The Issue Whether the Petitioner, Robbie Reynolds, is eligible for family medical insurance coverage for medical expenses incurred by the Petitioner's son?
Findings Of Fact The Parties. At all times relevant to this proceeding, the Petitioner, Robbie W. Reynolds, was an employee of Department of Corrections, an agency of the State of Florida. The Respondent, the Department of Management Services, Division of State Employees' Insurance (hereinafter referred to as the "Division"), is an agency of the State of Florida. The Division is responsible for managing the State's employee health insurance system. Participation in the State of Florida Health Insurance Plan. The State of Florida makes health insurance available to its employees (hereinafter referred to as the "State Health Plan"). Employees may choose health insurance through the State of Florida Employees' Group Health Self Insurance Plan or through various health maintenance organizations (hereinafter referred to as "HMOs"). The Division has promulgated Chapter 60P, Florida Administrative Code, regulating the State Health Plan. Employees pay part of the premiums for their health insurance and the State contributes a part of the cost of premiums. The amount of premiums paid by an employee and the State depends on the type of coverage selected. Employees may elect coverage only for themselves ("individual" coverage), or coverage for themselves and certain qualified dependents ("family" coverage). Female employees who elect individual coverage are eligible for the payment of maternity or pregnancy benefits. Included in these benefits are certain benefits for the newborn child referred to as "well-baby care." In order for medical expenses attributable solely to a newborn baby that is ill at or after birth to be covered by the State Health Plan, an employee must elect family coverage for the employee and the child. The family coverage must be effective as of the date the medical expenses are incurred for the child. Open Enrollment Periods. Once an employee selects the type of health insurance he or she desires, that employee generally may change the election only during certain designated periods of time, referred to as "open enrollment periods." During an open enrollment period, an employee may change from HMO coverage to the State of Florida Employees' Group Health Self Insurance Plan, or vice versa, may change from individual coverage to family coverage, or vice versa, and may add or delete dependents to the employee's family coverage. Changes to an employees' State Health Plan coverage made during an open enrollment period are effective for the calendar year immediately following the open enrollment period. Other Changes in Health Insurance Coverage. An exception to the requirement of the State Health Plan that changes in coverage only be made during an open enrollment period is provided for certain specified events, referred to as "qualifying events." The acquisition of an "eligible dependent" during a year may constitute a qualifying event. For example, if an employee marries, the employee may elect family coverage for himself or herself and the employee's spouse. A change from individual coverage to family coverage may also be made if an employee or an employee's spouse gives birth to a child. The change to family coverage as a result of marriage or the birth of a child must be made within thirty-one days after the eligible dependent is acquired. An employee may also elect family coverage as a result of the employee or the employee's spouse becoming pregnant. If the employee or employee's spouse elects family coverage in time for the family coverage to be effective at the time of the child's birth, the child may then be added as a dependent to the family coverage by notifying the Division of the child's birth within thirty-one days after the child is born. In order to change to family coverage when an employee or employee's spouse becomes pregnant, the employee, must apply for the change to family coverage in time for the employee to make a month's premium payment on the first day of at least the month during which the child is born or an earlier month. For example, if an employee elects to change from individual coverage to family coverage for a yet to be born child in July effective for September, the first full month's premium is paid on September 1, and the child is born on September 2, the employee has family coverage for all of September and the child will be covered if the Division is notified of the child's birth within thirty-one days after the date of birth. In order for an employee to make a change in coverage as the result of a qualifying event, the employee must file a Change of Information form with the employee's personnel office. The personnel office forwards the form to the Division. Ms. Reynolds' Health Insurance. Ms. Reynolds, as an employee of the State of Florida, was eligible for state health insurance. She elected to participate in the HMO that was available in the Gainesville area where she is employed. AvMed is the name of the HMO for the Gainesville area and Ms. Reynolds' insurer. Although married, Ms. Reynolds initially elected individual coverage. Ms. Reynolds did not elect family coverage for her husband because he received health insurance benefits from his employer. During 1992, Ms. Reynolds became pregnant. The baby's projected due date was April 15, 1993. The Open Enrollment Period for 1993. The open enrollment period for the next calendar year (1993) after Ms. Reynolds became pregnant took place in October of 1992. During the October 1992 open enrollment period the Department of Corrections, through its personnel office, conducted meetings with employees to discuss health care benefits and coverage available to its employees. Two benefits consultants, trained by the Division, conducted the meetings, providing information to, and answering questions from, employees concerning the open enrollment period. Ms. Reynolds, who was approximately three months pregnant at the time of the benefit consultation meetings, attended one of the sessions. Ms. Reynolds attended the session for the purpose of determining what steps she should take to insure that her yet-to-be-born infant was covered by health insurance. Ms. Reynolds spoke for some time with Gail Page and Jordaina Chambers, benefits consultants of the Department of Corrections. Ms. Reynolds informed the benefits consultants that she was pregnant and that she wanted to insure that her yet-to-be-born infant was covered by her health insurance. Ms. Reynolds was incorrectly told that she could not elect family coverage for just her and her yet-to-be-born infant. This incorrect advice, however, did not have any effect on the effective date Ms. Reynolds ultimately decided to begin her family coverage. Ms. Reynolds also informed the benefits consultants that the baby was due April 15, 1993. The benefits consultants informed Ms. Reynolds that her pregnancy constituted a qualifying event and that she could, therefore, switch to family coverage in order to cover her baby. She was also informed that she would have to notify the Division of her child's birth with thirty-one days after birth to add the child to the policy. After being told that she would have to switch her coverage from individual coverage to family coverage, adding her husband as a dependent, Ms. Reynolds asked the benefits consultants when she should switch to family coverage. Consistent with the policies of the Division, and the training the benefits consultants had received from the Division, the benefits consultants advised Ms. Reynolds that she should elect family coverage effective two or three months prior to her due date. The Division makes this recommendation so that employees can save the increased premiums for family coverage a reasonable period of time before the child is born. In light of the fact that Ms. Reynolds' conversation with the benefits consultants took place during the 1992 open enrollment period and the fact that January 1, 1993 was three and one-half months prior to Ms. Reynolds' due date, Ms. Reynolds was advised by the benefits consultants that it would be reasonable to switch from individual coverage to family coverage through the open enrollment period. Based upon this advice, Ms. Reynolds' family coverage would be effective January 1, 1993. The benefits consultants did not advise Ms. Reynolds of any possible consequences of not electing to switch from individual coverage to family coverage with an effective date prior to January 1, 1993. The benefits consultants also did not tell Ms. Reynolds that she could not choose to switch from her individual coverage to family coverage with an effective date prior to January 1, 1993. On or about October 15, 1992, Ms. Reynolds executed and filed with the Division an Annual Benefit Election Form. Respondent's exhibit 1. Pursuant to this form Ms. Reynolds elected to change her health insurance coverage from individual to family effective January 1, 1993. Ms. Reynolds elected to add her husband as a covered dependent. Based upon the election made by Ms. Reynolds, her family coverage became effective on January 1, 1993. If her child was born before that date, any expenses attributable solely to medical services received by the child would not covered by Ms. Reynolds' medical coverage. If the child was born on or after that date and Ms. Reynolds notified the Division of the child's birth within thirty-one days after the child's birth, any expenses attributable solely to medical services received by the child would be covered by Ms. Reynolds' medical coverage. The evidence failed to prove that the advice given by the benefits consultants in October 1992 was not reasonable based upon the information available to them and to Ms. Reynolds. The evidence also failed to prove that either the benefits consultants or Ms. Reynolds unreasonably failed to realize that the child would be born more than three and one-half months premature. Ms. Reynolds, while reasonably relying on the advice of the benefits consultants, knew or should have known that the ultimate decision as to when to begin family coverage was hers to make. Ms. Reynolds also should have been somewhat wary of the advice she was given, in light of the fact that Ms. Reynolds admitted that she was told by the benefits consultants that they "did not know that much about what she was asking." Despite this warning, Ms. Reynolds testified during the final hearing that she followed their advice because she felt there was "no reason to believe they would be wrong." The Premature Birth of the Reynolds' Child. On December 29, 1992, Ms. Reynolds underwent surgery, due to unforeseen medical complications, to deliver her child. The child died on January 1, 1993. In order to add the child as a dependent to her medical insurance when the child was born, Ms. Reynolds had to have family coverage in effect as of December 1, 1992 or earlier. Unfortunately for Ms. Reynolds, on December 29, 1992 when her child was born, Ms. Reynolds only had individual coverage. The rules governing medical benefits of state employees do not allow employees with individual coverage to add dependents. Therefore, even though Ms. Reynolds attempted to get the Division, through the personnel office of the Department of Corrections, to add her child by notifying the personnel office of the birth of the child immediately after December 29, 1993, the child could not be added to her individual coverage. The child received medical services and incurred medical expenses between December 29, 1992 and January 1, 1993. Those expenses were not covered by the well-baby care provided by Ms. Reynolds' individual coverage. Because Ms. Reynolds did not have family coverage at the time the child was born and the child could not be added to her individual coverage, the medical expenses incurred for the child were not covered by Ms. Reynolds' health insurance. Although the child should be added as a dependent to Ms. Reynolds family coverage which took effect as of January 1, 1993, the evidence failed to prove that any medical expenses incurred for the care of the child on January 1, 1993, were not attributable to a preexisting condition. Therefore, expenses incurred for the care of the child on January 1, 1993, are not eligible for reimbursement. Should the Division be Estopped from Denying Coverage? The Division relies on benefits consultants to assist the Division in administering the State Health Plan. Benefits consultants are trained by the Division, they are state employees and they hold themselves out as representing the State in general and the Division in particular. The Division's rules provide for the active involvement of the various personnel offices in administering the State Health Plan. See, Rule 60P- 2.003(1), Florida Administrative Code. The Annual Benefit Election Forms issued by the Division during the open enrollment specifically provide that the forms are to be turned in to employees' personnel offices. The Division allows personnel offices of the various state agencies to hold themselves out to employees as agents of the Division. In this case, Ms. Reynolds was given advice by benefits consultants, on behalf of the Division and consistent with Division policy, which played a role in Ms. Reynolds making a decision which resulted in medical expenses incurred upon the premature birth of her child not being covered by her medical insurance. While Ms. Reynolds was given some incorrect advice, she was not given incorrect advice concerning the effective date of her family coverage. The advice given to Ms. Reynolds concerning when to start her family coverage was reasonable at the time given and, as she admitted during the hearing, there was no reason in October of 1992 to doubt the wisdom of the advice she received. Ultimately, it was Ms. Reynolds decision. While she may not have understood that advice, she made the decision to make choices and act on the advice even after being warned that the benefits consultants were not knowledgeable about what she was asking.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of State Employees' Insurance enter a Final Order dismissing Robbie W. Reynolds' petition in this matter. DONE AND ENTERED this 19th day of November, 1993, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of November, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-3731 The Division has submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Ms. Reynolds did not file a proposed recommended order. The Division's Proposed Findings of Fact Accepted in 2-3 and 19. Accepted in 4-5, 9 and hereby accepted. Hereby accepted. Accepted in 6 and 9. Accepted in 11-17. Accepted in 7-8. Accepted in 1 and 18-19. Accepted in 23-26. Accepted in 20, 28 and 30-32. But See 27-20. See 29-30. But see 27. Accepted in 34 and 38. See 40. Hereby accepted. Accepted in 40-41 COPIES FURNISHED: Robbie W. Reynolds 2635 South West 35th Place, #1304 Gainesville, Florida 32608 Augustus D. Aikens, Jr. Chief of Bureau of Benefits and Legal Services Division of State Employees' Insurance Department of Management Services 2002 Old St. Augustine Road, B-12 Tallahassee, Florida 32301-4876 William H. Lindner, Secretary Department of Management Services Knight Building, Suite 307 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950 Sylvan Strickland, Esquire Department of Management Services Knight Building, Suite 309 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950
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
The Issue Whether the Petitioner is required to reimburse the Respondent for prescription drugs acquired by the Petitioner through the Prescription Drug Program of the State of Florida Employees Group Health Self Insurance Plan?
Findings Of Fact The Petitioner was an employee of the State of Florida during the latter part of 1985 and during 1986. His employment with the State began January 27, 1984. Prior to December 1, 1985, the Petitioner participated in the State of Florida Employees Group Health Self Insurance Plan (hereinafter referred to as the "State Plan"). On October 31, 1985, the Petitioner signed a Change of Information form electing to terminate his participation in the State Plan and to begin participation in a Health Maintenance Organization (hereinafter referred to as an "HMO"). The HMO the Petitioner selected was the Capital Health Plan. The title of the form the Petitioner signed on October 31, 1985, contained the following: STATE OF FLORIDA EMPLOYEES GROUP HEALTH SELF INSURANCE PLAN CHANGE OF INFORMATION FOR USE ONLY BY A CURRENT EMPLOYEE OF THIS PLAN [Emphasis added]. Above the Petitioner's signature was the following "employee authorization": I hereby request the above changes in my coverage and/or insurance information in the State of Florida Employees Group Health Self Insurance Plan....[Emphasis added] Prior to terminating his coverage under the State Plan, the Petitioner was given a brochure titled "A Comparison of Health Benefit Plans Offered to Employees of the State of Florida" (hereinafter referred to as the "Comparison Brochure"). The brochure was for employees working in North Florida. The Comparison Brochure indicates there are two general types of health insurance plans available to state employees: HMO Benefit Plans and the State Plan. The Comparison Brochure also indicates there are four HMO Benefit Plans available. Capital Health Plan, the plan the Petitioner elected on October 31, 1985, is one of the clearly designated HMO Benefit Plans listed in the Comparison Brochure. The Comparison Brochure provides the following with regard to prescription drugs for Capital Health Plan participants: "$3.00 co-payment at CHP pharmacy." The Comparison Brochure provides the following with regard to prescription drugs for State Plan participants: "PPC provider not available at this time" if a preferred provider is used and "20 percent co-payment (7)" when a non-preferred provider is used. The reference to "(7)" is a footnote which provides: "Prescription Drug Plan will be implemented by 1-1-86, paying 100 percent after nominal dispensing fee." The Comparison Brochure contains the following other pertinent information: Along with the conventional group health self insurance plan administered by Blue Cross/Blue Shield, the State of Florida offers its employees the opportunity to enroll in a different health care arrangement. This arrangement, called a Health Maintenance Organization (HMO), is available to eligible employees who live within a specific geographic area surrounding the HMO. The Comparison Brochure contains other information that indicates that the State Plan and the Capital Health Plan HMO are completely different types or methods of obtaining health insurance coverage available to state employees. Based upon the information contained in the Comparison Brochure, which the Petitioner indicated he read, the Petitioner should have known that he was entitled to health insurance benefits under the Capital Health Plan HMO as of December 1, 1985, and that he was not entitled to any health insurance benefits under the State Plan. Sometime after December 20, 1985, the Petitioner received a letter from the Department of Administration which provided in pertinent part: Dear Participant: We are pleased to announce the new Prescription Drug Program. Effective January 1, 1986, coverage for prescription drugs under the State Employees Group Health Self Insurance Plan is provided through a prescription drug program serviced by Paid Prescriptions and National Rx Services, Inc. This program is specifically designed to save you money when you use a Preferred Provider Organization (PPO) Pharmacy and Mail Service for your prescription drugs. [Emphasis added]. Included with the letter of December 20, 1985, was a "PLASTIC CARD to use at PPO and participating pharmacies" and a "brochure which gives you instruction on using the Program and a detachable patient profile for Mail Service." The prescription drug card the Petitioner received had "State of Florida Employees Group Health Self insurance Plan" printed on it. It did not contain any reference to Capital Health Plan or any other HMO. The brochure included with the letter of December 20, 1985, which the Petitioner received had "State of Florida Employees Group Health Self insurance Plan" printed at the top of the front cover of the brochure and elsewhere in the brochure. It did not contain any reference to Capital Health Plan or any other HMO. The brochure included with the letter of December 20, 1985, provided the following pertinent information: Coverage for prescription drugs under the State Employees' Group Health Self Insurance Plan is provided through the Prescription Drug Program.... A toll-free telephone number was provided on the prescription drug card and the brochure which the Petitioner was instructed could be used if he had any questions. The prescription drug card sent to the Petitioner was sent to all state employees participating in the "State Employees Group Health Self Insurance Plan." It was not for use by state employees participating in the Capital Health Plan or other HMO's. The card was erroneously sent to the Petitioner by the Respondent. Because the Petitioner had terminated his coverage under the State Plan and elected to participate in an HMO effective December 1, 1985, he was not entitled to use the prescription drug card which he received from the Respondent. In order for the Respondent to have the prescription drug cards ready to be mailed to participants in the State Plan before January 1, 1986, the Respondent used information concerning participants prior to December 1, 1985. Evidently no effort was made by the Respondent to insure that participants who left the State Plan during the end of 1985 did not receive a prescription drug card. The Respondent did send a memorandum dated December 20, 1985, to Personnel Officers and Insurance Coordinators requesting that they attempt to retrieve prescription drug cards from employees who terminated their participation in the State Plan after November 1, 1985. No one retrieved the Petitioner's card. After receiving his card, the Petitioner spoke to the business manager of the County Public Health Unit where the Petitioner worked for the Department of Health and Rehabilitative Services. The Petitioner asked the business manager whether he could use the card and was told that he did not know but would find out. The business manager later told the Petitioner that he had talked to the district personnel office and been told that the Petitioner could use the card. On February 26, 1986, and February 27, 1986, the Petitioner used the prescription drug card to purchase prescription drugs in south Florida. The Petitioner talked with a physician at Capital Health Plan by telephone before purchasing the medications and was authorized to receive treatment by other than a Capital Health Plan physician. The State was billed $5.82 for the medications purchased with the card on February 21, 1986 and February 26, 1986. On March 1, 1986, the Petitioner again used the card to purchase medications. The card was used in Tallahassee, Florida. The State was billed $63.95 ($55.43 and $8.52) for the medications purchased with the card on March 1, 1986. The Petitioner did not use the card on any other occasion. The Petitioner testified that he did not use the card because he discovered that it was less costly to acquire the medications he needed from Capital Health Plan. Based upon the evidence presented at the hearing, however, the cost to the Petitioner was the same whether he used the plastic card or Capital Health Plan's pharmacy: $3.00. On or about March 27, 1986 and April 10, 1986, the Petitioner was informed that he had used the card to obtain medications for which use of the card was not authorized. The Petitioner was requested to return the card and to repay the amount incurred for the medications. The Petitioner did not respond to these requests. On August 26, 1986, the Petitioner was sent a letter requesting that he repay the cost of the medications he had acquired with the card. Although the Petitioner was requested to remit $77.02, the evidence only proved that $69.77 of medication was paid for by the State. On August 28, 1986, the Petitioner returned the prescription drug card he had been given to Andrew Lewis, an employee of the Respondent. The Petitioner has not reimbursed the State for the cost of the medication he received. The $69.77 of medications paid for by the Respondent which the Petitioner acquired with the prescription drug card provided to him by the Respondent represents a payment on behalf of the Petitioner which he was not entitled to. The card was for use by state employees participating in the State Plan. As of December 1, 1985, the Petitioner was not a participant in this plan. When considered together, the information provided to the Petitioner should have put the Petitioner on notice as to the type of medical insurance coverage he was generally entitled to receive. In particular, the Petitioner should have known that he was eligible for coverage under the Capital Health Plan, an HMO, and that he was not entitled to coverage under the State Plan as of December 1, 1985. The Petitioner also should have known that the prescription drug card he received was for use of participants by the State Plan only and not participants of the Capital Health Plan. The Petitioner's reliance on the statements of the business manager of the County Public Health Unit where he worked was not reasonable in light of the other information which he had been provided about his coverage and the purpose of the prescription drug card he was sent. The Petitioner is not able to repay the $69.77 owed to the State in a lump sum. The Petitioner can only pay the $69.77 to the Respondent in monthly installments of $10.00 or less.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is RECOMMENDED that the Petitioner pay $69.77 to the Respondent for prescription drugs received by the Petitioner. DONE AND RECOMMENDED this 26th day of February, 1987, in Tallahassee, Florida. LARRY J. SARTIN 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 26th day of February, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4111 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they were accepted. Those proposed findings of fact which have been rejected and the reasons for their rejection have also been noted. Paragraph numbers in the Recommended Order are referred to as "RO ." The Petitioner's Proposed Findings of Fact: Proposed Finding RO Number of Acceptance of Fact Number or Reason for Rejection 1 Although the Petitioner did not inten- ionally use the prescription card despite being informed that he was not entitled to it, he should have known that he was not entitled to use it. 2 RO 31. 3 RO 21. 4 Not supported by the weight of the evidence. In light of the information provided to the Petitioner concerning the differences between the State Plan and an HMO, the Petitioner did not use due care to determine if the card was a part of the benefits he was entitled to receive as a participant in an HMO. 5 RO 25. 6 Not supported by the weight of the evidence. Ms. Walker testified that the coverage available to state employees is not confusing. The Respondent's Proposed Findings of Fact: 1. RO 1. 2. RO 2. 3. RO 3-4 and 13-14. 4. RO 15, 18, 21 and 24. 5. RO 21 and 26. 6. RO 27. 7. RO 10. 8. RO 29. 9. RO 30. 10. RO 31. 11. COPIES FURNISHED: RO 36. Gilda Lambert, Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550 Augustus D. Aikens General Counsel Department of Administration 530 Carlton Building Tallahassee, Florida 32399-1500 S. Philip Ford Post Office Box 20232 Tallahassee, Florida 32316
The Issue Whether Respondents, by refusing to allow consumers to cancel their individual health insurance policies subsequent to the "free-look" period and thereby failing to refund premiums paid, engaged in conduct violative of Subsection 627.6043, Florida Statutes.
Findings Of Fact The parties stipulated that the Petitioner has jurisdiction over Respondents, National States and Penn Treaty, during times material. On June 24, 1993, Petitioner filed a five count administrative complaint against National States alleging that 20 consumers had purchased various types of health insurance policies and that such policy holders requested cancellation of those policies before the expiration date of their policy. The policy holders prepaid the premiums on such policies. National States refused to honor those requests for cancellation and did not refund the unearned premiums remaining on those policies. National States, by its assistant vice president, William O'Connor, advised those policy holders that they were not entitled to cancellation after the "free-look" period and therefore refused to refund any unearned premiums. Policy holders who were denied premium refunds include the following: Alexandrine Austin, Henry M. and Mary Lou Butler, Madeline Goding, William O. and Rowena Haisten, Sebastian N. and Jane E. Imme, Teresa Karl, John F. Killinger, J. Robert Merriman, Nell I. Mooney, Ralph Motta, Kathryn Patterson, Alene R. Smith, and Bernadine Weiss. On June 17, 1993, Petitioner filed a three count administrative complaint against Penn Treaty alleging that certain consumers had purchased various health insurance policies, that the policy holders requested cancellation of those policies prior to the expiration and Penn Treaty refused to honor those requests for cancellation and to refund any unearned premium remaining. Penn Treaty advised those policy holders, by letter, that they could not cancel their policies after the "free-look" period. The policy holders who were denied cancellation and/or a refund by Penn Treaty were Adelbert Gronvold, George and Marie Hutnyak and George F. and Elizabeth M. MacVicar. Health insurance policies do not contain a provision granting the policy holder the right to cancel. Ms. Kitterman, a former employee of Petitioner who has reviewed health insurance policies for over sixteen (16) years, was familiar with such policy forms. She has not seen a provision in an individual health insurance policy which specifically granted an insured the right to cancel a policy midterm. Dr. Solomon, an expert with extensive knowledge concerning health insurance policy provisions or the absence thereof, opined that health insurance policies do not contain a provision dealing with the ability or the right of the insured to cancel or not to cancel their health insurance policy. Finally, Ms. Andrews, the assistant bureau chief of life and health forms for approximately eight (8) years, has also personally reviewed health insurance policy forms. Ms. Andrews supervised the insurance analysts who reviewed such forms and corroborate the testimony of Kitterman and Solomon that such policy forms do not contain a provision addressing the insured's right to cancel. Petitioner has never required an individual health policy form to contain a provision regarding an insured's right to cancel. Although Petitioner does not require such a provision, it does insist that companies refund unearned premiums once an insured files a request to cancel pursuant to Section 627.6043, Florida Statutes. A discussion of the "free-look" period is contained in Rule 4-154.003, Florida Administrative Code, entitled "Insured's Right to Return Policy; Notice". That rule states: It is the opinion of the insurance commissioner that it will be in the public interest and of benefit to all if the person to whom the policy is issued has the opportunity to return the policy if he is not satisfied with it, provided such return is made within a reasonable length of time after receipt of the policy; therefore, each and every company issuing for delivery a disability policy in this state is requested to have printed or stamped thereon, or attached thereto a notice in a prominent place stating in substance that the person to whom the policy or contract is issued shall be permitted to return the policy or contract within ten (10) days of its delivery to said purchaser and to have the premium paid refunded if, after examination of the policy or contract, the purchaser is not satisfied with it for any reason. The notice may provide that if the insured or purchaser pursuant to such notice returns the policy or contract to the insurer at its home office or branch office or to the agent through whom it was purchased, it shall be void from the beginning and the parties shall be in the same position as if no policy or contract had been issued. This rule shall not apply to either single premium non-renewal policies or contracts or travel accident policies or contracts. Notices in this Rule 4-154.003 and in Rule 4.154.001 may be combined. (emphasis added) Thus, if a policy is returned during the "free look" period, the company is required to return the entire premium paid. The "free-look" period allows the consumer an opportunity to review the contract for the designated period of time. It allows them to make sure that it was the type of contract they intended to purchase and to review the application that was submitted to the company to verify that the information on it is correct. "Guaranteed renewable" is defined in Rule 4-154.004, Florida Administrative Code, titled "Non-cancellable or non-cancellable and guaranteed renewable policy; Use of Terms." That rule states: The terms "non-cancellable" or "non-cancellable and guaranteed renewable" may be used only in a policy which the insured has the right to continue in force by the timely payment of premiums set forth in the policy until at least age 50, or in the case of a policy issued after age 44, for at least five years from its date of issue, during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force. Except as provided above, the term "guaranteed renewable" may be used only in a policy in which the insured has the right to continue in force by the timely payment of premiums until at least age 50, or in the case of a policy issued after age 44, for at least five years from its date of issue, during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force, except that the insurer may make changes in premium rates by classes. The foregoing limitation on use of the term "non-cancellable" shall also apply to any synonymous term such as "not cancellable" and the limitation on use of the term "guaranteed renewable" shall also apply to any synonymous term such as "guaranteed continuable". Nothing herein contained is intended to restrict the development of policies having other guarantees of renewability, or to prevent the accurate description of their terms of renewability or the classification of such policies as guaranteed renewable or non-cancellable for any period during which there may be actually be such, provided the terms used to describe them in policy contracts and advertising are not such as may readily be confused with the above terms. Thus, the term "guaranteed renewable" as defined by Petitioner's rule notably does not contain any prohibitions against an insured's ability to cancel. Both Dr. Solomon and National States expert, E. Paul Barnhart, agreed that the industry meaning of "guaranteed renewable" is that companies guarantee renewability of a health or accident policy but do not guarantee that the rate will remain constant. Guaranteed renewable policies may be cancelled by the company only for nonpayment of premium or for false statements made by the insured in the application. Guaranteed renewable policies can also be cancelled by the company at the terminal point which, for most of National States policy holders, is when the insured dies but, in a few cases, at age 65. Whether a policy is marketed by the company as "guaranteed renewable" is a business decision made by the insurer generally to meet competition. Thus, the insurer, in making the decision to market an insurance policy as guaranteed renewable, waives any right that might otherwise be available to the insurer to cancel or non-renew except those authorized by statute which are, as noted, nonpayment of premium and material misrepresentation. Nowhere in any of the expert's opinions or Petitioner's witnesses is the term guaranteed renewable construed to mean that an insured has also waived the right to cancel a health insurance policy. All health insurance policies are cancellable by the insurer unless the company has chosen to market the policy as non-cancellable or guaranteed renewable which, as noted, may be only cancelled for nonpayment of premium and material misrepresentation. Dr. Solomon's opinion is based on the equitable theory that an insurance company, when it writes a health policy, does not immediately earn all of the premium collected, and the insured is therefore entitled to the unearned premium if he cancels midterm. Mr. Barnhart confirmed that a premium is not totally earned the moment it is collected but that "it's earned over the period of time for which the premium has been paid . . . if someone pays an annual premium, say on July 1, 1993, that annual premium would become earned at a steady rate over the year that follows and become fully earned as of June 30, 1994." When a premium is received for health and accident policies, the company will establish an unearned premium reserve, which is a basic reserve set up as a result of the payment of premiums and represents, at any given point in time, that portion of the premium that remains unearned. Insurance companies are required by law to maintain unearned premium reserves because they have not earned the premium. Unearned premium reserve is typically a section in the balance sheet of a company that is reserved for that purpose of paying back premiums that are not earned, or holding premiums in that account, as a segregated item, until such time as they are earned. Refunds of premiums are made on the basis of either a short-rate or a pro-rata table. Short-rate refunds are for the purpose of returning a portion of the insured's premium in the event that the insured elects to cancel midterm. The insured is penalized for cancelling the policy midterm under the short-term rate table by absorbing some of the company's expenses of underwriting the policy and administrative costs. That is, if the insured cancels an annual policy within one month after which an annual premium has been paid, the insured will receive less than 11/12ths of the advance premium. Pro-rata refunds mean equal distribution which is the refund procedure used when the insurer makes the decision to cancel. Thus, if the insurer cancels an insured's policy that is so cancellable by the insurer in the annual policy example, the insurer would be liable to make a pro-rata refund of premium to the insured which will be 11/12ths of the premium paid. Thus, an insured is not penalized when it is the insurer who exercises its right to cancel any policies which are so cancellable by the insurer. Section 627.6043(2), Florida Statutes, states: In the event of a cancellation, the insurer will return promptly the unearned portion of any premium paid. If the insured cancels, the earned premium shall be computed by the use of the short- rate table last filed with the state official having supervision of insurance with the state where the insured resided when the policy was issued. If the insurer cancels, the earned premium shall be computed pro-rata. Cancellation shall be without prejudice to any claim originating prior to the effective date of cancellation. (emphasis added) Ellen Andrews, the Department's former assistant bureau chief for life and health insurance forms several years prior to 1989, and in 1989 when the statute at issue was initially rewritten by the Legislature and as it is currently written, was familiar with the development of Petitioner's position as the statute went through renumberings in 1990 and 1992. It was part of Ms. Andrews' duties and responsibilities to assist Petitioner in the interpretation of that statute. It was her ultimate responsibility to be in charge of implementation of that statute. Petitioner's initial interpretation has remained unchanged since the statute was initially reworded in 1989 and moved to its various sections of part 6 of Chapter 627, Florida Statutes. The Department's opinion and decision on the meaning of what is currently Section 627.6043(2), Florida Statutes, is that if the insured cancels a policy midterm, the insured would be entitled to a return of premium pursuant to the short-rate table if one was filed with the Department. The Department further interprets the statute to mean that the insurer has a right to cancel, unless the insurer has waived that right by selling a guaranteed renewable or non-cancellable policy and if an insurer exercises that right, the insurer must make a refund to the insured on a pro-rata basis. Petitioner's position is based on the statutory provision that the insured shall receive a return of premium if the insured cancels and that if the insured didn't have a right to cancel, then the insured wouldn't have a right to receive a refund of premium. In 1989, Petitioner took the initiative to obtain statutory authority for its position by submitting a proposed draft to the Legislature revising the statute in order to provide insureds, by statute, the right to receive a return of the unearned premium upon notifying the insurer of their decision to cancel the individual health insurance policies. Mr. Barnhart verified that there would be no claims incurred once a policy ceases to be in force; that National States refund a portion of the premium when a policy is rescinded or terminated and that National States refunds unearned premiums when an insured dies midterm of the policy period whether required by statute or not. Penn Treaty refunds unearned premiums upon death and has a provision in its individual health and accidental insurance policies which provides that the insured shall receive a refund of unearned premiums upon death. From an actuarial perspective, there is no difference between either death or cancellation in midterm of a policy period by an insured. Penn Treaty sells, in Florida, long term care, home health care and medicare supplement insurance policies. National States generally sells guaranteed renewable policies in Florida. National States' position is that health and accident policies are not cancellable by the insured in Florida and that only medicare supplement policies are cancellable by the insured because there is a provision in the policy that allows an insured to cancel and because there is statutory authority for the insured to cancel that policy. Its position is that Section 627.6043, Florida Statutes, does not provide for cancellation by the insured. However, National States allows that the statutes regarding cancellation under the medicare supplement law, Section 627.6741(4), Florida Statutes, mandates refunds to insureds who request cancellation of their medicare supplement policies. National States allow cancellations by insureds and refunds unearned premiums on health insurance policies in those other states which have statutes requiring such refunds. Likewise, Penn Treaty's position is that home health care and long term care policies are not cancellable by the insured because there is no provision in the contract to allow cancellation and because they are guaranteed renewable policies. Its position also is that the insured does not have the right to cancel, either contractually or statutorily. Respondents relied on legal opinions from their counsel (in Florida) and an opinion from Petitioner dated June 12, 1991 to deny refunds. Florida law addressing an insured's right to cancel a medicare supplement policy is at Section 627.6741(4), Florida Statutes. That section provides, in pertinent part, that: If a policy is cancelled, the insurer must return promptly the unearned portion of any premium paid. If the insured cancels the policy, the earned premium shall be computed by the use of the short-rate table last filed with the state official having supervision of insurance in the state where the insured resided when the policy was issued. If the insurer cancels, the earned premium shall be computed pro-rata. Cancellation shall be without prejudice to any claim originating prior to the effective date of the cancellation period. (emphasis added) The above statute is the only Florida law which addresses an insured's right to cancel his medicare supplement policy. Florida law requires that medicare supplement policies be guaranteed renewable. That law is found at Section 627.6741(2)(a), Florida Statutes, which provides: For both individual and group medicare supplement policies: an insurer shall neither cancel nor non-renew a medicare supplement policy or certificate for any reason other than non payment of premium or material misrepresentation. Respondents' position is that in Florida, insureds who purchase their policies are elderly and are easily led. If allowed to cancel, Respondents contend that they would lose out on a number of protections that they would be entitled to if they were required to keep their policies.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Petitioner enter a final order requiring Respondents to make refunds of premiums to all policy holders who request the cancellation of their health insurance policies after October 1, 1989, with 12 percent interest from the date cancellation was requested and further that Respondents' certificates of authority be placed on suspension for a period of twelve (12) months. It is further recommended that the suspension be suspended upon Respondents, payment of the unearned premiums to the above-referenced consumers. 1/ DONE AND ENTERED this 1st day of March, 1995, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 1995.
Findings Of Fact Petitioner is an employee of the State of Florida, and was at all times pertinent, a member of the State Group Health Insurance Program administered by Blue Cross and Blue Shield of Florida, Inc. In March of 1984, Petitioner was hospitalized due to severe indigestion and abdominal pain. Petitioner was discharged from the hospital and informed by his physician that if his condition worsened, surgery would be necessary. Petitioner's condition worsened and on May 28, 1984, his physician, R. Klein Bowen, M.D., admitted him to the hospital with a pre-operative diagnosis of chronic acalculus cholecystitis which is chronic inflammation of the gallbladder. On May 29, 1984, said physician operated upon petitioner and his operative report listed the following under the title "Operation": Cholescystectomy. Attempted operative cholangiogram. Incidental appendectomy. The description of the operative procedure stated in the operative report (Respondent's Exhibit 1) establishes that the appendectomy which was performed was accomplished through the same incision which was made for performing the cholescystectomy (gallbladder removal). The operative report stated that the appendix was not acutely inflamed. Subsequent to the operative procedures the Petitioner filed a claim with the State Group Health Insurance Plan administrator, seeking payment for the following charges: May 28, 1984, $90.00 for consultation and case history preparation prior to surgery; May 29, 1984, $1,350.00 Cholescystectomy; May 29, 1984, $375.00 Appendectomy. All of said services were performed by R. Klein Bowen, M.D. The State Group Health Self-Insurance Plan paid the charge for the cholescystectomy and denied the claims for consultation and case history preparation prior to the surgery and for the appendectomy. The State Self- Insurance Plan justified its denial of Petitioner's claim for the above benefits based upon limitations it alleged were contained in the State of Florida Employees' Group Health Self-Insurance Plan Benefit Document (Respondent's Exhibit 2). Section VIII entitled "Limitations" in paragraph I. specifies that payment may be made for in-patient medical care physician visits in addition to payment for surgery only when the condition which required medical care is not related to the surgery and does not constitute a part of the pre-operative or post-operative care. Additionally, Section VIII, F. specifies that no additional payment shall be made for a surgical procedure which is an incidental procedure performed through the same incision. Petitioner did not dispute the provisions which Respondent alleged were limitations justifying denial of payment, although he asserted that the provisions contained within the Group Health Self-Insurance Plan Benefit Document were not cost effective and would result in additional expenses and lost time from work and were worthy of reconsideration. However, Petitioner did not present any competent evidence to support his claim or refute the limitations relied upon by Respondent.
Recommendation Based on the foregoing, it is RECOMMENDED that Respondent enter a Final Order denying the Petition. DONE and ENTERED this 14th day of May, 1985, in Tallahassee, Florida. R. T. CARPENTER, 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 14th day of May, 1985. COPIES FURNISHED: Gerald B. Richardson 2909-198 South Semoran Boulevard Orlando, Florida 32822 Richard L. Kopel, Esquire Deputy General Counsel Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Gilda Lambert, Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32301
The Issue The basic issue in this case concerns the scope of the coverage provided by the State of Florida Employees Group Health Self Insurance Plan ("State Plan"). The Petitioner incurred extensive expenses for medical treatment, some of which have been paid by the State Plan. The Petitioner contends that under the State Plan, specifically under the "extended coverage" portion of the State Plan, she is entitled to more than has already been paid. The Respondent contends that the correct amount has already been paid.
Findings Of Fact The State of Florida makes available to its officers and employees several group insurance programs. With regard to group health insurance, the available programs include the State of Florida Employees Group Health Self Insurance Plan ("State Plan") and a number of different HMO's, depending upon the county in which an employee resides. Upon commencement of employment, State employees may elect to participate in the State Plan, may elect to join one of the HMO's in their geographical region, or may elect not to participate in any of the voluntary group insurance programs offered by the State. Employees who choose to participate in the State Plan are charged a premium which is normally deducted from their paychecks. The State also contributes regular amounts to pay a portion of the premium for each participating employee. Roberta Rubin has been an employee of the State of Florida for twelve years. She is currently employed as a judicial assistant to Circuit Court Judge George Orr. Roberta Rubin is an insured under the State of Florida Employees Group Health Self Insurance Plan ("State Plan"). The basic terms and conditions of the State Plan are set forth in a document titled State of Florida Employees Group Health Self Insurance Plan Benefit Document ("Benefit Document"). The version of the Benefit Document applicable to this case is the version amended effective July 1, 1988. The Department of Administration, Division of State Employees' Insurance, distributes a brochure titled Group Health Self Insurance Plan Benefits which describes the benefits under the State Plan and is intended to assist State employees in deciding which health insurance plan to select. The Department of Administration, Division of State Employees' Insurance, also distributes a brochure titled Group Health Self Insurance Plan Brochure ("Plan Brochure") to individuals enrolled for coverage under the State Plan. At page 1, the Plan Brochure describes the State Plan as follows: "This is a self-insured group health insurance program belonging to those State officers, employees, retirees, and their eligible dependents who elect to participate in the Plan." At the first unnumbered page inside the front cover of the Plan Brochure is a statement of the brochure's purpose, which includes the following: This brochure is not a contract since it does not include all of the provisions, definitions, benefits, exclusions and limitations of the State Self Insured Health Plan's Benefit Document, a copy of which is on file in your agency's personnel office. The purpose of this brochure is to furnish State officers and employees with a summary of the benefits available under the State Self Insured Health Plan. It is hoped that this brochure will answer any questions that might arise about the Plan. The State of Florida Employees Group Health Self Insurance Plan is administered by Blue Cross Blue Shield of Florida, Inc. In December of 1990, the Petitioner, Roberta Rubin, was diagnosed as having cervical cancer. The prognosis and recommended treatment provided by her treating physicians in Miami were not acceptable to Petitioner and she sought another opinion. Petitioner was referred to and ultimately treated by Dr. Neil Rosenshein, a gynecological oncologist at Johns Hopkins Hospital in Baltimore, Maryland. Dr. Rosenshein and Johns Hopkins Hospital are both "non-preferred patient care providers" within the meaning of the definitions in the Benefit Document. Dr. Rosenshein performed the following surgical procedures: radical abdominal hysterectomy; radical pelvic node dissection; bilateral commoniliac node dissection; and periaortic node dissection. The Physician's Procedural Terminology published by the American Medical Association ("PPT Code Book") assigns procedure codes to various surgical procedures that are utilized by billing physicians and various insurers. The PPT Code Book does not contain procedure codes that accurately reflect the latest technology or the complexity, intricacy, or radical nature of the procedures being performed in gynecological cancer surgery. Since no single or multiple procedure codes accurately characterized the surgical procedures performed by Dr. Rosenshein, his bill was submitted to Blue Cross Blue Shield of Florida, Inc., reflecting only one procedure code, 58210, with amodifier, "-22." The modifier "-22" is described in the 1986 version of the Approved Fee Schedule, of the State Plan, as follows: -22 UNUSUAL SERVICES: WHEN THE SERVICES PROVIDED ARE GREATER THAN THOSE USUALLY REQUIRED FOR THE LISTED PROCEDURE, IDENTIFY BY ADDING THIS MODIFIER -22 TO THE USUAL PROCEDURE NUMBER. LIST MODIFIED VALUE. REPORT MAY BE REQUIRED. However, the Benefit Document, as amended effective July 1, 1988, does not provide for or allow the use of the modifier "-22" in determining the amount of payment due on a claim even when the services provided are greater than those usually required for the listed procedure. The modifier "-22" is used by Blue Cross Blue Shield in the administration of other group health insurance plans. The claim form submitted by Dr. Rosenshein went through a level three review by Blue Cross Blue Shield of Florida, Inc., and in response to a request for additional information, Dr. Rosenshein submitted a letter explaining the nature of the procedures performed and a copy of the operative report. Following its review, Blue Cross Blue Shield of Florida, Inc., allowed payment only for the approved fee schedule amount for a single procedure code 58210, or $3,726.00. Dr. Rosenshein's uncontradicted testimony established that the most accurate representation of the procedures he performed would require the following three procedure codes: Code # Description 58210 limited periaortic lymphadenectomy 49201 extensive excision or destruction by any method of intra-abdominal retroperitoneal tumors or cysts or endometriomas 38780 retroperitoneal transabdominal lymphade- nectomy, extensive, including pelvic, aortic and renal nodes. The approved fee schedule for these procedure codes allows the following amounts: Code # Amounts 58210 $3,726.00 49201 2,683.00 38780 2,764.00 Petitioner has incurred the following bills in 1991 which are in excess of the applicable deductible and $1,500.00 out-of-pocket amount provided for under the Extended Coverage provisions of the benefit Document: Provider Amount JHU Department of Radiology $ 159.30 JHU Pain Management Anesthesia 698.10 JHU Anesthesiology 507.70 John Hopkins Hospital Outpatient 50.00 JHU Department of Oncology 503.50 JHU Cardiology 90.00 JHU Pathology 230.00 Dr. Neil Rosenshein 9,904.50 Total $12,143.10 The amounts reflected above are exclusive of benefits already paid by Blue Cross Blue Shield of Florida, Inc., and other insurers and do not include any charges for room and board services or ambulance services. Section I of the Benefit Document contains definitions of numerous terms, including the following: D. "AFS" means the "Approved Fee Schedule," as approved or amended by the Department of Administration. "Covered provider" shall mean a person, institution, or facility as defined herein and who furnishes a covered service or supply. "Covered service or supply" shall mean a medically necessary service or supply furnished by a covered provider and which is covered by the Plan. Q. "Deductible" shall mean the dollar amount of covered services and supplies which each insured is required to pay before benefits are payable by the Plan. BA. "Preferred Patient Care Fee Schedule" or "PPC Fee Schedule" means a list of allowances for each service which has been set and agreed to by the preferred patient care providers. BB. "Preferred Patient Care Provider" or "PPC Provider" means a physician or hospital which has an agreement with the Administrator to provide health care services at set fees to individuals insured under the Plan. A non-preferred patient care provider does not have such an agreement. BJ. "Reasonable Charge" shall mean the following: an average of the amounts charged by the non-preferred patient care hospital, skilled nursing facility, hospice facility or birth center facility for services to individuals using such hospital or facility, as determined by the Administrator; or the charge set forth in the AFS for covered medical-surgical services. BS. "Usual, Customary and Reasonable" or "UCR" means a schedule of fees for covered services in a geographical area which is determined by the Administrator based upon the normal amount charged by the provider in his/her practice, (b) the range of fees for most providers in an area for the same service, and (c) any unusual circumstances or complications requiring additional time, skills and experience by the provider which can be documented. Section II of the Benefit Document contains the provisions regarding coverage for hospital and other facility services. That section reads as follows, in pertinent part: The following services shall be covered when ordered by a physician a nd are medically necessary for the treatment of an insured as a result of a covered accident or illness. Non-Preferred Patient Care Hospital Inpatient Room and Board Services: 1. When confined to a semi-private or private room or ward, 80% of the hospital's average semi-private room rate shall be paid but not to exceed an actual payment of one- hundred and fifty-two ($152.00) per day. Other Covered Non-Preferred Patient Care Inpatient Services: 80% of the actual charge for the following services will be paid by the Plan: Use of operating room, labor room, delivery room and recovery room; All drugs and medicines used by the patient while confined in the hospital, provided such drugs and medicines are listed in "New and Non-Official Remedies" or the "United States Pharmacopoeia"; Solutions (including glucose); Dressings; Anesthesia and related supplies; Oxygen therapy; Transfusion supplies and services including blood, blood plasma and serum albumin, if not replaced; Laboratory services; Electrocardiograms; Basal metabolism examinations; X-ray, including therapy; Electroencephalograms; Diathermy and physical therapy. Covered Outpatient Hospital, Ambulatory Surgical Center or Outpatient Health Care Facility Services: Ninety percent (90%) of the reasonable charge shall be paid for covered outpatient services provided by a Non-PPC provider. When such services are provided by a PPC provider, the plan shall pay ninety percent (90%) of the charge subject to the PPC fee schedule limits. Covered Clinical Laboratory Services: Ninety percent (90%) of the charge for covered clinical laboratory services shall be paid by the Plan not to exceed the maximum amount permitted under the AFS. Section III of the Benefit Document contains the provisions regarding coverage for medical-surgical services. That section reads as follows, in pertinent part: A. Ninety percent (90%) of the charge for medically necessary inpatient/outpatient services provided to an insured by a non- preferred patient care physician, physical therapist or nurse anesthetist for the treatment of the insured as a result of a covered accident or illness shall be paid by the Plan, subject to the provisions of Section VI and Section XXIII; however, such payment shall not exceed the maximum amount permitted under the AFS. C. If a covered procedure does not have a specified fee listed in the AFS, pricing will be performed by the Administrator in accordance with its normal procedures. Section V of the Benefit Document, titled "Extended Coverage," contains the provisions regarding what is commonly known as the "stop loss" feature of the plan. That section reads as follows, in pertinent part: If under individual or family coverage, the out-of-pocket expenses of an insured for covered services under Section II., Section III., Section IV and Section XXV amount to one thousand five hundred dollars ($1500.00) during a calendar year, all further covered charges for such services incurred by the insured during the remainder of the calendar year shall be paid by the Plan at one hundred percent (100%), subject to the lifetime maximum and the maximum payments listed in paragraph C. below. If under family coverage, the out-of- pocket expenses of two or more insureds for covered services under Section II., Section III., Section IV. and Section XXV. amount to three thousand dollars ($3000.00) during a calendar year, all further covered charges for such services incurred by any insured during the remainder of the calendar year shall be paid at one hundred percent (100%), subject to the lifetime maximum and the maximum payments listed in paragraph C. below. Maximum payments subject to Subsections A. and B. above shall apply only to room and board services under Subsection II A., Subsection II E., Subsection II G., and ambulance services under Section IV, as follows: One hundred and ninety dollars ($190.00) per day for hospital room and board; Ninety-five dollars ($95.00) per day for room and board in a skilled nursing facility; Three hundred and eighty dollars ($380.00) per day for an intensive care unit; Two hundred and eighty-five dollars ($285.00) per day for a progressive care unit; One hundred and twenty-five dollars ($125.00) per use for ambulance service; One thousand dollars ($1000.00) for ambulance transportation of a newborn child; One hundred and ninety dollars ($190) per day for room and board in a specialty institution or residential facility. Charges for covered services and supplies applicable to the deductible(s) under the Plan shall not be considered an out-of-pocket expense under the provisions of Section V. The brochure titled Group Health Self Insurance Plan Brochure contains the following language at page seven regarding the stop loss feature of the plan: Maximum Out-Of-Pocket Expense If, during a calendar year, the out-of-pocket expenses for one person insured under individual or family coverage amount to $1,500, or $3,000 for two or more persons insured under family coverage, all further charges will be paid at 100%, subject to the lifetime maximum, any allowance limits for room and board while confined to Non-PPC facilities, and ambulance transportation allowance limits for newborn children. This provision applies to all covered services except Hospice services; however, charges applicable to the deductible shall not be considered an out-of-pocket expense. The language of Section V of the Benefit Document regarding "Extended Coverage" is ambiguous with regard to the scope of the coverage provided by that section of the benefit document. The language of Section V of the Benefit Document regarding "Extended Coverage" also conflicts with the language at page seven of the Plan Brochure regarding "Maximum Out-Of-Pocket Expense. /1
Recommendation On the basis of all of the foregoing, it is RECOMMENDED that the Department of Administration issue a Final Order to the following effect: (a) concluding that the "Extended Coverage" language of Section V of the Benefit Document is ambiguous; (b) concluding that the "Extended Coverage" language of Section V of the Benefit Document is in conflict with the language at page 7 of the Plan Brochure under the caption "Maximum Out-Of-Pocket Expense;" (c) concluding that after the Petitioner's out-of- pocket expenses for covered services reached $1,500, she was entitled to have "all further charges" for covered services paid at 100% of the amount of the charges except as specifically limited in paragraph C. of Section V of the Benefit Document; and (d) providing for payment in the total amount of $12,143.10 to the Petitioner or to the providers listed in paragraph 15 of the Findings of Fact. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22 of May 1992. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SC 278-9675 Filed with the Clerk of the Division of Administrative Hearings this 22 day of May 1992.
Findings Of Fact Petitioner resigned from State Government on July 23, 1987. At the time of his resignation, Petitioner was covered under the Florida State Group Health Insurance Plan. His wife, who is a diabetic, was also covered under Petitioner's insurance. Upon termination Petitioner was eligible for continuation of coverage benefits under the federal COBRA Act. However, prior to receiving any notice of his COBRA rights, Petitioner elected to continue his State Employees' Insurance for two months from July 1, 1987 and then begin coverage under his new employer's insurance plan. 2/ Petitioner made advance payment on the 2 months additional coverage. The payments carried his State Employees' health insurance through September 1, 1987 when it was terminated. DOA notified Petitioner on August 27, 1987, of his right to elect continuation of coverage under the COBRA Act. This notice complied with the notice requirements under the COBRA Act. COBRA provides continued health insurance coverage for up to (18) months, after a covered employee leaves employment. However, coverage does not continue beyond the time the employee is covered under another group health plan. COBRA simply fills the gap between two different employers group health insurance plans so that an employee's group health insurance does not lapse while the employee changes jobs. Petitioner's new employer's health coverage began around September 1, 1987. After Petitioner had begun coverage under his new insurance plan, he discovered that his wife's preexisting diabetic condition would not be covered. However, no evidence was presented that Petitioner, within 60 days of September 1, 1987 requested the Division of State Employee's Insurance to continue his insurance coverage pursuant to COBRA. Moreover, Petitioner's COBRA rights terminated when he began his coverage under his new employer's health plan.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Administration enter a Final Order denying Petitioner's request for continuation of coverage under COBRA. DONE and ENTERED this 5th day of April, 1989, in Tallahassee, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of April, 1989.
Findings Of Fact At all times pertinent to the issues herein, the Petitioner, Department of Insurance, was the state agency responsible for the licensure of insurance agents and the regulation of the insurance business in Florida. Respondent, Richard M. Rinker, was licensed by the Petitioner as a health insurance agent engaged in the business of soliciting, selling and servicing health insurance policies for National States Insurance Company. Levon H. and Joan D. Sprague, husband and wife, moved to Florida from New York in August, 1991. Prior to moving to Florida, the Spragues operated a restaurant in New York and purchased health insurance from Blue Cross/Blue Shield for themselves and some of their employees. They also owned a H.I.P. policy which was similar to a health maintenance organization, but both that coverage and the Blue Cross/Blue Shield coverage were dropped when they moved to Florida. Because both Mr. and Mrs. Sprague were getting older, and because both had indications of possible future health problems based on experience and family history, upon the recommendation of Mrs. Sprague's father, who had purchased coverage from Respondent and was satisfied with the service received, they contacted Respondent and met with him about purchasing health insurance. The first meeting was on January 6, 1992. At that time, the Sprague's made Respondent aware of the fact that they had no health insurance coverage at that time and that they wanted to purchase coverage which would give them 100 percent reimbursement of all bills for medical care rendered. After some discussion, they agreed to accept less coverage for doctors' bills and other professional services, but were quite adamant in reiterating they wanted a policy that would cover 100 percent of the cost of hospitalization. They emphasized this because of Mr. Sprague's family's history of heart problems and they wanted to be sure the hospital expense would be covered in full. They felt the doctors could wait a while for payment of the full amount of their bills. During the course of his presentation, Respondent utilized a document called a National States Limited Medical-Surgical Hospital Confinement Plan which purportedly outlined the specifics of policy coverage. Under that portion entitled "Specific Benefits", the form read, "This policy pays percent of usual and customary expenses of the following type:". Under the blank space, in smaller type, were the numbers "10, 20, 30, 40". In the blank area, Respondent, by hand, inserted 80 percent. Above, and to the right of that insertion, he also placed the numbers, "100 percent" and "40 percent." Respondent explains this as being his attempt to provide answers to questions asked of him by Mrs. Sprague. He noted that his company does not offer a major medical policy such as desired by the Spragues, and that the only way he could provide coverage close to that which they wanted was to combine policies. Using a yellow highlighter, he also highlighted the words, "Doctor's charges", "doctor's office", "clinic", "hospital", "home", and "surgical or medical center." He also highlighted the terms "annual mammography screening" because Mrs. Sprague had specifically inquired about coverage of that procedure. On that visit, Respondent sold the Spragues two policies each. These were "MSH-1" and "MSH-2" policies which, the Spragues recall, Respondent indicated would provide the total coverage they wanted. Initially, the premium was to be $3,600.00 for the year, but when the Spragues indicated they could not afford that much, after calling his office, Respondent was able to offer them 6 months coverage for one half the price. They were satisfied with this and accepted the policies. Mr. Rinker received as his commission 45 percent of the premium paid in by the Spragues for the first year of the policy. When he departed the Spragues' home, he left with them the policy outline he utilized in his presentation, a large manila envelope containing information regarding his office hours and phone number, and a MSP form required by law. The coverage was not heavily used at first. When, during the first six month period, claims were initially denied because of the waiting period, the Spragues accepted that. After the expiration of the waiting period, all claims submitted for doctors' visits and mammography were covered to at least 80 percent of the amount expected by the Spragues. This was, however, because of the combined benefits paid by the two policies. Neither policy, alone, paid 100 percent percent of the claim. The Spragues were satisfied with this because it was not hospitalization. Later on, however, it became apparent that Mr. Sprague would have to enter the hospital for coronary bypass surgery, and he was admitted on an emergency basis. Before the surgery was done, however, the Spragues wanted to be sure the hospital bills would be paid in full, and they had their daughter- in-law, who had extensive experience in the insurance business prior to that time, to examine the policies. Her review of the policies generated some questions in her mind as to whether they provided 100 percent coverage of all hospital costs. To satisfy herself and her in-laws, utilizing the telephone number for Respondent on the materials left by him with the Spragues, she contacted him and asked, specifically, whether the policies he had sold to the Spragues, provided the 100 percent coverage they desired. His answer was somewhat evasive and non- responsive to her inquiry. He said, "Don't worry. She'll [Ms. Sprague] be able to sleep at night. She has a good policy." This did not satisfy either Ms. Sprague or her mother-in-law, and so she called Respondent again. During this second conversation he admitted that for at least a part of the cost, there was a 40 percent coinsurance provision. Respondent claims that during these calls, Ms. Sprague did not tell him that her father-in-law was to have surgery but only told him about tests. The tests were covered and the bills therefor paid by National States. By the time of these calls, however, Mr. Sprague was already in the hospital and facing the surgery the following morning. There was little that could be done. Mr. Sprague wanted to cancel the surgery but his wife would not allow this and the operation was accomplished. The hospital bills received by the Spragues amounted to approximately $140,000. Of this, the insurance company paid approximately $18,000. Ultimately, the Spragues and the hospital were able to reach an agreement for settlement of the obligation for $40,000. In order to satisfy this, Mr. Sprague was required to liquidate all his investments. He still owes the doctors a substantial sum but is making periodic payments to liquidate those obligations. The policies which Respondent sold to the Spragues were limited medical and surgical expense policies which pay only a limited percentage of incurred medical expenses over a limited period of time. Neither policy pays 100 percent of any medical or surgical expense. Respondent did not clearly communicate this fact to the Spragues. They suffered from the misconception that the policies sold to them by the Respondent paid 100 percent coverage for hospital expense, 80 percent for doctor fees, and 40 percent for medication. Petitioner presented no evidence that what Respondent did was below the standards accepted of sales agents within the health insurance industry. On the other hand, James Quinn, an insurance agent since 1975, who has taught life and health insurance and the legal responsibility of agents in the health insurance area with the approval of the Department since 1985, testified on behalf of Respondent. Mr. Quinn noted that there are three types of medical policies in use, including basic medical expense, major medical, and comprehensive major medical. The first of these, basic medical expense, permits liberal underwriting and pays policy limits. In Mr. Quinn's opinion, based on the age and preexisting conditions that the Sprague's have, major medical coverage, like they wanted, would cost between seven and ten thousand dollars annually, excluding deductibles. Health insurance coverage outlines, such as used by Respondent in his presentation to the Spragues are, according to Mr. Quinn, reasonably self-explanatory and are left with the insured either when the policy is applied for or is delivered. In the former case, the client is able to read the outline and cancel the policy before delivery, if he so desires. In the latter case, the insured has a set number of days to read the policy after delivery and cancel if he so desires. These outlines do not substitute for the policy, however, and generally, the agent prefers to deliver the policy personally so he can go over it again with the insured. According to Mr. Quinn, it is difficult to explain coverage to prospective insureds because of their unfamiliarity with the terminology and the available benefits. He concluded that the action of the Respondent, in issue here, whereby he used the coverage outline to explain the coverages to the Spragues, was consistent with proper agent conduct and was within industry standards. He also concluded that based on what Respondent had available to sell to the Spragues, he sold them the best package he could, at the time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be issued in this matter finding Respondent, Richard Michael Rinker, guilty of a violation of Sections 626.611(5), (7), (9), and (13); 626.621(2) and (6); 626.9521, and 626.9541(1)(a)(1), (1)(e)(1), and (1)(k)(1), Florida statutes, and suspending his license as a health insurance agent for nine months. RECOMMENDED this 13th day of October, 1994, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of October, 1994. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 94-0089 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: & 2. Accepted and incorporated herein. 3. & 4. Accepted and incorporated herein. & 6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. & 10. Accepted and incorporated herein. FOR THE RESPONDENT: Accepted and incorporated herein. Accepted as to finding Mr. Quinn is an expert regarding insurance standards and business practices, but rejected as insinuating those opinions are binding on the Hearing Officer. Rejected notwithstanding the opinions of Mr. Quinn. Accepted, as there is no evidence to the contrary. Rejected as contra to the weight of the evidence. First sentence rejected as contra to the evidence. Second sentence accepted as to the furnishing, but the quality of the information was less than clear. Balance accepted. & 8. Rejected. COPIES FURNISHED: Daniel T. Gross, Esquire Department of Insurance and Treasurer Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0333 Thomas F. Woods, Esquire Gatlin, Woods, Carlson & Cowdery 1709-D Mahan Drive Tallahassee, Florida 32308 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neill General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
The Issue The basic issue in this case is whether the Petitioner is entitled to a waiver of the limitations in the state group health self insurance plan regarding pre-existing conditions during the first 12 months of coverage under the plan.
Findings Of Fact Based on the stipulations of the parties, on the testimony presented at the hearing, and on the exhibits received in evidence, I make the following findings of fact. The Petitioner was first employed by the Department of Transportation as a Clerk Typist Specialist on October 31, 1986. As a new employee, the Petitioner was entitled to select health insurance under the state group health self insurance plan or with a participating health maintenance organization (HMO). The state group health self insurance plan and the HMO's each have different benefits and premiums. The Petitioner's direct supervisor is Ms. Gwen Molander. On October 30, 1986, the day prior to her first day of employment, the Petitioner met with her supervisor to sign the employment paperwork. On that day Ms. Molander called the Department of Transportation personnel office in Lake City for the purpose of finding out whether the state group health self insurance plan would cover pre-existing allergy conditions of the Petitioner's son. Ms. Molander specifically asked the Lake City personnel office if the plan would cover the Petitioner's son if the son was under the care of an allergist. The words "pre- existing condition" were not used in the conversation Ms. Molander had with the Lake City personnel office. The Lake City personnel office told Ms. Molander that the Petitioner's son would be covered even if it was not an open enrollment period. The Petitioner authorized a "double-up" deduction so the health insurance would be effective as of December 1, 1986. The Petitioner's son has been covered as a dependent under the Petitioner's health insurance since December 1, 1986. Based on the information from the Lake City personnel office, the Petitioner believed that the state group health self insurance plan would provide coverage for all of her son's medical expenses without any limitation regarding pre-existing conditions. The Petitioner's son had a pre-existing allergy condition for which he received medical treatment in December of 1986 and thereafter. Since December of 1986 the Petitioner has incurred medical bills of approximately $2,000.00 for treatment related to her son's pre-existing allergy condition. The state group health self insurance plan has refused to pay any of the medical expenses related to the treatment of the pre-existing allergy condition of the Petitioner's son. The state group health self insurance plan contains a provision to the effect that "no payment shall be made for pre- existing conditions during the first 12 months of coverage under the Plan." Accordingly, the refusal to pay described above is consistent with the provisions of the state group health self insurance plan. At the time the Petitioner chose to enroll in the state group health self insurance plan, she could also have chosen any of three HMO programs available to state employees in he Gainesville area. Petitioner chose the state group health self insurance plan because of her belief that it provided coverage for her son's pre-existing allergy condition. There is no competent substantial evidence in the record in this case regarding the coverage provided by the three available HMO's, the limitations (if any) on the coverage, or the cost to the employee of such coverage. At the time the Petitioner chose to enroll in the state group health self insurance plan, her employing office did not have any written information regarding the health insurance options available to new employees. There is no evidence that the Petitioner attempted to obtain information regarding health insurance options from any source other than her direct supervisor and the Lake City personnel office. On the insurance enrollment form signed by the Petitioner, dated October 31, 1986, the Petitioner was put on notice and acknowledged that coverage and the effective dates of coverage under the state group health self insurance plan were governed by Rule Chapter 22K-1, Parts I and II, Florida Administrative Code, and by the plan benefit document, "regard-less of any statements or representations made to me. " The Petitioner has previously worked in the insurance field and she is familiar with limitations on coverage for pre-existing conditions.
Recommendation On the basis of all of the foregoing, it is recommended that the Department of Administration issue a final order in this case denying the relief requested by the Petitioner and dismissing the petition in this case. DONE AND ENTERED this 29th day of May, 1987, 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 29th day of May, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-1485 The following are my specific rulings on the proposed findings of fact submitted by both parties: Proposed findings submitted by Petitioner As noted in the introductory portion of the recommended order in this case, the Petitioner's post-hearing submission consists of a letter dated May 12, 1987. Although the letter does not contain any statements which are identified as proposed findings of fact, in light of the lesson taught by Kinast v. Department of Professional Regulation, 458 So.2d 1159 (Fla. 1st DCA 1984), all factual assertions in the letter of May 12, 1987, have been treated as though they were proposed findings of fact. The references which follow are to the unnumbered paragraphs and sentences of the letter of May 12, 1987. First unnumbered paragraph: This is an introductory comment only. Second unnumbered paragraph: First sentence is rejected as a proposed finding because not supported by evidence in the record. Second sentence is a statement of position rather than a proposed finding. Third sentence is rejected as a proposed finding because not supported by evidence in the record. Fourth sentence is a statement of the relief requested rather than a proposed finding. Fifth sentence is rejected as a proposed finding because it is inconsistent with the greater weight of the evidence. Third unnumbered paragraph: This entire paragraph is rejected as proposed findings because it consists of statement of position and argument rather than proposed facts. Proposed findings submitted by Respondent The Respondent's proposed findings of fact are contained in twelve numbered paragraphs in Respondent's proposed recommended order. The paragraph references which follow are to each of those twelve paragraphs. Paragraph 1: Accepted. Paragraph 2: First sentence accepted. Second sentence is rejected in part and accepted in part; first ten words are rejected as not supported by competent substantial evidence in the record. The remainder of the sentence is accepted. Paragraph 3: Accepted. Paragraph 4: Accepted in substance with correction of confused dates and deletion of irrelevant details. Paragraph 5: Accepted. Paragraph 6: Accepted in substance. Paragraph 7: Accepted in substance. Paragraph 8: Accepted in substance. Paragraph 9: First sentence accepted in substance. Second sentence rejected as not supported by competent substantial evidence. Paragraph 10: Accepted in substance. Paragraph 11: Accepted in substance. Paragraph 12: Rejected as irrelevant due to the fact that no such literature was available at Petitioner's employing office. COPIES FURNISHED: Ms. Juanita L. Resmondo Department of Transportation Maintenance Office Post Office Box 1109 Gainesville, Florida 32602 Augustus D. Aikens, Jr., Esquire General Counsel Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550 Adis Vila, Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550
Findings Of Fact Petitioner underwent surgery in August of 1971 for the purpose of reconstructive repair to his leg as a result of burns. He had the first surgery in the early part of August of 1971. That surgery was unsuccessful since the graft did not take. Approximately two weeks thereafter, also during August of 1971, he had further surgery. That graft was also unsuccessful. After eight to nine months, the second graft developed keloid scarring in the area on the back of Petitioner's knee, which necessitated a third operation. The third operation was performed some nine months after the second operation and removed keloid scarring from the back of the knee area and added some additional tissue to allow for contracture during the aging process. In 1972, there was a fourth surgical procedure performed on Petitioner's leg, this time to remove keloid scarring from the front of the knee area. That was the last surgery performed on Petitioner with respect to this injury. Petitioner had no apparent symptoms of additional scarring until 1982. Petitioner joined the plan in December of 1980. From this stipulation of facts and the correspondence forwarded with the request for hearing, it is evident this case should not have been referred to the Division of Administrative Hearings but should have been handled as a Declaratory Statement pursuant to Rule 18-4.05, Florida Administrative Code.
