieberman Medical Benefits Plan, J.E. cancelled all of the Plan Products. Although there was some language in the Acknowledgement and Disclosures and the form titled "Medical Benefits Plan" signed by J.E. indicating that some part of the Lieberman Medical Benefits Plan was not insurance, due to the ambiguity of the language of the Acknowledgement and the disclaimer, the lack of opportunity to read the documents before he signed them, the other language normally associated with insurance used in the documents, and the lack of coherent explanation provided by Mr. Lieberman, it is found that, as to J.E., Mr. Lieberman: Did not inform him that the Chamber Card was not an insurance program, plan, or policy; "Portrayed" the Chamber Card as an insurance program, plan, or policy; and Sold him products, none of which provided insurance coverage for the cost of physician office visits. The Administrative Complaint. On January 26, 2004, the Department issued a four- count Administrative Complaint against Mr. Lieberman. (Stipulated Facts).7 The Administrative Complaint contains four counts, one each for Mr. Lieberman's association with W.E. (Count I), A.H. (Count II), R.G. (Count III), and J.E. (Count IV). The Administrative Complaint alleges that Mr. Lieberman's conduct with all four individuals violated Section 626.611(6), (7), and (8), Florida Statutes, and Section 626.621(2), Florida Statutes. The Administrative Complaint also alleges that, as to A.H., Mr. Lieberman violated Section 626.621(6), Florida Statutes. In support of the alleged statutory violations, the Department alleged, in part, that with regard to all four individuals: Mr. Lieberman "did not inform [his customers] that The Chamber Card was not an insurance program, plan or policy"; Mr. Liberman "portrayed The Chamber Card as an insurance program, plan or policy"; and That "[n]one of the products you, CHARLES STEVEN LIEBERMAN, sold to [W.E., A.H., R.G., and J.E.] provide insurance coverage for the cost of doctors' visits."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department finding that Charles Steven Lieberman violated Sections 626.611(7) and (8), Florida Statutes, as alleged in Counts I, II, and IV of the Administrative Code; dismissing Count III of the Administrative Code; and suspending his licenses for a period of 12 months from the date of the final order. DONE AND ENTERED this 31st day of August, 2004, in Tallahassee, Leon County, Florida. LARRY J. SARTIN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of August, 2004.
The Issue Whether Respondent has violated the following statutes as charged within the Administrative Complaint: Count I: Sections 627.6425(1), 627.6425(3)(a)2., and 624.418(2)(a), Florida Statutes. Count II: Sections 626.9521, 626.9541(1)(a)1., 626.9541(1)(e)2., 626.9541(1)(g) 2., and 624.418(2)(a), Florida Statutes. Count III: Sections 626.9521, 626.9541(1)(g)2., and 624.418(2)(a), Florida Statutes. Count IV: Sections 626.9521, 626.9541(1)(a)1., 626.9541(1)(e)2., 626.9541(1)(g)2., 626.418(2)(a), and 627.6425(3), Florida Statutes. Count V: Sections 624.418(2)(a), 626.9521, 626.9541(1)(a)1., 626.9541(1)(e)2., and 626.9541(1)(g)2., Florida Statutes. Count VI: Sections 624.418(2)(a), 626.9521, 626.9541(1)(a)1., 626.9541(1)(e)2., and 626.9541(1)(g)2., Florida Statutes. Count VII: Sections 624.418(2)(a), 626.9521, 626.9541(1)(a)1., 626.9541(1)(e)2., and 626.9541(1)(g)2., Florida Statutes Count VIII: Sections 624.418(2)(a), 626.9521, 626.9541(1)(a)1., 626.9541(1)(e)2., and 627.6675(17), Florida Statutes.2
Findings Of Fact At all times material, Respondent United Wisconsin was a foreign insurer domiciled in the State of Wisconsin and operating under a subsisting certificate of authority to transact the business of insurance in the State of Florida. At all times material, American Medical Security, Inc. (AMS) was a Florida-licensed administrator authorized to market and administer United Wisconsin's out-of-state group health insurance plans in Florida. United Wisconsin and AMS are wholly-owned subsidiaries of American Medical Security Group, Inc. Section 627.6515(2), Florida Statutes, is found in Part VII (7) of the Florida Insurance Code, and provides, in pertinent part: 627.6515 Out-of-state groups. - Any group health insurance policy issued or delivered outside this state under which a resident of this state is provided coverage shall comply with the provisions of this part in the same manner as group health policies issued in this state. This part does not apply to a group health insurance policy issued or delivered outside this state under which a resident of this state is provided coverage if: (a) The policy is issued to . . . an association group to cover persons associated in any other common group, which common group is formed primarily for purposes other than providing insurance; a group that is established primarily for the purpose of providing group insurance. . . * * * In or about May 1993, United Wisconsin, through AMS, filed with the Department, pursuant to Section 627.6515(2), Florida Statutes, an out-of-state group health insurance policy to be offered through an Alabama-sitused Trust, formed primarily for the purpose of providing group insurance. In June 1993, the Department accepted this filing as meeting the requirements of Section 627.6515(2), Florida Statutes. In November 1996, United Wisconsin, through AMS, filed with the Department, pursuant to Section 627.6515(2), Florida Statutes, an out-of-state group health insurance policy (the MedOne Choice plan) to be offered through an Ohio-sitused association called the Taxpayers' Network, Inc. (TNI), formed primarily for purposes other than providing insurance. In January 1997, said filing was accepted by the Department as meeting the requirements of Section 627.6515(2), Florida Statutes. On or about September 22, 1998, United Wisconsin notified the Department that the Alabama-sitused Trust plans in Florida were being discontinued, effective as of each certificate holder's 1999 renewal date. On or about September 25, 1998, United Wisconsin notified all certificate holders issued coverage through the Alabama-sitused Trust that the Alabama-sitused Trust plans in Florida were being discontinued, effective as of each certificate holder's 1999 renewal date. Upon discontinuance of the Alabama-sitused Trust plans, the only United Wisconsin health insurance plans available in Florida were the MedOne Choice plans offered through the Ohio- sitused association TNI, to members of TNI. Membership in TNI was available to anyone, conditioned upon submitting an application form and paying the membership fee. Via the September 25, 1998 notice, (see Finding of Fact No. 7), United Wisconsin guaranteed each Trust certificate holder that, upon joining TNI and upon request, s/he would be issued coverage under the Classic Benefit Plan (one of the TNI MedOne Choice plans) without regard to his or her health status. Certificate holders were also advised that, if they desired coverage under a MedOne Choice plan other than the guaranteed issue Classic Benefit Plan, they could apply for any of the other TNI MedOne Choice plans. If the applicant met the underwriting guidelines of the plan they applied for, he or she would be issued coverage under that MedOne Choice plan. After the September 22, 1998 notice (see Finding of Fact 6) from United Wisconsin, the Department raised questions and concerns about United Wisconsin's decision to discontinue the Trust plans and whether the plan of discontinuance was in compliance with Section 627.6425, Florida Statutes. Section 627.6425, Florida Statutes, provides, in pertinent part, that an insurer discontinuing an individual policy form must offer the option of coverage by another of its policies uniformly, without regard to any health-status-related factor, to all enrolled individuals. Section 627.6425, Florida Statutes, addresses "renewability of individual coverage" and is located within Part VI (6) of the Florida Insurance Code. It arguably does not apply to out-of-state group insurers registered in Florida, pursuant to Section 627.6515, Florida Statutes, because such out-of-state insurers are only bound by Section 627.6515, Florida Statutes, to comply with Part VII (7) of the Florida Insurance Code. It also arguably does not apply to a discontinuance of coverage where the entity discontinuing a policy form has no other policy to offer. (See Conclusions of Law.) United Wisconsin corresponded with, and met with, Department representatives between October 1998 and early January 1999. Ultimately, United Wisconsin met with James J. Bracher, the Department's Chief of the Bureau of Life & Health Forms & Rates, on January 14, 1999, and entered into an agreement with the Department to offer to Trust certificate holders an additional guaranteed issue TNI plan, and to cap the rate for the guaranteed issue plans at no more than twice (200%) the rate (premium) currently being paid by Trust certificate holders for the discontinued Trust plan. In accordance with the foregoing agreement, on or about January 19, 1999, United Wisconsin notified Trust certificate holders of the additional guaranteed issue option available to them. In 1999, United Wisconsin discontinued the Trust plans in accordance with the agreement negotiated with Mr. Bracher. At the time of the discontinuance of the Trust plans, the TNI association coverage was the only health insurance coverage United Wisconsin had qualified through the Department for sale in Florida. Accordingly, the TNI association's plan(s) were the only health insurance coverage United Wisconsin could legally offer in the Florida market. The discontinued Trust certificate holders were offered alternative coverage through TNI. They were not given the option to renew or continue their prior coverage through the Trust because the Trust had been discontinued. Only one Trust policy form was discontinued. All discontinued Trust certificate holders were invited to join TNI and get coverage under the association group policy issued to TNI. United Wisconsin's offer continued to be to TNI, and through TNI, to that association's members. There were approximately 11,800 Trust certificate holders who were Florida residents in 1998-1999 when the Trust was discontinued. Of these 11,800 discontinued Trust certificate holders, 4,498 applied for continued coverage through the TNI plan. Trust certificate holders qualified for membership in the TNI association, and thus qualified for its insurance plan(s) by completing a membership application, agreeing to pay $5.00 per month in association dues, and sending it all to TNI by a date established relative to their renewal date for their discontinued Trust policy. The Department was fully informed, in 1998-1999, before the Trust coverage was discontinued, as to the type of coverage United Wisconsin offered through TNI, including the fact that individuals wanting coverage through TNI would be required, as a prerequisite, to become TNI association members. There is no evidence any Trust certificate holder was not allowed to join TNI. There is no evidence any Trust certificate holder who wanted to obtain coverage through TNI was refused by United Wisconsin. United Wisconsin had a conversion policy available. The Department has determined that United Wisconsin's rate for the conversion policy is within 200% of the standard risk rate, as was agreed between United Wisconsin and the Department, and that the statutorily required notice of conversion privilege (to convert from group to individual coverage) was contained in the certificates of coverage issued to Florida residents. Throughout 1999, the Department received various consumer inquiries about United Wisconsin's discontinuance of the Alabama-sitused Trust certificates in Florida and defended to consumers United Wisconsin's right to discontinue the Trust policies as agreed between United Wisconsin and the Department. In its responses, the Department consistently reiterated that United Wisconsin had adhered to underwriting guidelines; had violated no Florida statutes or administrative rules; and was not discriminating against individual certificate holders, because this was a situation in which an entire plan (policy form) was being cancelled/discontinued. The Department also asserted that the new insurance was "being offered on a guarantee issue basis," and that United Wisconsin had a right to underwrite and charge an additional premium on such a basis. Moreover, the Department repeatedly stated that it had no regulatory power over the rates of out-of-state insurers, such as United Wisconsin. Even now, the Department concedes that it has no authority to set premiums for out-of-state insurers like United Wisconsin. On March 30, 2000, the Department questioned the implementation of the January 1999 agreement in correspondence sent to United Wisconsin. At least partly on the theory that the Department had focused on capping the overall premium of previous Trust policyholders to the exclusion of every other consideration, the Department notified United Wisconsin that in March 2000, the Department now believed the discontinuance of the Trust plans, in accordance with the January 1999 agreement between United Wisconsin and the Department, may have violated Section 627.6425, Florida Statutes. The Department reached this conclusion only after United Wisconsin had relied on the agreement, fully complied with the agreement, and changed its position so as to fulfill the agreement. Beginning approximately August 2000, the Department pursued this matter, framed by a variety of legal theories, through at least an Order to Show Cause and an Amended Order to Show Cause, each voluntarily dismissed. The instant Administrative Complaint was referred to the Division of Administrative Hearings on or about June 7, 2001, and is largely directed to rate-setting practices that occurred in 1999 and 2000, for the TNI coverage. The factual charges originally were that "illegal tier blocking" occurred during the switchover in 1999 and again in the year 2000, at each certificate holder's annual renewal date. It is general insurance industry practice to adjust (usually increase) premiums by class when the time for renewal occurs, if loss experience justifies the premium increase. The Department would not oppose United Wisconsin's raising premiums across an entire class of health insureds. It is permissible underwriting practice in the health insurance industry to consider health, among a host of other actuarial considerations, when initially developing premium rates. It is not uncommon in the health insurance industry for members of a group to be divided into classes based on risk. The riskiest group (substandard) pay premiums higher than those with average health risks (manual), who pay more than those policy holders who are designated "preferred." Insureds may be designated "preferred" because they are either very healthy or because they make the fewest claims. This rating system is variously called "tier rating," "tier blocking," or "tier pricing." The terms are synonymous. The parties agree that the 1999 discontinuance of the Trust certificates was a "guaranteed renewable" situation, but they disagree as to the meaning of that term. As of the date of hearing herein, the Department's position was that an out-of-state insurer may not tier block premiums on a "guaranteed renewable" policy at any time other than at the initiation of the policy, when the original underwriting is done. The Department also asserted that United Wisconsin's underwriting methodology is discriminatory, due to its ranking of health hazards and lack of oversight/review of its underwriters, whose discretion is allegedly too broad. The evidence did not establish that United Wisconsin did any reclassification by tiers of premium levels of any of the Trust certificate holders at the switchover. It is now conceded by the Department that tier blocking did not occur during 1999, as specifically alleged in paragraph 19 of the instant Administrative Complaint. See greater detail in Finding of Fact 56, infra. This Administrative Complaint also makes allegations with regard to the federal Health Insurance Portability and Accountability Act (HIPAA). Chapter 96-223, Laws of Florida, created Section 627.6425, Florida Statutes, effective May 25, 1996. Chapter 97- 179, Laws of Florida, substantially amended Section 627.6425, Florida Statutes, effective May 30, 1997. This statute, along with Sections 627.6571 and 627.6487, Florida Statutes, are among those state statutes adopted to implement HIPAA. HIPAA was created primarily to preclude discrimination in insurance premiums and coverage on the basis of race and gender, but for purposes of the instant case, the basic theory of HIPAA, and the derivative State statutes, is that an insurance company cannot simply cancel a health insurance policy without providing other options. HIPAA provides for continuation of an insured's health policy, but does not limit the premiums the insurer can charge for health coverage. An individual who, through no fault of his own, loses his group health insurance coverage, is guaranteed by the statutes an opportunity to obtain substitute coverage. HIPAA laws do not regulate premium rates or have anything to do with what rates are allowable. No Trust certificate holders subject to the 1999 discontinuation process, authorized by the Department in January 1999 and followed by United Wisconsin, were HIPAA-eligible. This Administrative Complaint further asserts, however, that conditioning the new TNI association policy on a requirement that certificate holders join the TNI association and pay a TNI membership fee offends the concept of "guaranteed renewable" coverage, that including the requisite notice of conversion privilege in the certificates of coverage was insufficient, and that such notice should have been sent to inquiring certificate holders. United Wisconsin made full disclosure to the Department as to how TNI membership worked and its dues before the Department entered into the January 1999 agreement with United Wisconsin. The Department did not protest the imposition of the TNI fee and membership conditions prior to United Wisconsin's complying with their agreement and did not raise these issues until it initiated the first administrative action in August 2000. Departmental concern about a failure to fully advise in relation to the conversion notice is even more recent. Ms. Shaneen Wahl, a former Trust certificate holder, testified that she protested having to join TNI to get coverage after the Trust discontinuance, but this protest was apparently oral and occurred while the Department was still defending United Wisconsin's actions in accord with their agreement. Ms. Wahl also made a lot of phone calls to her insurance agent and to United Wisconsin, over some indeterminate period of time, during which she asked "almost everybody" she talked to whether there was anything else she could do besides take a guaranteed issue TNI plan at twice the premium of her Trust coverage, whether there was another policy, and whether she could be put in a different group. She never specifically asked for information about a conversion policy, because she had never heard that term (despite the notice of conversion privilege in her Trust certificate). This testimony falls short of clear notice to United Wisconsin that Ms. Wahl was considering applying for a conversion policy. Except for repeated premium increases, allegedly based on their individual health status and medical claims, both Ms. Wahl and Ms. Arlene Shallan testified that they had overall good coverage and service from Respondent. The evidence shows that only one eligible individual requested information about conversion policies, and United Wisconsin provided that person the required forms. He did not apply for a conversion policy. During the 1999 discontinuing of Trust certificates and issuing of TNI association coverage, all 4,498 Floridians who obtained coverage through TNI were given coverage irrespective of their health status. About 85% of the 4,498 Trust certificate holders who switched over to TNI in 1999 had the same health risk factor they had with the Trust carried over for the TNI association coverage, without reference to updated health information. The other 15% of Trust certificate holders who switched over were those that the Department now primarily seeks to protect from allegedly grossly inflated premiums due to perceived uninsurability. Nonetheless, despite the perception that due to current health status (potentially high claims), this 15% was essentially uninsurable, United Wisconsin guaranteed them health insurance coverage through TNI at the 1999 switchover under two different plan options, pursuant to its January 1999 agreement with the Department. However, at the switchover, each TNI application required certain information on eight underwriting factors, including, but not limited to, the applicant's medical history, geographic location, age, gender, and smoker or non-smoker status. TNI/United Wisconsin continues to request similar information prior to each annual renewal date. At each renewal date, United Wisconsin uses such information to set premiums by tiers based, in part, on health/claim history. The Department hired Dennis Fagin, an expert life and health underwriter, to perform an on-site audit of United Wisconsin's 1999 discontinuance of Trust certificates and switchover to TNI insurance. The Department has complained that there was a lack, or complete absence, of underwriting worksheets associated with the 1999 switchover, but the thrust of Mr. Fagin's testimony was that worksheets were unnecessary because the situation in 1999 had been controlled by the terms of United Wisconsin's January 1999 agreement with the Department, that United Wisconsin's underwriting manual was used in this initial review in accord with that agreement, and that the underwriting manual was consistently applied among the Trust certificate holders under consideration for TNI association coverage. The Department's on-site audit confirmed that in 1999, United Wisconsin considered health status solely to answer one question: whether the Trust certificate holder would otherwise qualify for TNI coverage at all. If the applicant did qualify, s/he was accepted into a preferred tier. If s/he did not qualify, the premium was capped at two times (200%) the Trust policy's premium, in accord with United Wisconsin's agreement with the Department. Trust certificate holders who had purchased after the effective date of Section 627.6425(3) had been provided certificates that expressly stated that premium levels could be adjusted by United Wisconsin in the future. It was not demonstrated that any of the policies involved in this case contain any language guaranteeing original premium classifications or guaranteeing a level premium, or any "guaranteed renewable" language. The TNI brochure provided in 1998 to Trust certificate holders contains no "guaranteed renewability" language, but does state "We have the right to change the premium rate once it is in effect for 12 consecutive months." The TNI certificates of coverage repeat this language. The TNI certificates of coverage provide that premiums may change at any time after one year. After an individual's premium rate has been in effect for one year, United Wisconsin determines an annual renewal premium rate but guarantees renewed coverage at that renewal premium rate. United Wisconsin changes its TNI base rates quarterly, based on medical costs, changes in technology, medical care utilization, and historic claim utilization, but covered individuals' premiums are only adjusted on an annual basis at their respective 12 months' renewal date. United Wisconsin considers all Florida TNI certificate holders to constitute a single class of business, its "actuarially supportable class." Its "actuarially supportable premium" overall is established by considering three factors: estimated claims, expenses, and reasonable profit. United Wisconsin's practice in the year 2000 became to move insureds between tiers. For instance, a person in the preferred tier who experienced costly medical services in the preceding year might be moved to a manual or substandard tier, resulting in that person paying a greatly increased premium. It is theoretically possible that one can move into a decreased risk category based on giving up smoking, changing geographical location, or making fewer claims, but it is unlikely, since one factor always considered is an insured's inevitably increasing age. As is the nature of group insurance, the result of United Wisconsin's rating methodology is that there is cross- subsidization of less healthy insureds by healthy insureds. Overall, for TNI coverage, United Wisconsin pays out 21 cents per premium dollar in claims by the healthiest individuals; 48 cents per premium dollar in claims by less healthy individuals, and $1.71 per premium dollar in claims by the least healthy individuals. The thrust of the Department's concern with tier- blocking relates to a potential "death spiral." This term is not defined by a Florida Statute or rule. It refers to the belief, widely held in the insurance industry, that the practice of moving insureds among classes means that when a substandard class becomes populated with persons experiencing costly claims, premiums can increase to the point that substandard class members cannot afford the premium, or if they can afford the premium, premiums for the other less costly classes may still increase to the point the members of those "actuarially better" classes may seek insurance elsewhere. If premiums inflate to the point that benefits utilization in relation to the amount of premiums paid cause enough of the healthy members to leave the plan, the plan will become economically unsound, will perish, and no one will be able to purchase health insurance coverage. The "death spiral" concept seems logical, and an enormous amount of energy has been devoted to nationwide discussion of it. There is some evidence to the effect that most insurers have a 20-25% lapse rate and United Wisconsin's lapse rate is 30-35%, but there is no guarantee that lapse rate is the result solely of changed health factors United Wisconsin rated at renewal. Likewise, there is no definitive proof that a "death spiral" will be the inevitable outcome of United Wisconsin's actions here complained of. The Department's approach to proving that a death spiral will be the inevitable result of United Wisconsin's tier methodology at renewal is anecdotal and limited to one or two prior TNI members (Ms. Wahl and Ms. Shallan) who did not renew due to premiums which increased as much as 60% at their respective annual renewals. United Wisconsin has undertaken a study to prove a death spiral cannot happen and that its rating method could result in the retention of more healthy people as plan members. However, as presented at hearing, this study is flawed and neither weighty nor credible. Accordingly, there is no persuasive evidence herein that United Wisconsin's tier blocking of premiums at annual renewal will result in a death spiral or that it will minimize the incentive for healthy people to leave TNI to seek coverage elsewhere. The Administrative Complaint charges that United Wisconsin's 2000 tier blocking constituted a "knowing and willful" unfair insurance trade practice, pursuant to Sections 626.9521 and 626.9541, Florida Statutes, because the Department allegedly warned United Wisconsin it was illegal to tier block and United Wisconsin promised that it would never tier block. On February 8, 1996, the Department extended time for review of the Alabama Trust's then-pending rate filing to allow United Wisconsin time to provide additional information and included the following language: This filing also has the problems of tier rating at the time of renewal to solve (P-1). This missive cited Rule 4-149.005(10), Florida Administrative Code. On February 28, 1996, the rate filing was disapproved for several reasons, including: Your follow-up material of February 22, 1996, has been reviewed. The problem of tier rating has not been addressed . . . The methodology described in Exhibit H is considered an Unfair Practice in accord with Florida Statute 626.9541. In addition, the rating practice described is considered to be a prohibition under Florida Rule 4- 149.005(10) (P-1). Florida Rule 4-149.005(10), Florida Administrative Code, is not applicable to out-of-state insurers such as United Wisconsin. It applies to rate filings of in-state insurers. See Part I, Chapter 4-149, particularly, Rule 4-149.002(1)(b), Florida Administrative Code. By a November 1996 revised MedOne rate filing, United Wisconsin attempted to settle an administrative action challenging the Department's disapproval of a prior rate filing, and therein stated that it had eliminated the tier rating approach of the disapproved filing. The Department questioned language in the new filing, which still sounded like a tier ranking approach, and advised that the product involved was covered by HIPAA so as to restrict underwriting options. United Wisconsin withdrew its new rate filing. Whether or not that rate filing involved HIPAA considerations or not is debatable. However, the instant case clearly does not. By a January 27, 1997, letter, American Medical Security, Inc., referring to plans at that time to close out the Alabama Trust book of business in Florida and issue only through TNI by May 1997 advised the Department: . . . we will underwrite at new business and assign a risk factor to those we accept, as we do now, which will not change at renewal. We will not tier rate at renewal: a person's underwriting factor will never be adversely changed . . . (P-2). The foregoing "promise" not to tier rate at renewal was clearly conditioned upon United Wisconsin being able to reject some applicants and assign a new risk factor for those who were accepted. However, the Alabama Trust business was not closed out in 1997, pursuant to this offer, and new negotiations ensued. Subsequent 1998 correspondence (P-8) indicates that as of February 1, 1997, United Wisconsin had ceased tier rating at renewal by agreement with the Department (P-7), but this is hardly an everlasting promise for the future regardless of changed circumstances. The foregoing 1996-1998 correspondence amounts to United Wisconsin sequentially devising a variety of tier rating systems, each of which was, in turn, rejected by the Department for reasons (Rule 4-149.005(10), Florida Administrative Code, and HIPAA) not necessarily applicable to United Wisconsin as an out-of-state insurer or to the situation at bar. While United Wisconsin might legitimately disagree with the Department's legal analysis in this correspondence and could guess it might be prosecuted for an unfair practice if it tier rated in any form, the foregoing correspondence does not amount to the Department giving United Wisconsin notice it could not annually review and adjust TNI premiums by tiers after the 1999 switchover or a promise from United Wisconsin not to tier block upon renewal of TNI coverage in 2000. It was neither pled nor proven that the Department (Mr. Bracher) relied on any of this correspondence in entering into the January 1999 agreement with United Wisconsin. By all accounts, tier rating at renewal was never discussed in relation to that agreement. The January 1999 agreement, for reasons more properly discussed in the Conclusions of Law, superceded all prior negotiations. Finally, subsequent pronouncements by the Department have amounted to admissions that the current statutes do not prohibit tier blocking at renewal by out-of-state insurers. (See Finding of Fact 94.) It is also alleged that United Wisconsin failed to inform certificate holders during the 1999 switchover that tier blocking would occur in the year 2000, as each policy came up for renewal, and that this failure to inform that United Wisconsin would annually "re-underwrite" on the basis of individual health status factors constituted a "knowing misrepresentation," a "knowing material omission," and a "knowing omission of a true statement," by United Wisconsin, pursuant to Sections 624.418, 626.9541, and 626.9521, Florida Statutes. However, the Department did not demonstrate that any requirement exists at law or through the Department's January 1999 agreement with United Wisconsin which affirmatively required United Wisconsin to make such a disclosure stating it would "tier block" based on health/claims. The term "tier block" and its permutations are not even statutory terms. The Department did not demonstrate that any requirement exists at law or by the agreement that required United Wisconsin to advise certificate holders if it intended annual underwriting of premiums beginning in 2000. (See Conclusions of Law.) Moreover, the Department offered no plausible explanation how, based on the contents of the new offering and solicitation of health information, the Department or certificate holders could have failed to expect that United Wisconsin would make annual premium alterations. (See Findings of Fact 57-59.) The Department admits United Wisconsin disclosed its intent to reclassify certificate holders coming into TNI in 1999. The Department views it as appropriate for United Wisconsin to establish different premium rates for individuals upon the factors utilized by United Wisconsin at the outset of coverage, but objects to increased premiums by tier blocking based on certificate holders' current health status on the respective renewal anniversary date of each TNI policy. Despite United Wisconsin's completely fulfilling the January 1999 agreement at the switchover, the Department now considers it illegal tier-blocking and discriminatory if insureds were reclassified based on current claim/medical health history subsequent to their having been initially placed in a class (in this case by the Trust) based on claim/medical health history. United Wisconsin's expert actuaries and underwriter testified that TNI certificate holders with the "same health hazard" are treated the same at annual renewals. The Department presented no evidence that United Wisconsin's review of health status at the 2000 renewals has resulted in disparate premiums between individuals with "essentially the same hazard." In the course of the onsite audit, Mr. Fagin reviewed the underwriting manual utilized by United Wisconsin for the 2000 anniversary renewals and annual premium calculations. Mr. Fagin acknowledged that United Wisconsin's renewal process selectively gives the largest premium increases to those who have made claims within the last year or who have the expectation of claims in the next year. However, Mr. Fagin opined that the underwriting manual used by United Wisconsin "was generally reasonable; it's flawed in certain respects; generally consistent with the kind that might have been used by other companies as well." The derivation of United Wisconsin's underwriting manual was originally from another insurance company. Its major aspects are not unique to United Wisconsin, although United Wisconsin uses tiers in a different way from other companies. Mr. Fagin stated that for some health conditions, United Wisconsin's underwriting manual had a narrow range of points; for other conditions, it had a broad range of points; for some conditions, such as the health risk presented by blood pressure, much instruction was provided to underwriters by the manual; and for other conditions, the underwriters had to rely on their education, training, and experience, with only general directions provided in the manual itself. In Mr. Fagin's opinion, it is "not a good business practice" if underwriters have broad latitude in arriving at diagnostic factors for premium renewal with little further underwriting review. A "bad business practice" does not necessarily equate with a statutorily proscribed "unfair competitive practice" or "unfair or deceptive insurance trade practice." In Mr. Fagin's opinion, if underwriters have broad latitude in arriving at diagnostic factors for premium renewal it can potentially lead to arbitrary, capricious decision- making, but he presented no proof that United Wisconsin's underwriters actually had made arbitrary, capricious decisions in setting renewal diagnostic factors or premiums, nor did any other witness. Mr. Fagin questioned a "limited" number of the diagnostic factors assigned by United Wisconsin underwriters, but did not pronounce any TNI renewal customer as wrongly underwritten or discriminated against by commonly accepted underwriting standards. At the switchover in 1999 and at renewals in 2000, some certificate holders may have revised coverage levels, added or subtracted dependents, moved to another geographical area and/or made other changes to their TNI coverage. There was no evidence tying specific amounts of premium increases and decreases to each factor, so it is impossible to determine which factors actually resulted in premium differences or to what extent United Wisconsin's TNI premiums changed due to any single specific factor, including current health status. What effect health or claims factors played in the 2000 renewal premiums was not calculated by Mr. Fagin. The Department agrees with United Wisconsin that for TNI coverage, the entire block of Florida business is the single "actuarially supportable class." (See Finding of Fact 60.) Frank Dino, agency representative and Chief Actuary for the Department, even conceded that the statutory term "actuarially supportable class" does not mean that all certificate holders must be charged the same premium and that there may be legitimate different premium levels within a class, based on how (and probably when) the insureds came into the class. Mr. Dino defined a "hazard" as "a specific situation that increases the probability of the occurrence of a loss arising from a peril," only because Merit Publishing's Glossary of Insurance Terms defines it that way. No statute or rule containing that definition was put forth. Mr. Dino also believes that because the term "actuarially supportable class and essentially the same hazard" is used in Section 626.9541, Florida Statutes, the entire body of actuarial literature, including the Code of Conduct and Standards of Practice, bears on that statutory term. Furthermore, Mr. Dino believes that because some actuarial literature introduced at hearing states, or may be interpreted to mean, that the "same hazard" can only be assessed at the initiation of the policy and may not be reassessed during the life of the policy, that also means that the Florida statute prohibits an out-of-state insurer from raising premiums based on health, in tiers within the single class, at annual renewal. United Wisconsin's expert actuaries disagreed with Mr. Dino's actuarial opinion. Mr. Dino does not administer the statutes under which United Wisconsin is charged in this Administrative Complaint. One of the so-called "professional standards" introduced by the Department is ambiguous. All of the professional literature is subject to interpretation. None of this literature has been adopted into a Florida statute or a rule of the Department which would apply to this case. In May 2001, the Department circulated an official publication for insurance agents and adjusters throughout Florida. That document posed the question, "What kind of practices in use would be prohibited if Florida's rating laws applied to out-of-state coverage?" (emphasis supplied.) It also gave the answer: "Tier rating, whereby carriers move your clients from the underwriting basis or class in which they were issued coverage to one that is of a lesser standard and subject to higher renewal rate." Although the date of this document means it could not have been relied upon by United Wisconsin in 1996-2000, the document still constitutes an admission of the Department that as of May 2001, it had no statutory authority over out-of-state insurers who tier rate. At a minimum, it demonstrates that Mr. Dino's opinion is not the only statutory interpretation within the Department. Mr. Fagin, Mr. Dino, and Mr. Jerry Fickes, an outside consultant who was accepted as an expert in insurance regulatory matters and practice of the insurance industry, defined "guaranteed renewable" as a continuation of an existing form of coverage at the option of the insured. United Wisconsin does not dispute that limited definition. However, all of the foregoing Department witnesses further understand the term "guaranteed renewable" to also mean that the premium may not be changed unless it is changed for everyone in the same class, by the same amount. No Florida statute or rule adopts or specifies their definition. Respondent's experts disagree with their definition. No expert denied that premiums can legitimately change with new coverage and with each renewal. Various treatises relied on by the Department's experts were introduced in evidence. Some of the literature is old. Some applies to individual or disability insurance. All describe common, usual, and general meanings of the term "guaranteed renewable." These items purportedly support the Department's definition that a "guaranteed renewable" policy cannot change premiums except identically across an entire class after the initial underwriting at the inception of the policy. However, all these treatises vary in one respect or another from agreed, stipulated, or proven components of the present situation, and most of them recognize that laws are not uniform among all the states and that each state's law is controlling. Not all of these Codes, Standards, or treatises are universally accepted in the insurance industry. None have been adopted by a Departmental rule or by statute. Although Section 627.6425, Florida Statutes, does not contain the phrase, "guaranteed renewable," its gist is that, except under specified circumstances, if an insured has an individual health insurance policy, that person has a right to continued coverage, at his option. The Department contends that there also can be no reclassification or movement between classes at the time of renewal, i.e. no adjustment of premiums except for an entire class. The Department has not presented or argued any adopted rule containing or defining the phrase "guaranteed renewable." Apparently, the Department concedes that none of its rules governs the present situation, including those rules it has adopted to define "guaranteed renewable" and "discrimination." Neither has either party referred to any statute or rule adopting a "standards of the insurance industry" test for how the term "guaranteed renewable" is to be interpreted.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that all Counts of the Administrative Complaint be dismissed. DONE AND ENTERED this 25th day of April, 2002, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with Clerk of the Division of Administrative Hearings this 25th day of April, 2002.
The Issue The issue is whether Petitioners, as beneficiaries of their deceased father's life insurance policy, are entitled to a payment of $7,500 in addition to the $2,500 benefit already paid. As set forth more fully herein, since Florida's statutory and rule framework do not require that notice provided to the Division of Retirement be shared with the Division of State Group Insurance, Petitioners did not demonstrate that they are entitled to the additional benefit.
Findings Of Fact The Division of State Group Insurance (DSGI) is an administrative unit located within the Department of Management Services (DMS), and pursuant to Section 110.123(3), Florida Statutes, is designated as the agency responsible for the administration of the State Group Insurance Program (Program). The life insurance program at issue in these proceedings is a part of the Program. DMS has contracted with Northgate Arinso, formerly Convergys, Inc., to provide human resources management services, including assisting in the administration of employee benefits. Convergys primarily performs these tasks through an online system known as "People First." The term "employee benefits" refers to insurance, but not to retirement benefits. People First became the system of record for DSGI benefits data, including addresses, on January 1, 2005. Petitioners Martha L. Kenerson and David R. Kenerson, Jr., are the daughter and son of David R. Kenerson (Mr. Kenerson), a retired employee of the State of Florida, and the beneficiaries of the life insurance that was provided through the Program. Mr. Kenerson died a resident at 156 56th Street South, St. Petersburg, Florida, on March 31, 2009. Since Mr. Kenerson's retirement, the State of Florida, through DSGI, has maintained a Group Life Insurance Policy (the Policy) covering the individual lives of its former employees who elected to be covered. The Policy is a benefit available to retirees of the State of Florida which Mr. Kenerson, as a retiree, accepted. The Insured, Mr. Kenerson, was entitled to inclusion in the group of State of Florida retirees who were covered under the Policy that was offered by the State of Florida to its retirees. Mr. Kenerson received a pension for life from the State of Florida. Beginning January 1, 2000, and subsequently, the life insurance coverage was $10,000. It was changed beginning in Plan Year 2007, as to all retirees, due to DSGI's determination of the impending loss of the Advanced Premium Account. As to Mr. Kenerson, it was reduced from $10,000 to $2,500 beginning in Plan Year 2007 for the following reasons: He defaulted in responding to the Open Enrollment Notice; Neither Mr. Kenerson nor anyone on his behalf submitted any notification of election pursuant to such Open Enrollment Notice; and DSGI determined that it was necessary to change the coverage for death benefits because of such impending loss of the Advanced Premium Account. On April 10, 2009, Minnesota Life Insurance Company claims examiner Latrice S. Tillman contacted Petitioner Martha L. Kenerson regarding the death of Mr. Kenerson, asking for the death certificate of the Insured and the Preference Beneficiary Statements from both Petitioners. On April 17, 2009, Petitioners filed the appropriate documents with the Minnesota Life Insurance Company as beneficiaries of Mr. Kenerson's life insurance policy. On May 20, 2009, Petitioners each received a check in the amount of $1,257.59, constituting $1,250 of insurance proceeds (totaling $2,500) and the balance of interest on the $2,500 insurance proceeds. On May 24, 2009, Petitioner Martha L. Kenerson wrote a letter to DSGI requesting an appeal. On June 9, 2009, Ms. Kenerson received a letter dated July 9, 2009, from Michelle Robleto, the Director of DSGI, denying Petitioners' Level II Appeal and informing Petitioners of their right to request a hearing. On June 26, 2009, Ms. Kenerson timely petitioned for an evidentiary hearing regarding Mr. Kenerson's policy. Approximately 29,391 State of Florida retirees were covered under the Policy in Class A (i.e., with initial $10,000 coverage excluding Classes having such initial coverage) at the time when Respondent sent the Change Notice of the proposed changes in coverage that applied also to Mr. Kenerson's Policy. Approximately 5,921 State of Florida retirees were covered under Class A of the Policy and elected, in response to the Change Notice, to increase the premium in order to retain the coverage at $10,000. None of the State of Florida retirees in Class A under the Policy who failed to respond in writing to the Change Notice was contacted by Respondent prior to the effective date of coverage change. Respondent never attempted to call retirees regarding their wishes as to the Change Notice. Respondent has no proof that it spoke with the Insured to explain the proposed change of coverage and/or premium in January 2007. Respondent did not mail the Open Enrollment Notices to retirees by a method that required affirmative identification of the recipient, such as by certified return receipt or other postal proof of delivery. The premiums for the Policy were paid by the State of Florida from Mr. Kenerson's pension as a deduction from the payment of the gross pension payments. From at least January 1, 2003, to the end of the Open Enrollment Period for Plan Year 2007, the Department of Financial Services (DFS) never communicated to Respondent the address that DFS was using for Mr. Kenerson. DFS has a separate and independent data base from that used by Respondent. At no time did DMS send to the Insured c/o Petitioner David R. Kenerson, Jr., any Open Enrollment Notice for any plan year before the 2008 plan year relating to the terms of the Policy. As administrator of the Policy, it is and has been DMS's responsibility to maintain a database of addresses for contacting retirees who are eligible for coverage under the Policy. In August 2002, DMS contracted with Convergys as a third party service provider to perform administrative functions, including the maintenance of the retirees "address of record" database for insurance purposes and for recordkeeping relating to retirees whose lives were insured under the Policy. With respect to the July 31, 2006, mailing to retirees, DMS retained direct control of the stuffing, sending, and addressing of the letters, as well as the collection of mail that was returned as undeliverable. In 2004, DMS delivered to Convergys a copy of the retiree address of record contained in the Cooperative Personnel Employment System (COPES), previously maintained only by DMS. Tom Lockridge, Respondent's Benefits Team Manager in 2005, noted his confusion with how many different databases exist that cover retirees of the State of Florida. He was aware that DSGI and the Division of Retirement Services (DRS) each has its own databases. Retirees entitled to enroll in the Policy managed by DSGI are also entitled to pension eligibility or other post- retirement activities managed by DMS, DRS, or the State University System. Since the inception of the DMS website, www.myflorida.com, two separate databases, the People First database and the DRS database, have been maintained. At all times since 2000, Mr. Kenerson was listed as a retiree of the State of Florida in the databases of DSGI and DRS. During the Open Enrollment period for Plan Year 2007 for the Policy, DMS records maintained by Convergys in the "address of record" database showed that Mr. Kenerson lived at 1737 Brightwaters Boulevard, St. Petersburg, Florida. DMS, through its agent Convergys, sent the Open Enrollment Notice for Plan Year 2007 for the Policy to Mr. Kenerson at the Brightwaters Boulevard address. In 2001, Mr. Kenerson sent to DRS, but not to DSGI, a written notice of change of address showing his new address as 156 56th Street South, Villa 37, St. Petersburg, Florida. DMS never received an affirmative notice from Mr. Kenerson electing to either adopt the $2,500 coverage; increase to $10,000 in coverage; or terminate his enrollment altogether. In connection with the Open Enrollment notice, DMS contract with Convergys did not require Convergys to seek data from other Florida agencies or divisions to update the database of retirees' addresses and contact information. In connection with the Open Enrollment notice, DMS records management policies did not require DMS personnel to obtain data from other Florida agencies or divisions to update the DMS database of retirees' addresses and contact information. In designing the offered choices on the Open Enrollment notice, DMS allocated $6.33 per month from the Advance Premium Account to subsidize each retiree's premium for Plan Year 2007. Approximately 80 percent of the then-current retirees elected, or were deemed to have elected by default, to reduce their coverage from $10,000 to $2,500 as a result of the Open Enrollment process conducted by DMS. As of October 2006, 24,488 retirees elected the $2,500 life insurance policy for Plan Year 2007, while 4,769 retirees elected the $10,000 coverage. The Open Enrollment notice did not explain why those electing the $10,000 in coverage were required to pay almost eight times the amount of premium charged for $2,500 of coverage ($35.79 per month versus $4.20 per month). A "positive enrollment" means an individual must affirmatively elect each and every benefit or a certain type of benefit. A "passive enrollment" is where, by taking no action, the individual continues to have the same benefit level as previously. Respondent used the "passive enrollment" system for Plan Year 2008, when the life benefit premium changed due to the fact that Convergys would have charged a significant fee (seven figures) to conduct a "positive enrollment." DMS elected not to incur the additional expense. Since the state has designated People First as the system of record for its retirees relating to their benefits and information regarding Open Enrollment, any changes in address are made through the People First system. The agreement between DMS and Convergys does not require Convergys to communicate with other agencies regarding updating of the address of record database for retirees. Convergys, as the contractor to DMS, routinely destroys mail returned as undeliverable after 90 days. Neither DMS nor Convergys maintains a list of "bad addresses," those to which mail has been returned as undeliverable. DMS told Convergys not to synchronize their address database with the Florida Retirement System (FRS) database. DMS was aware that there were retirees who sent address changes to DRS and not to People First. DMS was aware that its address of record database for retirees contained at least some addresses that were not current for some customers. DMS was aware that some number of Open Enrollment packages was returned every year as undeliverable due to incorrect addresses. DMS does not maintain a record of returned Open Enrollment packages. DMS has adopted no rules to record the names and addresses of retirees whose Open Enrollment packages have been returned as undeliverable. DMS has adopted no rules to compare or synchronize the DMS address of record used for Open Enrollment packages with other databases maintained by DMS, DFS, the Florida Department of Revenue, the Florida Department of Highway Safety and Motor Vehicles, local voter registration, or any other State of Florida address lists. DMS has adopted no rules to update the address of record database used by DMS for notices to retirees relating to group term life insurance policies such as the one at issue here. DMS has adopted no rules to create, preserve, or update records, and to destroy names of retirees whose notices are returned by the U.S. Postal Service as undeliverable due to no forwarding address. The ultimate custodian of the State of Florida database containing addresses of record for retirees' insurance benefits is Convergys, Inc. At all times from January 1, 2001, to April 30, 2009, the FRS, administered by DMS, has maintained a database of State of Florida retirees that includes their address records in connection with pension and retirement income and expense matters. This FRS database is separate from the address of record database maintained by Convergys/People First for the same period. The letter dated July 31, 2006, relating to the 2007 plan year, advised State of Florida retirees that they could change their election of life insurance benefit up to and including January 19, 2007. Mike Waller, an employee of DSGI, maintains benefits data for People First/DSGI. In July 2006, Mr. Waller was asked to prepare a file containing the names and addresses of all retirees who were covered by life insurance. He created a file used in a mail merge program to send all retirees a copy of the July 31, 2006, letter. In preparing the file containing the mailing addresses of retirees covered by life insurance in July 2006, Mr. Waller used the addresses of record from the benefits data he maintained. The DSGI address of record for Mr. Kenerson in July 2006 was 1737 Brightwaters Boulevard, St. Petersburg, Florida 33704, and was included in the mailing addresses file. Mr. Waller prepared the file and delivered it to Dick Barnum and Thomas Lockridge on July 3, 2006. Thomas Lockridge delivered the file to Laura Cutchen, another employee of DSGI. DSGI contracted with Pitney Bowes, a mailing system company, to mail the July 31, 2006, letter to all State of Florida retirees. After obtaining copies of the letter from the DSGI print shop, Ms. Cutchen delivered the letters and the file containing the names and addresses of the retirees to Pitney Bowes to assemble. The letters were assembled by Pitney Bowes and delivered to the U.S. Post Office, accompanied by Ms. Cutchen, and the State of Florida first class mailing permit had been applied to each envelope. The letter dated July 31, 2006, was mailed to Mr. Kenerson at the Brightwaters address, by first class mail, using the State of Florida permit for DSGI. The return address on the envelope containing the July 31, 2006, letter was DSGI, 4050 Esplanade Way, Suite 215, Tallahassee, Florida 32399-0949. Any letters returned to DSGI as undeliverable were processed by Janice Lowe, an employee of DSGI. Each letter returned to DSGI was handled in one of two ways: If the envelope showed a different address on the yellow sticker applied by the U.S. Postal Service, the letter was re-mailed to that address; or If the returned envelope did not provide a different address, a manual search of the database of DRS was made; a copy of the print screen showing the address in the DRS database was made, if different from the address on the database of DSGI; and the original envelope and letter were placed in another envelope and mailed to the address from the DRS database. A copy of each DRS print screen that was accessed by Ms. Lowe was printed and inserted in alphabetical order in a binder. There was a DRS print screen for every person whose letter was returned and for which there was not another address. The absence of a DRS print screen indicates that the initial letter was not returned. No DRS print screen exists for Mr. Kenerson, an indication that the letter to him dated July 31, 2006, was not returned to DSGI. Prior to Convergys assuming responsibility for the administration of benefits, DSGI maintained benefits information in COPES. When Convergys assumed responsibility for the management of benefits on January 1, 2005, the benefits information from COPES was imported into the Convergys/People First system. People First and DRS do not share databases and each maintains its own database of names and addresses. In addition to the letter discussed at length above, each year, DSGI must hold an "Open Enrollment" period for the health program. Open Enrollment is the period designated by DMS during which time eligible persons, not just State of Florida retirees, may enroll or change coverage in any state insurance program. Prior to Open Enrollment each year, DSGI provides employees and retirees a package that explains the benefits and options that are available for the next plan year. The 2006 Open Enrollment period for the 2007 plan year ran from September 19, 2006, through October 18, 2006. During Open Enrollment for Plan Year 2007, the People First Service Center was charged with the responsibility of sending Open Enrollment packages to State of Florida retirees and other employees. People First mailed Mr. Kenerson's Open Enrollment package to the Brightwaters Boulevard address on September 3, 2006. The mailing of Open Enrollment packages is noted on the Open Enrollment screen by the Item Code "FSAE." The Open Enrollment packages, like the July 31, 2006, letter to retirees, were mailed by People First through the U.S. Post Office, first class prepaid postage. The Open Enrollment package mailed to Mr. Kenerson on September 3, 2006, contained Mr. Kenerson's Benefits Statement; a letter from John Mathews, former Director of DSGI; Information of Note; a Privacy Notice; a Notice Regarding Prescription Coverage; and the 2007 Benefits Guide. The Information of Note included a detailed description of the reduction in life insurance benefits from $10,000 to $2,500 unless an affirmative election was made to pay a higher premium. Neither Mr. Kenerson nor anyone on his behalf affirmatively elected to continue $10,000 in life insurance coverage during the enrollment period in 2006 for Plan Year 2007. Because the $10,000 life insurance option was not affirmatively made by the Insured or anyone on his behalf, upon his death, Respondent determined that he was entitled to $2,500 in death benefit. For those retirees who did not make a timely election pursuant to the Open Enrollment notice sent in 2006 for Plan Year 2007, the death benefit automatically became $2,500, effective January 1, 2007, for a monthly premium of $4.20. As of Open Enrollment 2005, the People First Service Center was charged with the responsibility of sending Open Enrollment packages to State of Florida retirees and other employees. The letter contained in the Open Enrollment package for 2006 for Plan Year 2007 stated as follows: The State conducts a "passive enrollment." If you want to keep the same insurance and benefits plans indicated, you do not have to do anything. Your Flexible Spending Account will be continued at the same annual amounts if no charges are made during Open Enrollment. The reverse side of this letter contains important information regarding changes, new offerings, and reminders regarding processes necessary to ensure a successful enrollment. Please review these items of note. Included in the Open Enrollment package was an "Information of Note" which set forth the reduction in life insurance benefit as well as the amounts to be charged for either the $2,500 or $10,000 benefit. Prior to January 1, 2007, funds in the Advanced Premium Account were applied to payment of costs of life insurance premiums under the policy for retirees. Once the funds in the Advanced Premium Account were depleted, the monthly premium for the $10,000 policy increased significantly to $35.79. DSGI has consistently mailed Open Enrollment packages, including Benefits Guides, to the addresses of record for all retirees, including Mr. Kenerson. Prior to May 1999, Mr. Kenerson actually resided at the Brightwaters Boulevard address, which had been his address of record since at least 1988. DSGI had mailed all correspondence to that address for Mr. Kenerson. In the past, DSGI had mailed, from time to time, newsletters to retirees. These newsletters were mailed to the addresses of record for the retirees. The newsletter for January-March 1999 contains the telephone number and address for DSGI and the following notice under the heading "Reminder Tidbits": "Notify both the Division of Retirement and the Division of State Group Insurance in writing if your mailing address changes." The newsletter for July-September 1999 contained the following: "Q. What if I do not receive my Open Enrollment package? A. If you do not receive the Open Enrollment package by September 17, contact the Division of State Group Insurance. You should also confirm your mailing address when you call." Prior to Mr. Kenerson moving from the Brightwaters Boulevard address, notices mailed to him there included notification that retirees were required to update any changes in address with DSGI. Throughout the years, the Benefits Guides that are included in the Open Enrollment packages have informed all program participants of their responsibility to maintain a current address with DSGI. Even if Mr. Kenerson had changed his address with DRS, such update would not have been provided to DSGI. Neither DSGI nor DRS notifies the other of receipt of a change of address. A change of address with one division of DMS does not automatically change the address in another since the two divisions have separate databases. Within DMS there is no centralized database of records containing addresses of record for all DMS functions. Retirees and active employees of the State of Florida are not required to have one address of record for all functions and services received through DMS. In fact, many State of Florida employees have different addresses for different DMS division functions. DSGI and DRS serve different functions and do not share databases. DRS consists of all retirees who participate in FRS, including local governments. The total number of individual participants is over 300,000. The synchronization of databases would be an expensive undertaking and no funding has been provided to synchronize DSGI with DRS or any other state agency or public entity. No evidence demonstrated that Mr. Kenerson informed DSGI in any way that he desired to maintain his $10,000 life insurance benefit, or that DSGI assumed or accepted that responsibility.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of State Group Insurance, enter a final order dismissing the petition in its entirety. DONE AND ENTERED this 10th day of November, 2010, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 2010. COPIES FURNISHED: Sonja P. Mathews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399 Martha Lynne Kenerson, Esquire Bierce & Kenerson, P.C. 420 Lexington Avenue, Suite 2920 New York, New York 10170 William B. Bierce, Esquire Bierce & Kenerson, P.C. 420 Lexington Avenue, Suite 2920 New York, New York 10170 John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
Findings Of Fact The Petitioner, at all times pertinent hereto was an employee of the Department of Health and Rehabilitative Services. The Respondent is an agency of the State of Florida charged with administering the group self-insurance health insurance program and other insurance programs such as life insurance and is the agency charged with accepting or rejecting applications for coverage under those programs, such as the application at issue. On January 11, 1980 the Petitioner commenced employment with the State of Florida, Department of Health and Rehabilitative Services as a District Intake Counselor in District eleven of the Department. Shortly after commencing employment the Petitioner attended an orientation meeting during which all insurance benefits and other benefits available for state employees were explained. Ernestine Thurston, the HRS employee who conducted the orientation session on January 11, 1980 informed all employees present at that orientation meeting, including the Petitioner, of the available benefits and the means by which they were to avail themselves by proper application, of those benefits, including the fact that the Petitioner had thirty days to enroll in the State Group Health Insurance Program without the necessity of obtaining medical approval for insurability. A second orientation meeting was held during which insurance benefits were explained for a second time to the employees whose names were depicted on the recruitment log, which names include the Petitioner 's. The Petitioner was present at both orientation sessions. At the first orientation session on January 11, 1980 the Petitioner received an HRS Employee Handbook which included the following language concerning insurance benefits: "Employees may enroll within 30 days of date of employment without evidence of insurability. "Application at a later date requires proof of insurability. Consult your supervisor, personnel manager, or district/central personnel office for additional information." The Petitioner admitted that she signed a receipt on January 11, 1980 acknowledging receipt of a complete copy of that Employee Handbook and which receipt included the following language: "I understand that it is my responsibility to review the pamphlet in detail and request any clarification needed from my supervisor or personnel office." Petitioner conceded that she did not read the pamphlet or handbook, but instead put it in her desk drawer at her office. On January 14, 1980, knowing of the need to apply for insurance benefits within 30 or 31 days of her employment during the open enrollment period, the Petitioner applied for various insurance -overages and submitted the pertinent enrollment forms through her District 11 personnel office. She applied for and received State Supplemental Health Insurance coverage through the Gulf Life Insurance Company (then called the "20/20" plan). This supplemental health insurance coverage was designed to complement the overall state group health insurance program or plan. The Petitioner at that time was covered under the overall state group health insurance plan (The Plan) through her husband's family coverage since he was an employee covered under that plan at the time. The Petitioner also timely applied for and received coverage under the state life insurance program as well. The Petitioner did not submit a new enrollee form requesting to participate in the State of Florida Employee's Group Health Self Insurance Plan within 31 calendar days of January 11, 1980. The Hearing Officer has considered the Petitioner's testimony as well as that of Ms. Thurston and the other evidence surrounding the circumstances of her initial employment, the explanation of insurance coverage benefits, including the time limit for the open enrollment without medical approval which the Petitioner did not avail herself of insofar as the group health self-insurance plan is concerned. The Petitioner did not apply for the overall group health self-insurance plan because she was already covered under that plan through her husband's coverage and not because, as Petitioner maintains, that it was never explained that she had 30, or actually 31, calendar days from January 11, 1980 to apply for that plan. Indeed it was explained to her as Ms. Thurston established and Respondent admits receiving the handbook further explaining the time limit to apply for that coverage without medical approval. She signed a receipt acknowledging her responsibility to read that pamphlet or manual and ask for clarification, if needed, concerning coverage benefits and she admitted that she did not read it. Thus it is found that at the time of her initial employment all pertinent insurance benefits and entitlements were explained to the Petitioner both verbally and in writing and she failed to avail herself of the automatic coverage provision referenced above in a timely way, for the reason stated above. In any event, on July 28, 1980 the Petitioner elected to submit a new enrollee form which was submitted with a medical statement form requesting participation in the State Plan. After correspondence with the State Plan administrator requesting additional medical information, on October 22, 1980 the Department of Administration, by letter, advised the Petitioner that she had not been approved by the plan administrator and she was denied coverage for medical reasons. Accordingly, on October 24, 1980 the Petitioner enrolled in the South Florida Group Health, Inc. Plan which is a health maintenance organization plan (HMO) and she was allowed enrollment in that plan without regard to her current medical condition. The Petitioner remained enrolled in the HMO and requested and was granted leave of absence without pay from her employment position commencing May 29, 1981. Her employing agency advised her that it was her individual responsibility to forward premium payments for the HMO health insurance premiums as well as the state life insurance coverage herself. In other words, she was to pay by cash or her own personal check for this coverage during the time she was not being paid by the state, that is, the premiums for that coverage were not being payroll deducted because she was temporarily off the payroll. Her employment with the State did not lapse during this period commencing May 29, 1981, rather she remained employed, but was on leave without- pay status. The Petitioner knew of her responsibility to pay the premiums for the HMO coverage and the state life insurance coverage itself during the period she was on leave of absence without pay as evidenced by the check she and her husband submitted in June 1981 to pay the premiums on her state life insurance coverage. The Petitioner and her husband moved from Miami to Fort Myers during early June 1981 and the Petitioner remained on leave of absence without pay. When her husband changed employment and moved to the Fort Myers area in June 1981 the Petitioner was a covered dependent under the health insurance coverage available to her husband through his new employment. I n August 1981 the South Florida Group Health, Inc., the HMO in the Miami are of which Petitioner was a member, terminated the Petitioner's health insurance coverage effective August 1, 1981 due to the Petitioner's failure to pay the premiums for that coverage. Shortly thereafter the Petitioner interviewed with personnel officials of HRS in District 8 in Fort Myers and obtained an employment position as a district intake counselor for District 8. She became an active payroll employee of HRS in District 8 by transfer in August 1981. Before the effective date of her transfer the Petitioner was interviewed by Judy Graham, an HRS employee assigned to process her transfer from her former active employment in District 11 in Miami. The Petitioner failed to advise Judy Graham at the time of the interview of her HMO coverage, merely inquiring of Ms. Graham concerning the details of continuation of her state life insurance coverage and concerning her credit union membership. Thereafter, more than 31 calendar days after the effective date of her transfer, (August 24, 1981), indeed, in excess of two years later, the Petitioner completed a new enrollee form again and applied for the state employee's group self- insurance plan benefits. The Department of Administration denied the Petitioner participation upon the determination that she was not medically approvable for insurability by the Plan's claims administrator, Blue Cross and Blue Shield of Florida, Inc. In any event, the Petitioner's continuous employment with the state and with HRS had never lapsed since she was initially hired January 11, 1980. She was merely on inactive/leave-without-pay status as a state employee from May 29, 1981 until August 24, 1981, as that relates to any right to a second 31-day open enrollment period.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties it is, therefore, RECOMMENDED that a final order be entered by the Department of Administration denying the Petitioner's requested enrollment in the State Group Health Insurance Plan without medical approval. DONE AND ORDERED this 31st day of December, 1985, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 1985. APPENDIX The following specific rulings are made on the Proposed Findings of Facts submitted by the parties: Petitioner's Proposed Findings of Fact Accepted. Accepted, but subordinate and not material to disposition of the issues at bar. Accepted, but subordinate and not material to disposition of the issues at bar. Accepted, but subordinate and not material to disposition of the material issues at bar. Rejected as not being in accordance with the competent, substantial, credible testimony and evidence adduced. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Rejected as not being in accordance with the competent, substantial, credible testimony and evidence adduced. Accepted, but this Proposed Finding of Fact in itself is not dispositive of the material issues of fact and law resolved herein. Accepted. Rejected as not in accordance with the competent, substantial, credible evidence and testimony adduced. Accepted. Accepted. Respondent's Proposed Findings of Facts The Respondent failed to number its Proposed Findings of. Fact, therefore its Proposed-Findings of Fact will be specifically ruled upon in the order the various paragraphs containing its Proposed Findings of Fact were presented. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. COPIES FURNISHED: Gilda Lambert Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Curtright C. Truitt, Esq. Post Office Box 2706 Ft. Myers, Florida 33902 Richard L. Kopel, Esq. Department of Administration 435 Carlton Building Tallahassee, Florida 32301
The Issue This case involves a dispute as to whether the Petitioner underpaid the premiums due on his health insurance coverage and, if so, what action should be taken by the Department of Administration as a result of any premium underpayments. By notice dated March 18, 1988, the Department of Administration notified the Petitioner that the Department records "show a total underpayment of $1,117.81 for the coverage periods 9/86 through 9/87." At the formal hearing, over the objection of the Petitioner, the Department was permitted to offer evidence regarding the Petitioner's premium history (both the amounts due and the amounts actually paid) for the entire period of the Petitioner's employment with the State of Florida, a period which runs from May 1978 until October 1988. At the formal hearing the Department of Administration presented the testimony of one witness and offered several exhibits, all of which were received. The Petitioner did not present any evidence, but did present oral argument on his own behalf. The parties were allowed 10 days from November 3, 1988, within which to file their post-hearing submissions with the Hearing Officer. The Department of Administration timely filed Proposed Findings Of Fact. Those findings are specifically addressed in the appendix to this recommended order. The Petitioner did not file any post-hearing submission.
Findings Of Fact Based on the evidence received at the formal hearing, I make the following findings of fact. From May 1, 1978, until August 1, 1978, the Petitioner requested and received family coverage under the State Group Health Self-insurance Plan. From November 1, 1978, until November 1, 1985, the Petitioner requested and received individual coverage under the State Group Health Self-Insurance Plan. From November 1, 1985, until the date of the hearing, the Petitioner requested and received family coverage under the State Group Health Self-Insurance Plan. From May 1, 198, until July 1, 1984, the Petitioner was a part-time employee of the State of Florida, working .25 of a full-time equivalent position. Accordingly, his premiums for health insurance coverage under the State Group Health Self-Insurance Plan during this period should have been paid on the basis of employment in a .25 full-time equivalent position. From July 1, 1984, until at least the date of the hearing, the Petitioner has been a part-time employee of the State of Florida, working .20 of a full-time equivalent position. Accordingly, his premiums for health insurance coverage under the State Group Self-Insurance Plan during this period should have been paid on the basis of employment in a .20 full-time equivalent position. During the period beginning May 1, 1988, and continuing through October of 1988, the amount by which the Petitioner underpaid his health insurance coverage premiums totals S1,116.36. 1/ During the period beginning March 1, 1986, and continuing through October of 1988, the amount by which the Petitioner underpaid his health insurance coverage premiums totals $861.74. During the thirteen-month period beginning with September 1986 and ending with (but including) September 1987, the amount by which the Petitioner underpaid his health insurance coverage premiums totals $258.36.
Recommendation Based on all of the foregoing, I recommend the entry of a Final Order to the following effect: Finding the Petitioner to be in debt to the State of Florida in the amount of $258.36 by reason of underpayment of premiums during the period of September 1986 through September 1987. Providing that the Petitioner's health insurance coverage under the State Group Health Self-Insurance Plan will be cancelled unless within thirty (30) days following the entry of the final order the Petitioner either pays the full amount of $258.36 or enters into an installment payment program consistent with Rule 22K-1.049(1)(a)2., Florida Administrative Code. DONE AND ENTERED this 23rd day of November, 1988, at Tallahassee, Florida. MICHAEL M. PARRISH, 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 November, 1988.
