The Issue Whether Respondent's proposed amendment of Rule 59G-6.040, Florida Administrative Code, and Respondent's proposed new Rule 59G-6.045, Florida Administrative Code, would be invalid exercises of delegated legislative authority, within the meaning of Chapter 120, Florida Statutes, for the reasons asserted by Petitioner.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: Petitioner Petitioner is a nonprofit Florida corporation. It operates as a charity providing services to individuals (both children and adults) with developmental disabilities in Florida and elsewhere. It provides services to Florida residents in various Intermediate Care Facilities for the Developmentally Disabled (ICF/DDs6) that it owns and/or operates, including state-owned "cluster" facilities each consisting of three eight-bed buildings sharing a common campus. These "cluster" facilities were created by the state as an alternative to the large state-owned and operated institutions.7 Petitioner renders services in these "cluster" facilities pursuant to contracts it has entered into with the state. All of the facilities that Petitioner operates in the state, regardless of size, are located in residential neighborhoods. The residents of these facilities suffer from mental retardation and various other disabilities, including cerebral palsy, autism, spina bifida and epilepsy. Many require constant supervision, attention, and care, as well as aggressive intervention and treatment. The services that Petitioner provides are designed to assist these individuals in reaching their full potential. All of the residents of Petitioner's ICF/DDs in Florida are Medicaid-eligible.8 Petitioner receives Medicaid payments for providing services to these residents. These Medicaid payments have been insufficient to cover Petitioner's costs. (Other private ICF/DD providers9 in Florida have experienced similar funding shortfalls.10 From 1991 to 1996, private ICF/DD providers in Florida, as a group, received $4,652,312.00 less in Medicaid payments than they spent to provide services.) Petitioner has engaged in fund-raising activities to supplement the Medicaid payments it receives. While these fund-raising activities have generated additional monies, Petitioner, nonetheless, to the detriment of residents, has had to make reductions in the amount it spends for their treatment and care. Recently, Petitioner experienced significant difficulty meeting its payroll, and was forced to obtain a bank loan to pay its employees the monies it owed them. Current Medicaid Reimbursement Methodology Petitioner and all other ICF/DD providers, including the state, are currently reimbursed for providing Medicaid- covered services at their facilities in accordance with the methodology set forth in "Florida Title XIX Intermediate Care Facility for the Mentally Retarded and Developmentally Disabled Reimbursement Plan, Version VI, November 15, 1994" (Version VI of the Plan). Version VI of the Plan is incorporated by reference in Rule 59G-6.040, Florida Administrative Code,11 which provides as follows: 59G-6.040 Payment Methodology for ICF/MR-DD Services. Reimbursement to participating ICF/MR-DD facilities for services provided shall be in accord with the Florida Title XIX ICF/MR-DD Reimbursement Plan Version VI, November 15, 1994, and incorporated herein by reference. A copy of the Plan as revised may be obtained by writing to the Office of the Medicaid Director, P.O. Box 13000, Tallahassee, Florida 32399-0700. Specific Authority 409.919 FS. Law Implemented 409.908 FS. History--New 7-1-85, Amended 2-25-86, Formerly 10C-7.491, Amended 11-19-89, 8-14- 90, 12-26-90, 9-17-91, 1-27-94, Formerly 10C- 7.0491, Amended 11-15-94. Pursuant to Version VI of the Plan, "[r]eimbursement rates [are] established prospectively for each individual provider based on the most historic costs, but historic costs [are] limited to allowable percentage increases from period to period." "Reimbursement rates [are] calculated separately for two classes . . . based on the four levels of ICF/MR-DD care," Developmental Residential, Developmental Institutional, Developmental Non-ambulatory, and Developmental Medical, with the former two (Developmental Residential and Developmental Institutional) constituting one class and the latter two (Developmental Non-ambulatory and Developmental Medical) constituting the other class. "The four components [of a provider's reimbursement rate] are operating costs, resident care costs, property costs, and return on equity costs or use allowance, if applicable. Inflation allowances used in the rate setting process [are] applied to the operating and resident care cost components independently for the two reimbursement classes." Section V.M. of Version VI of the Plan, which provides as follows, describes the "target rate of inflation" feature of the reimbursement methodology, which is a cost containment feature designed to promote economy and efficiency: The use of a target rate of inflation for cost increases shall be used as a measure of efficient operation for purposes of this reimbursement plan. The target rate of inflation principle is that a provider's operating and resident care per diems by reimbursement class should not increase from one fiscal period, that is, year, to the next by a percentage amount with exceeds 1.786 times the average percentage of increase in the Florida ICF/MR-DD Cost Inflation Index for the same period. If a provider's per diem costs for either reimbursement class for operation or resident care exceeds the target rate of inflation, then the allowable per diem costs of the period in which the excessive costs occurred shall be limited to a level equal to the prior period's allowable per diem costs inflated by the target rate percentage. Only allowable per diem cost shall be used for prospective rate setting purposes and for future target rate comparisons. Notwithstanding its name, the "Florida ICF/MR-DD Cost Inflation Index" is based upon a national (rather than a Florida- specific) market basket index.12 Section IV.K. of Version VI of the Plan provides for "incentive payments" to be made to providers who are not "out of compliance with any Condition of Participation" and "whose annual rates of cost increase for operating cost or resident care costs from one cost reporting period to the next are less than 1.786 times the average cost increase for the applicable period documented by the ICF/MR-DD Cost Inflation Index." According to the language contained in this section, its provisions are designed to "encourage high quality care while containing costs." Version VI of the Plan also has a "rebasing" feature, which operates to increase reimbursement rates periodically (no less than once every five years). This "rebasing" feature is described in Section V.B.9 as follows: Rebasing of the operating and resident care component per diems shall occur every five (5) years or whenever fifty percent (50%) of private providers are reimbursed less than reported, allowable costs (whichever occurs first). In detail, rebasing will occur in the rate semester in which fifty percent (50%) or more of the private providers' operating and resident care per diem rate (combined) are less than the operating and resident care inflated costs (combined)(inflated at 1xNational DRI as Florida weighted) based upon eligible cost reports, or each five (5) years counting from October 1, 1991 (1.e, the first rebasing occurring on October 1, 1996) whichever occurs first. The rebasing calculation methodology shall be identical to that used for the October 1, 1989 rate semester rebasing (Section V.A.1.5.) except that rebasing shall occur only for providers whose inflated combined operating and resident care rate does not cover one hundred (100%) of their combined operating and resident care inflated costs. Individual providers which would qualify for rebasing based on April 1, 1991 rates shall be rebased effective July 1, 1991. Version VI of the Plan also provides for "interim changes in component reimbursement rates, other than through the routine semi-annual rate setting process . . ., as well as changes in a provider's allowable cost basis." These provisions promote quality of care inasmuch as they authorize reimbursement for certain costs "necessary to meet existing state or federal requirements," notwithstanding the cost containment features contained elsewhere in the Plan. They are found in Section through 6, which provide as follows: Requests for rate adjustments for increases in property-related costs due to capital additions, expansion, replacements, or repairs shall not be considered in the interim between cost report submissions, except for the addition of new beds or if the cost of the specific expansion, addition, repair, or replacement would cause a change of 1 percent or more in the provider's total per diem reimbursement rate. Requests for interim rate changes reflecting increased costs occurring as a result of resident care or administration changes or capital replacement other than that specified in (1) above shall be considered only if such changes were made to comply with existing state or federal rules, laws, or standards, and if the change in cost to the provider is at least $5000 and would cause a change of 1.0 percent or more in the provider's current total per diem rate. The provider must submit documentation showing that the changes were necessary to meet existing state or federal requirements. In the event that new state or federal laws, rules regulations, or licensure and certification requirements require all affected providers to make changes that result in increased or decreased resident care, operating, or capital cost, request for component interim rate shall be considered for each provider based on the budget submitted by the provider. All affected providers' budgets submitted shall be reviewed by the agency and shall be the basis for establishing reasonable cost parameters. Interim rate requests resulting from (1), (2), and (3) above must be submitted within 60 days after costs are incurred, and must be accompanied by a 12-month budget which reflects changes in services and costs. An interim reimbursement rate, if approved, shall be established for estimated additional costs retroactive to the time of the change in services or the time the costs are incurred, but not to exceed 60 days before the date AHCA receives the interim rate request. The interim per diem rate shall reflect only the estimated additional costs, and the total reimbursement rate paid to the provider shall be the sum of the previously established prospective rates plus the interim rate. A discontinued service would offset the appropriate components of the prospective per diem rates currently in effect for the provider. Upon receipt of a valid interim rate request subsequent to June 30, 1984, the AHCA Office of Medicaid must determine whether additional information is needed from the provider and request such information within 30 days. Upon receipt of the complete, legible additional information as requested, the AHCA Office of Medicaid must approve or disapprove the interim rate within 60 days. If the Office of Medicaid does not make such determination within the 60 days, the interim rate shall be deemed approved. Interim Rate Settlement. Overpayment as a result of the difference between the approved budgeted interim rate and the actual costs of the budgeted item shall be refunded to AHCA. Under-payment as a result of the difference between the budgeted interim rate and actual allowable costs shall be refunded to the provider. After the interim rate is settled, a provider's cost basis shall be restricted to the same limits as those of a new provider . . . . The right to request interim rates shall not be granted for fiscal periods that have ended. Sections VI. and VII. of Version VI of the Plan are entitled "Payment Assurance" and "Provider Participation," respectively, and provide as follows: Payment Assurance The state shall pay each provider for services provided in accordance with the requirements of the Florida Title XIX state plan and applicable state or federal rules and regulations. The payment amount shall be determined for each provider according to the standards and methods set forth in the Florida Title XIX ICF/MR-DD Reimbursement Plan. Provider Participation The plan is designed to assure adequate participation of ICF/MR-DD providers in the Medicaid Program, the availability of high- quality services for recipients, and for services which are comparable to those available to the general public. ICF/DD Reimbursement Prior to 1989 Originally, ICF/DD providers in Florida were reimbursed for providing services to the Medicaid beneficiaries in their facilities pursuant to the same methodology used to reimburse nursing home operators. It subsequently was determined, however, that, because of the differences between ICF/DDs and nursing homes and their respective populations,13 a separate methodology for ICF/DDs was warranted in order to ensure that reimbursement rates for ICF/DD providers were adequate. Such a separate methodology for ICF/DDs (ICF/DD Methodology) was created in 1984. The new ICF/DD Methodology did not include a rebasing provision, and its implementation did not result in an elimination of ICF/DD underfunding. In fact, from 1984 to 1989, most ICF/DD providers, including the state, suffered "tremendous losses." In 1989, a rebasing provision was added to the ICF/DD Methodology. In less than 24 months after the addition of this provision, however, more than half of the ICF/DD providers were spending more on providing ICF/DD services than they were being reimbursed. United States District Court for the Southern District Court of Florida Case No. 89-0984 Petitioner is now, and has been at all times material to the instant case, a member of the Florida Association of Rehabilitation Facilities, Inc. (FARF), a trade association representing non-profit corporations that own and/or operate intermediate care facilities for the developmentally disabled. In 1989, FARF and its members (Plaintiffs), including Petitioner, filed suit in the United States District Court for the Southern District Court of Florida (Case No. 89-0984) challenging the manner in which Florida reimbursed FARF members for the provision of Medicaid-covered services. In May of 1991, Respondent's predecessor, in an effort to address the issues raised in the FARF lawsuit, announced that it was making revisions in the ICF/DD Methodology. These revisions took effect July 1, 1991. On September 11, 1991, United States District Court Judge Lenore C. Nesbitt, acting upon the Plaintiffs' motion, issued an Order Granting Preliminary Injunction in Case No 89- 0984. Judge Nesbitt's order contained the following "findings of facts": Plaintiffs are a group of non-profit corporations providing health care services to mentally retarded individuals in intermediate care facilities ("ICF/MR"), and a trade association representing that group. Defendants are the Florida Department of Health and Rehabilitative Services ("HRS") and two of its officials. At the request of the State of Florida, Plaintiffs provide treatment for mentally retarded individuals, 99%-100% of whom are Medicaid-eligible, in numerous facilities in the state. Certain Plaintiffs both own and operate the ICF/MRs. Others only operate the facilities, which are on land owned by the State. This latter group of facilities are known as "cluster facilities." Because the State of Florida has chosen to receive federal funds by participating in the Medicaid program, it must comply with the requirements of the federal act. One requirement is that the State develop a reimbursement plan for providers of ICF/MR services. As described below, the state need not reimburse all actual costs of the providers; it must only pay rates which are "reasonable and adequate" for an efficient provider to provide care in compliance with applicable state and federal laws and quality and safety standards. HRS reimburses Plaintiffs in the following manner: Operators of cluster facilities are paid pursuant to a fixed-rate contract, not pursuant to any reimbursement plan. Also, HRS' obligations under the contract are expressly made conditional on sufficient appropriations by the state legislature. Operators of non-cluster facilities are reimbursed pursuant to a plan formulated by the state. As is true with most state plans, and is permitted by the Medicaid Act, HRS' plan determines cost on a prospective basis. That is Plaintiffs are paid based on what their services should cost not on what they have actually spent. See Wilder v. Virginia Hosp. Assn., 110 S.Ct 2510, 2516 n.7 (1990). The plan reimburses non-cluster providers as follows: Providers get either last year's actual costs or last year's "target limit cost" (i.e. the previous year's costs plus allowed inflation plus 1.5%), whichever is lower, plus one times the "Modified DRI Nationwide Nursing Home Costs Index." By contrast, operators of "skilled nursing facilities" were provided an inflation increase equivalent to two times the DRI Index. Significantly, there is no periodic readjustment of the target limit. As a result, efficient providers whose necessary costs are consistently greater than their target limit will continue to be under- reimbursed. Further, providers who keep their costs below the target limit are rewarded with a penalty: their target limit for the following year is reduced.14 Plaintiffs assert three challenges to Florida's medicaid reimbursement system. In count I, the substantive challenge to the state's plan, Plaintiffs allege that HRS' plan does not meet the substantive requirement of the Boren Amendment to the Medicaid Act. That is, it does not provide for rates which are "adequate and reasonable" to meet those costs which must be incurred by efficient providers of services in conformity with applicable federal and state laws, regulations, and quality and safety standards. In support of this count, Plaintiffs have submitted several affidavits stating that they and every other provider in the state, except one, continually operate at a large loss because their costs substantially exceed the amounts reimbursed under the plan.15 Neither is it genuinely disputed that the current situation impacts on quality of care.16 Count II, the equal protection claim, alleges that the state's decision to reimburse "skilled nursing facilities" at two times the DRI inflation rate while reimbursing ICF/MR providers at just one times the DRI rate is arbitrary, without justification, and hence violative of the Constitution. Count III alleges and it is undisputed that HRS payment to cluster providers via a fixed- rate contract instead of pursuant to a plan, while at the same time receiving federal funds under the Medicaid Act, violates federal law. Further, Plaintiffs challenge HRS' refusal, prior to the filing of the pending motion, to amend the cluster contracts to cover unexpected and unavoidable interim cost increases, such as increases in worker's compensation insurance rates. As a result of these refusals, Plaintiffs have suffered financially relative to those reimbursed pursuant to a plan. Plaintiffs' evidence also indicates that, because of these consistent and substantial unreimbursed costs, operators of cluster facilities may be unable to continue providing care in the future.17 Defendants' evidence consists of allegations that Plaintiffs' financial difficulties have resulted from past poor management decisions, specifically from their past failure to devote sufficient resources to the wages of their direct care staff. Defendants' evidence also raises a factual dispute as to the financial loss to cluster providers as a result of being paid pursuant to a fixed-rate contract. Otherwise, Defendants do not seriously dispute most of the facts set forth in Plaintiffs' affidavits. Instead, Defendants' submissions consist primarily of argument: they comment on Plaintiffs' evidence and ask the Court to draw the conclusion that (1) their plan reasonably and adequately reimburses the truly efficient provider, and that (2) Plaintiffs' problems are the result of inefficiencies and management mistakes unrelated to deficiencies in the plan. After setting forth these "findings of fact," Judge Nesbitt, in her order, engaged in a discussion explaining why it appeared that Plaintiffs were entitled to a preliminary injunction as to Counts I and III of their complaint. In "conclusion," Judge Nesbitt stated the following: For these reasons, Plaintiffs' Motion for Preliminary Injunction is GRANTED as to Counts I and III. Accordingly, effective September 4, 1991, Defendants are hereby ENJOINED from inadequately reimbursing providers of care in the ICF/MR program. Defendants are further ENJOINED from paying providers for services at ICF/MR cluster facilities in a manner other than as provided for in a rate plan, and shall commence paying each provider of ICF/MR services at cluster facilities the full Medicaid rate for that facility, and shall afford each provider at cluster facilities all rights and protections accompanying a rate plan governing ICF/MR facilities. Though the Court may make interim modifications to the state's current plan, . . . the Court shall not do so at this time. In the spirit of the Boren Amendment's goal of permitting states maximum flexibility in formulating plans for reimbursement, Defendant shall be permitted to file, on or before October 4, 1991, a plan which complies with the substantive requirements of 42 U.S.C. Section 1396a(a)(13). See Wilder v. Virginia Hosp. Assn., 110 S.Ct. 2510, 2517 & 2525 (1990). The rates of reimbursement established under the plan ultimately approved by the Court shall be retroactive to September 4, 1991. The parties are directed to cooperate in formulating an acceptable plan to be presented to this court.18 The Order Granting Preliminary Injunction entered by Judge Nesbitt has not been vacated, rescinded, set aside or modified. On November 14, 1991, Judge Nesbitt issued an Order on Motion for Civil Contempt and Sanctions in Case No. 89-0984, which provided as follows: THIS CAUSE came on before the Court on Plaintiffs' Motion for Civil Contempt and Sanctions and after agreement of counsel for the respective parties before Magistrate Judge Turnoff and submission by all parties of the attached joint proposal, IT IS ORDERED AND ADJUDGED that the attached document is adopted and approved by the Court as its Order on Motion for Civil Contempt and Sanctions and the parties and their agents and successors are hereby ordered to comply with the terms hereof commencing on November 1, 1991. The "attached joint proposal" which Judge Nesbitt "adopted and approved" provided as follows: BASIS FOR AGREEMENT TO DISMISS MOTION FOR CONTEMPT Interim rates for Sunrise OK (Weeks attachment) Depreciation and Maintenance HRS agrees to pay the full Medicaid rate in the current Medicaid rate plan to cluster operators. Cluster operators agree to use amounts in the full rate devoted to depreciation for repair of the facility and replacement (if necessary) of the equipment of facility. HRS and clusters shall agree on said repairs and replacements and shall prioritize any licensure deficiencies for replacement or repair. To the extent there is no necessity for repair of the facility or replacement of equipment, all funds shall revert to HRS/Developmental Services. The amount of depreciation in any given year shall be as computed in the cost report and in accordance with the rate Plan. HRS agrees to retain all liability for repair of the facility and replacement equipment (if any) in excess of those items handled under section 2. Cluster operators and HRS agree that maintenance funds in the full rate, which are attributable to HRS costs incurred in the facility, shall be sent to HRS for continuation of maintenance, or may be retained by cluster and HRS relieved of responsibility for maintenance. Cluster operators are not obligated to assume duties and obligations/ responsibilities in their contracts with HRS district offices that are in excess of those required of an ordinary ICF/MR provider. Pay 6+% retroactive to July 1 by November 30. Agree to pay minimum of May 17 agreement or full rate, whichever is higher, for 1 year, ending June 30, 1992. Agree to pay minimum of May 17 agreement or full rate, whichever is higher, for 1 year, ending June 30, 1992. Agree to pay minimum of May 17 or full rate, whichever is higher, for an additional 4 year period, ending June 30, 1996 subject to legislative appropriation each year. Absent legislative approval, cluster entitled to full rate without depreciation and expense deduction or restrictions contained herein. HRS agrees to seek legislative appropriations, for additional funds, if necessary, in excess of total Medicaid rate, to fund those additional revenues, required per #5 for each year until 1996. These term[s] supplement and do not abrogate May 17 except annual renewal replaced with 5 year contract. Each subsequent contract shall be for 5 years. Defendants shall be entitled in that year to renegotiate the contract or bid-out the contract. Under 2B. Right to Renewal of the Stipulation of Settlement lines 8 through 12 beginning with "Cluster" and ending with "Stipulation" shall be stricken. In additions lines 6 through 19 on Page 7 shall be stricken beginning with "Defendants" and ending with "1991." See attached. (Sic. #8 now included in running text.) If depreciation of funds are available after expenditures have been made for necessary repairs and replacement, HRS and cluster operator shall agree to deposit such funds into a reserve fund, to be held by the operator, to fund necessary repairs and replacement in future years, particularly long term repairs unlikely to appear on a regular basis. Funds held in reserve by the operator for long term repair or replacement which are not expended by the end on the 5 year contract period shall revert to the Department, unless the Department renews the contract with the same operator, or funds are transferred to new provider. At the end of each 5 year contract with cluster, the contract may be renewed with the current cluster operator, or bid out. When contracts are renewed or bid out, the terms shall be for the full Medicaid rates. Funds appropriated in F.Y, 1991-92 for repairs and replacement shall be promptly disbursed. (Note: The numbering system on my original copy reflects changes made after copying had taken place, but before signature. Thus the copy shows an 8. and 9., which have been deleted on the original signed agreement. Also the copy shows number 10.-14 which have been renumbered on the original 8.-12.) (Weeks Attachment) 1. The interim rate request filed for the McCauley, Mahan, Dorchester, Bayshore, Green Tree Court and St. Petersburg on June 17, 1991 will be approved for all six clusters. Reimbursement for the interim rate increase shall be paid to Sunrise beginning 60 days prior to the date of filing and the interim shall be settled based on the June 30, 1991 cost reports for each of these clusters. The level of interim rate increase shall be per data and calculations provided the Department with Sunrise's July 31, 1991 letter to Ms. Joyce Barrington. Procedure used for this interim shall be in compliance with the current Florida Title XIX ICF/MR-DD Reimbursement Plan and current procedures for interim rates to include inflation on the interim rate component effective 7/1/91 through 3/30/92. Case No. 89-0984 is still pending (but before Judge Michael Moore). Doe v. Chiles In March of 1992, FARF became involved in another federal lawsuit against the state, when it, along with United Cerebral Palsy, Inc., and various Florida residents who had been placed on waiting lists for entry into an ICF/DD, filed a 1983 action in the United States Court for the Southern District of Florida (styled Doe v. Chiles) claiming that the state was causing unreasonable delays in the provision of ICF/DD services. In December of 1992, FARF and United Cerebral Palsy, Inc., were dismissed as plaintiffs. On July 22, 1996, Judge Wilkie D. Ferguson, Jr., granted the remaining plaintiffs' motion for summary judgment, holding: Section 1396a(a)(8) of the Medicaid (A)ct, specifically the reasonable promptness clause, is enforceable under 42 U.S.C. Section 1983. "Medical assistance under the plan" has been defined as medical services. The (S)tate is obliged to furnish medical services, however, only to the extent that such placements are offered in the Federal Health Care Financing Agency ("HCFA") approved State plan. Once a state elects to provide a service, that service becomes part of the state Medicaid plan and is subject to the requirements of Federal law. At oral argument on this issue, Defendants conceded that Florida's [HCFA] State approved plan does provide for placement in ICF/MR facilities. Further, Defendants have not disputed the facts alleging the [S]tate's failure to conform with the provisions set forth in that statute, which the Court construes as an admission of unreasonable delays in placing developmentally disabled persons into ICF/MR facilities. On August 26, 1996, a magistrate judge signed a report recommending that Judge Ferguson grant the plaintiffs' motion to certify as a class "all those developmentally disabled persons who have not received prompt [ICF/DD] placement." After conducting a hearing on August 28, 1996, Judge Ferguson entered a final judgment, ordering that the state "shall, within 60 days of the date of this Order, establish within the State's Medicaid Plan a reasonable waiting list time period, not to exceed ninety days, for individuals who are eligible for placement in [an ICF/DD]." The state appealed the final judgment. On February 26, 1998, the Eleventh Circuit, in an opinion reported at 136 F.2d 709 (11th Cir. 1998), affirmed the judgment. Chapter 96-417, Laws of Florida In 1996, the Florida Legislature passed House Bill No. 1621 (Chapter 96-417, Laws of Florida), Sections 4, 6, 11, 12, 13, 14, 15, 16 and 17 of which provided, in pertinent part, as follows: Section 4. Subsections (8) and (14) of section 409.906, Florida Statutes, are amended to read: 409.906 Optional Medicaid services. --- Subject to specific appropriations, the agency may make payments for services which are optional to the state under Title XIX of the Social Security Act and are furnished by Medicaid providers to recipients who are determined to be eligible on the dates on which the services were provided. Any optional service that is provided shall be provided only when medically necessary and in accordance with state and federal law. Nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Optional services may include: . . . (14) INTERMEDIATE CARE FACILITY FOR THE DEVELOPMENTALLY DISABLED MENTALLY RETARDED SERVICES. For the purposes of Medicaid reimbursement, "intermediate care facility for the developmentally disabled services" means services provided by a facility which is owned and operated by the state and to which the agency may pay for health-related care and services provided on a 24-hour-a-day basis, for a recipient who needs such care because of a developmental disability or related condition. The agency may pay for health related care and services provided on a 24-hour a day basis by a facility licensed under chapter 393, to a recipient who needs such care because of his mental or physical condition.19 . . . Section 6. Section 409.908, Florida Statutes is amended to read: 409.908 Reimbursement of Medicaid providers. Subject to specific appropriations, the agency shall reimburse Medicaid providers, in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals and handbooks incorporated by reference therein. These methodologies may include fee schedules, reimbursement methods based on cost reporting, negotiated fees, competitive bidding pursuant to s. 287.057, and other mechanisms the agency considers efficient and effective for purchasing services or goods on behalf of recipients. Payment for Medicaid compensable services made on behalf of Medicaid eligible persons is subject to the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Further, nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act, provided the adjustment is consistent with legislative intent. (2)(a)1. Reimbursement to nursing homes licensed under part II of chapter 400 and state-owned-and-operated intermediate care facilities for the developmentally disabled mentally retarded licensed under chapter 393 must be made prospectively. . . . Section 11. (1) The Legislature finds: That noninstitutional home and community-based services are a cost-effective and appropriate alternative to institutional care for many individuals who would otherwise be served in institutional settings; That the Intermediate Care Facility for the Developmentally Disabled program is an optional institutional service authorized by Title XIX of the Social Security Act and that this act encourages states to develop and utilize alternatives to optional institutional services for Medicaid clients through authorization of waivers that allow for federal financial participation in the provision of services in noninstitutional settings for clients who are eligible for Medicaid-reimbursed institutional services; That utilization of noninstitutional funding mechanisms for individuals residing outside of state-owned-and-operated institutions allows individuals to be appropriately served at less cost than is possible through the Intermediate Care Facility for the Developmentally Disabled program; That federal regulations diminish the ability of the state to manage resources currently used to reimburse privately owned or operated intermediate care facilities for the developmentally disabled to enable the most cost-effective utilization of resources appropriated to programs that serve individuals with developmental disabilities; That there are fundamental differences in the respective roles of private and public facilities that serve individuals with developmental disabilities and that these differences justify funding private and public facilities through different funding mechanisms; That there is a critical state need to continue financing institutional services provided in state-owned-and-operated facilities for the developmentally disabled through the Intermediate Care Facility for the Developmentally Disabled program to provide for the adequate care of the clients who reside in these facilities; and That the most appropriate and cost- effective care for state-supported clients who reside in privately owned or operated residential facilities for individuals with developmental disabilities is provided through community-based, noninstitutional service delivery models that are financed through noninstitutional financing mechanisms. (2) In accordance with the findings in subsection (1), it is the intent of the Legislature that, in order to both reduce the cost of serving individuals with developmental disabilities and provide appropriate alternative services to institutional care, privately owned or operated facilities authorized to receive reimbursement through the Medicaid Intermediate Care Facility for the Developmentally Disabled program on June 30, 1996, shall no longer be reimbursed through that program but may continue to serve clients through noninstitutional service arrangements that are financed through noninstitutional funding mechanisms. It is further the intent of the Legislature that individuals who reside in state-owned-and- operated intermediate care facilities for the developmentally disabled shall continue to receive services financed through the Medicaid Intermediate Care Facility for the Developmentally Disabled program. Section 12. The Agency for Health Care Administration shall issue a license as a home for special services to each facility desiring such licensure, if the facility was eligible to receive reimbursement through the Intermediate Care Facility for the Developmentally Disabled program on June 30, 1996. Individuals with developmental disabilities who reside in homes for special services licensed pursuant to this section may receive services reimbursed through the home and community-based services waiver, provided all other Medicaid eligibility criteria are satisfied. A license granted pursuant to this section shall be valid until the expiration of the facility's Intermediate Care Facility for the Developmentally Disabled license. The Agency for Health Care Administration shall develop standards for facilities licensed pursuant to this section which shall include appropriate sanctions for noncompliance with the standards and shall specify the terms for renewal of licenses. Any license granted pursuant to this section shall be contingent upon the facility allowing access to the Agency for Health Care Administration to conduct inspections to ensure compliance with standards. Section 13. Subsection (29) of section 393.063, Florida Statutes, is amended to read: 393.063 Definitions.- For purposes of this chapter: (29) "Intermediate care facility for the developmentally disabled" or "ICF/DD" means a state-owned-and-operated residential facility licensed in accordance with state law, and certified by the Federal Government pursuant to the Social Security Act, as a provider of Medicaid services to persons who are mentally retarded or who have related conditions. The capacity of such a facility shall not be more than 120 clients. Section 14. Section 393.067, Florida Statutes, is amended to read: 393.067 Licensure of residential facilities and comprehensive educational programs.- In addition to the requirements in subsection (4), the initial license application for an intermediate care facility for the developmentally disabled of six beds or less shall also include: The provider's proposal, on forms provided by the department, including a pro forma budget which shall also serve as the basis for establishing an initial interim Medicaid reimbursement rate. Approval and selection of the provider's proposal by the district and the Developmental Services Program in accordance with paragraph (20)(c). The initial license application shall be valid while the provider develops the facility in compliance with the conditions of the approved proposal. The department shall only accept proposals for intermediate care facilities for the developmentally disabled of six beds or less in response to the publication of projected bed need. Projected bed need shall be published by the department and shall identify: The district in which the beds are to be located. The maximum per diem cost which shall be in accordance with the Florida Title XIX ICF/MR Reimbursement Plan. The maximum size of the facility. The level of care of clients to be served, including demographic and programmatic characteristics of the client population. Projected bed need shall be directed towards clients who have severe disabilities, who have extensive service needs, who require extensive active treatment services, and who can only be adequately served in a cost-effective manner in an intermediate care facility for the developmentally disabled. Projected bed need shall be determined by the department on the basis of client need for extensive active treatment services that can only be delivered in a cost-effective manner in an intermediate care facility for the developmentally disabled. The department shall approve and select from provider proposals that respond to published projected bed need, based on the following weighted criteria in order of importance: Adequacy and quality of services that address the published bed need projections, especially the client demographic and programmatic characteristics. Completeness of the proposal and adherence to timeframes. Demonstration of financial ability to operate the facility in relation to published bed need projections. Appropriateness of per diem cost to provide quality services. Any license granted for intermediate care facilities for the developmentally disabled under the provisions of subsections (18) and (20) shall be valid only while the provider operates the facility in compliance with the conditions in the proposal that were approved by the department, as well as with all other applicable laws, rules, and regulations related to the operation of such facilities. Section 15. (1) Section 393.16, Florida Statutes, is hereby repealed.20 (2) Any cash balance remaining in the Intermediate Care Facilities Trust Fund shall be transferred to the Community Resources Development Trust Fund. Section 16. Notwithstanding any other provision of law, or this act to the contrary, the Agency for Health Care Administration may continue to reimburse private intermediate care facilities for the developmentally disabled through the Intermediate Care Facility for the Developmentally Disabled program through August 30, 1996, if requested by the Secretary of Health and Rehabilitative Services to ensure the safety and well-being of clients. Section 17. This act shall take effect July 1, 1996, or upon becoming a law, whichever is later; however, if this act becomes a law after July 1, 1996, it shall operate retroactively to July 1, 1996. Chapter 96-417, Law of Florida, became a law without the Governor's approval on June 7, 1996. Cramer v. Chiles Chapter 96-417, Florida Statutes, was challenged in the United States District Court for the Southern District of Florida in the case of Cramer v. Chiles, Case No 96-6619, which was assigned to Judge Ferguson. On August 28, 1996, Judge Ferguson issued an Order on Motion for Preliminary Injunction in Case No. 96-6619, which provided as follows: THIS CAUSE came before the Court for oral argument August 28, 1996 on Plaintiffs' Emergency Motion for Preliminary Injunction. Plaintiffs request the Court stay the effective date of Chapter 96-417, Public Laws, which is scheduled to go into effect August 30, 1996. The enactment would eliminate all private intermediate care facilities for the developmentally disabled21 ("ICF/DDs") in Florida, reducing the number of ICF/DD placements available by nearly 2,200. This Court previously determined in Doe v. Chiles, Case No. 92-589-CIV-Ferguson, that the State of Florida is obligated to provide placement of eligible individuals in ICF/DDs. Accordingly, in the absence of a transitional plan and showing that the State's proposed revised plan, under the new legislation, will adequately provide ICF/DD placements for eligible persons in Florida, there is a likelihood that Plaintiffs will succeed on the merits. To allow the substantial change scheduled for August 30, 1996, prior to the submission to, and approval by, the Federal Health Care Financing Agency ("HCFA") of an alternative plan which satisfies the State's obligations to beneficiaries under the existing plan, would cause irreparable harm to individuals currently provided care in those facilities. There must be a period and a plan for transition which will insure that services to the entitled recipients are not substantially impaired. The Plaintiffs have made a sufficient showing that there is no adequate legal remedy. Accordingly, it is ORDERED AND ADJUDGED that the Plaintiffs' motion for preliminary injunction is GRANTED, and the State shall continue to provide the current funding for 100% of cost reimbursements to private ICF/DD facilities until such time as a revised plan is presented and approved by HCFA. The new plan, for fairness considerations, shall disclose criteria to be used by the State in its reassessments for continued institutional care eligibility. Time is of the essence, as budgetary constraints dictate that a plan must be approved well before the end of the fiscal year, June 30, 1997. It is thus incumbent on all parties to move expeditiously. On October 13, 1998, Judge Ferguson issued an Order on Defendants' Ore Tenus Agreed Motion to Revive Statutory Scheme, which provided as follows: THIS MATTER came before the Court upon Defendants' Ore Tenus Agreed Motion to Revive Statutory language in Chapters 393 and 409, FLORIDA STATUTES (1995), as they existed prior to the enactment of Chapter 96-417, LAWS OF FLORIDA, and the Court being fully advised in the premises and having considered the entire record of the case, for good cause shown, it is hereby ORDERED AND ADJUDGED the Motion is Granted nunc pro tunc to the date of the entry of oral Order on Summary Judgment on January 9, 1998. Chapter 97-260, Florida Statutes Following the initiation of the challenge to Chapter 96-417, Laws of Florida, the Florida Legislature further addressed the "transition from funding through the Intermediate Care Facility for Developmentally Disabled Program to noninstitutional funding" by enacting Chapter 97-260, Laws of Florida, section 4 of which provided as follows: Report required; department to notify Legislature and develop plan if judicial decisions result in spending requirements in excess of appropriations.– The Department of Children and Family Services shall develop individual support plans for the approximately 2,176 persons directly affected by the transition from funding through the Intermediate Care Facility for Developmentally Disabled Program to noninstitutional funding. The individual plans shall provide for appropriate services to each affected individual in the most cost- effective manner possible. The department shall report the projected aggregate cost of providing services by fund source through the individual plans to the Office of Planning and Budgeting, the Senate Ways and Means Committee, and the House Health and Human Services Appropriations Committee by September 30, 1997. The aggregate costs reported shall be based on typical industry rates and shall not include special adjustments for property costs or other additional costs unique to any individual provider or type of provider. The department may, however, report any such costs separately. The report must further provide detailed information on department efforts to maximize Medicare and other funding available outside the Developmental Services Program and the use of generic community resources along with a calculation of the value of such resources. The report must also include a summary of the department's progress in recruiting alternative providers in the event that any current providers decide to discontinue services to clients or cannot provide quality services within the anticipated rate structure. If judicial decisions are continued or rendered that the Department of Children and Family Services feels will require spending in excess of the amounts budgeted for Developmental Services, the department shall immediately notify the Chairs of the Senate Ways and Means Committee, the House Fiscal Responsibility Council, and the House Health and Human Services Appropriations Committee. Within 1 week after providing notification pursuant to this subsection, the department shall submit a spending plan that addresses the projected deficit. This section is repealed July 1, 1999. Boren Amendment Repeal In the Balanced Budget Amendment of 1997 (more specifically, Section 4711(a)(1) thereof), the United States Congress repealed the Boren Amendment to the Medicaid Act, which Judge Nesbitt had referred to in her Order Granting Preliminary Injunction in United State District Court for the Southern District of Florida Case No. 89-0984. The Boren Amendment required, in pertinent part, that a state plan for medical assistance22 provide for "payment of . . . the hospital services, nursing facility services, and services in an intermediate care facility for the mentally retarded provided under the plan through the use of rates . . . which the State finds, and makes assurances to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and Federal laws, regulations, and quality and safety standards." Section 4711(a)(1) of the Balanced Budget Amendment of 1997 eliminated this requirement (which was codified in 42 U.S.C. 1396a(a)(13)) and replaced it with the requirement that a state plan: (13) provide-- for a public process for determination of rates of payment under the plan for hospital services, nursing facility services, and services of intermediate care facilities for the mentally retarded under which-- proposed rates, the methodologies underlying the establishment of such rates, and justifications for the proposed rates are published, providers, beneficiaries and their representatives, and other concerned State residents are given a reasonable opportunity for review and comment on the proposed rates, methodologies, and justifications, final rates, the methodologies underlying the establishment of such rates, and justifications for such final rates are published, and in the case of hospitals, such rates take into account (in a manner consistent with section 1923) the situation of hospitals which serve a disproportionate number of low- income patients with special needs. Subsection (b) of Section 4711 of the Balanced Budget Amendment of 1997 provided as follows: STUDY.--The Secretary of Health and Human Services shall study the effect on access to, and the quality of, services provided to beneficiaries of the rate-setting methods used by States pursuant to section 1902(a)(13)(A) of the Social Security Act (42 U.S.C. 1396a(a)(13)(A)), as amended by subsection (a). REPORT.--Not later than 4 years after the date of the enactment of this Act, the Secretary of Health and Human Services shall submit a report to the appropriate committees of Congress on the conclusions of the study conducted under paragraph (1), together with any recommendations for legislation as a result of such conclusions. Subsection (d) of Section 4711 of the Balanced Budget Amendment of 1997 provided as follows:: EFFECTIVE DATE.--This section shall take effect on the date of the enactment of this Act and the amendments made by subsections (a) and (c) shall apply to payment for items and services furnished on or after October 1, 1997. Following the passage of the Balanced Budget Act of 1997, the Health Care Finance Agency (HCFA), a federal agency which assists in the administration of the federal Medicaid program,23 sent the following letter, dated December 10, 1997, to state Medicaid directors concerning the repeal of the Boren Amendment: This letter is one of a series that provides guidance on the implementation of the Balanced Budget Act of 1997 (BBA). Section 4711 of BBA repeals Sections 1902(a)(13)(A), (B), and (C) of the Social Security Act (the Act), requires states to implement a public process when changes in payment rates or payment methodologies are proposed, and applies to payments for items and services furnished on or after October 1, 1997. (See Enclosure 1 for background on Section 4711.) Section 4711 of BBA replaced the Boren requirements with a new section 1902(a)(13)(A) of the Act, which requires states to (a) use a public process for determining rates, (b) publish proposed and final rates, the methodologies underlying the rates, and justifications for the rates, and (c) give interested parties a reasonable opportunity for review and comment on the proposed rates, methodologies, and justifications. In the case of hospitals, such rates must take into account the situation of hospitals which serve disproportionate number of low-income patients with special needs. The intent of Section 4711 is to provide states with maximum flexibility, as well as to minimize HCFA's role in reviewing inpatient and long-term care state plan amendments involving payment rate changes. HCFA would consider the state to be in compliance with this provision if it elected to use a general administrative process similar to the Federal Administrative Procedures Act that satisfies the requirements for a public process in developing and inviting comment in Section 4711. This will allow states the flexibility to follow current state procedures. If a state's public process is not currently being applied to rate setting, or does not currently include a comment period, then the state would need to modify the process. (See Enclosure 2 for public process options.) The repeal of the Boren amendment cannot be interpreted to be retroactively effective; the Boren amendment still applies to payment for items and services furnished before October 1, 1997. Thus, inpatient hospital and long-term state plan amendments that are currently pending approval by HCFA, including those where Boren requirement questions are the only outstanding issues, need to have these issues resolved before amendment can be approved. However, we recognize that the intent in repealing the Boren amendment was to reduce HCFA's role in the institutional payment rate setting process and to increase state latitude in this area. In light of the less restrictive requirements now in place, HCFA is committed to working with states to expedite resolution of outstanding Boren issues in existing pending amendments. States that are not proposing changes in their payment methods and standards, or changes in rates for items and services furnished on or after October 1, 1997, need not immediately implement a BBA public process. States need only publish proposed rates, methodologies, and justification prior to the proposed effective date of any changes in payment rates or payment methodologies. In other words, states are not required to subject their existing rates to a public process to the extent that those existing rates were validly determined in accordance with legal standards in effect prior to October 1, 1997. In the event changes are already underway, states are to submit the preprint page (or comparable language inserted elsewhere in the hospital and long- term care payment sections of the plan) with the next proposed amendment. (See Enclosures 3 and 4 for preprint pages.) We envision a streamlined Federal review process due to the fact that state plan amendments previously submitted under the Boren requirements were subjected to more rigorous statutory standard both in terms of Federal review of their substance and the review of the process itself. Chapter 98-46, Laws of Florida. The 1998 Florida Legislature passed legislation directing Respondent to make changes to the ICF/DD Methodology. The directive was contained in Chapter 98-46, Laws of Florida, Sections 13 and 40 of which provided as follows: Section 13. In order to implement Specific Appropriation 243 of the 1998-1999 General Appropriations Act, subsection (22) is added to section 409.908, Florida Statutes, to read: 409.908 Reimbursement of Medicaid providers.- Subject to specific appropriations, the agency shall reimburse Medicaid providers, in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals and handbooks incorporated by reference therein. These methodologies may include fee schedules, reimbursement methods based on cost reporting, negotiated fees, competitive bidding pursuant to s. 287.057, and other mechanisms the agency considers efficient and effective for purchasing services or goods on behalf of recipients. Payment for Medicaid compensable services made on behalf of Medicaid eligible persons is subject to the availability of moneys and any limitations or directions provided for in the General Appropriations Act or chapter 216. Further, nothing in this section shall be construed to prevent or limit the agency from adjusting fees, reimbursement rates, lengths of stay, number of visits, or number of services, or making any other adjustments necessary to comply with the availability of moneys and any limitations or directions provided for in the General Appropriations Act, provided the adjustment is consistent with legislative intent. (22) The agency is directed to implement changes in the Medicaid reimbursement methodology, as soon as feasible, to contain the growth in expenditures in facilities formerly known as ICF/DD facilities.24 In light of the repeal of the federal Boren Amendment, the agency shall consider, but is not limited to, the following changes in methodology: Reduction in the target rate of inflation. Reduction in the calculation of incentive payments. Ceiling limitations by component of reimbursement. Elimination of rebase provisions. Elimination of component interim rate provisions. Separate reimbursement plans for facilities that are government operated versus facilities that are privately owned. The agency may contract with an independent consultant in considering any changes to the reimbursement methodology for these facilities. This subsection is repealed on July 1, 1999. Section 40. This act shall take effect July 1, 1998, or in the event this act fails to become a law until after that date, it shall operate retroactively thereto. Chapter 98-46, Laws of Florida, became a law without the Governor's approval on April 30, 1998. Respondent's Response to Chapter 98-46, Laws of Florida Becoming a Law The task of taking the necessary steps to comply with the legislative directive contained in Chapter 98-46, Laws of Florida, was the responsibility of John Owens, a Regulatory Analyst Supervisor with Respondent, whose job duties include "overseeing the various reimbursement plans for Medicaid and their application." Mr. Owens' training is primarily in accounting and finance, not health care. Mr. Owens acted in consultation with his immediate supervisor, Carlton Snipes, as well as the Director of Respondent's Division of Health Purchasing and agency counsel. He did not employ any independent consultants to assist him. After formulating revisions to the ICF/DD Methodology that he preliminarily determined should be made in light of legislative mandate in Section 13 of Chapter 98-46, Laws of Florida, Mr. Owens had published in the August 14, 1998, edition of the Florida Administrative Weekly the following notices of proposed rule development:
The Issue Whether the Department properly excluded coverage for care provided to Petitioner’s child.
Findings Of Fact Petitioner, Susan Carswell, was employed by the State of Florida, Department of Labor and Employment Statistics, from June 1994 until December 1998. She enrolled herself and her children in the State Group Health Insurance Plan (State Plan). The State Plan, Section XXVIII, paragraph A, provides as follows: 18. 'Condition' shall mean any disease, illness, injury, accident, bodily dysfunction, pregnancy, drug addiction, alcoholism, or mental or nervous disorder. * * * 21. 'Covered Services and Supplies' shall mean those health care services, treatments, therapies, devices, procedures, techniques, equipment, supplies, products, remedies, for which expenses are covered under the Benefit Document. (emphasis supplied) * * * 23. 'Custodial Care' means care which does not require Skilled Nursing Care or rehabilitation services and is designed solely to assist the Participant with the activities of daily living, such as: help in walking, getting in and out of bed, bathing, dressing, eating, and taking medicine. (emphasis supplied) * * * 40. 'Illness' means physical sickness or disease, pregnancy, bodily injury, or congenital anomaly. * * * 49. 'Medically Necessary' means the service received required to identify or treat the illness, injury, or mental or nervous disorder which a physician has diagnosed or reasonably suspects. The service must (1) be consistent with the symptom [sic], diagnosis and treatment of the patient’s condition, (2) be in accordance with standards of good medical practice, (3) be required for reasons other than convenience of the patient or his/her physician, (4) be approved by the appropriate medical body or board for the illness or injury in question, and (5) be the most appropriate, efficient and economical medical supply, service, or level of care which can be safely provided. * * * 56. 'Outpatient' means a patient who is receiving medically necessary care or treatment ordered by a physician and who is not an inpatient. * * * 80. 'Skilled Nursing Care' means care which is furnished by, or under the direct supervision of, licensed Registered Nurses (under the general direction of the physician) to achieve the medically desired result and to ensure the Participant’s safety. Paragraph C of the State Plan provides for covered medical and surgical services and supplies as follows: Seventy percent(70) of the Allowance for Medically Necessary Inpatient/Outpatient services and supplies provided to a Participant by a Non-Network Provider for the treatment of the Participant as a result of a covered accident, illness. (emphasis supplied) * * * Ninety percent (90) of the Allowed Amount for Medically Necessary Inpatient/Outpatient services and supplies provided to a Participant by a Network Provider for the treatment of the Participant as a result of a covered accident, illness. (emphasis supplied) Paragraph D of the State Plan provides for other covered services as follows: The Plan shall pay eighty percent (80) of the Allowed Amount or Allowance, whichever is applicable, for the following Medically Necessary Services when ordered by a physician for the treatment of the Participant as a result of a covered accident, illness . . . . Nursing care by a Registered Nurse or Licensed Practical Nurse. Paragraph G of the State Plan provides for exclusions to covered services and supplies as follows: The following are not Covered Services and Supplies under the Plan. 4. Any services and supplies which are not medically necessary. * * * 14. Any services in connection with Custodial Care or preventive care; immunizations or except those in accordance with Child Health Supervision Services or when necessary as a result of an accident. The term "treatment" is not defined in the State Plan. Veronica Carswell is the daughter of Petitioner. She was born on May 5, 1983. Veronica was born healthy, but due to problems resulting from an illness that hospitalized her when she was a week old, she is severely disabled. Her current state is due either to her illness or an accident. She has cerebral palsy, seizure disorder, and vision problems. She is a spastic quadriplegic, severely brain damaged and profoundly mentally retarded. Her body is severely dysfunctional. She has a tracheotomy tube for breathing and a gastrostomy tube for feeding. Veronica is totally dependant on other people for her care. From 1987 to 1998, Veronica resided in a specialty care residential hospital facility in New York. In 1998, Petitioner moved her daughter to Florida so that she could reside at home. In preparation for the move, Petitioner advertised for and hired licensed practical nurses (LPNs) to provide her daughter with the care she needed on a 24-hour basis. Petitioner hired LPN’s because she had discovered it was considerably cheaper to hire an LPN than pay for the services of a lesser qualified home health care aid through a licensed home health care agency. The LPNs provided care to Veronica according to a Care Plan devised by Kathleen Hamilton, LPN, and approved by Dr. Gary Soud, Veronica’s physician. The Care Plan provides for medically necessary treatment or management of Veronica’s current condition and bodily dysfunction. The care required in the plan is recognized as appropriate care and treatment by experts in the field and is not being given for purposes of convenience. Nurse Hamilton is also one of the LPNs who care for Veronica and has provided health care services to Veronica for one year. Other LPNs provide services to Veronica similar to those provided by Nurse Hamilton. The services provided by the LPNs hired by Petitioner include repositioning of Veronica periodically throughout the day, feeding through the gastric tube, checking residual fluid in Veronica’s stomach with a syringe, administering medication through the gastric tube, misting to keep secretions moist, suctioning of the tracheotomy tube, changing the tracheotomy tube ties, replacing the tracheotomy tube every 3 weeks, assessing Veronica’s cardiopulmonary status at least every eight hours and continuously throughout her care, and monitoring Veronica’s oxygen saturation every four hours or as needed by her condition at the time. The attention Veronica requires in order to maintain her breathing is fairly constant, to the point that when Nurse Hamilton testified, she had to sit or stand beside Veronica to administer care, primarily suctioning, to her. Although seizures have not been a problem, Veronica still requires monitoring by a nurse for small seizures, which while not deadly, could adversely affect Veronica’s condition. Veronica’s condition is fragile and without constant care she can quickly deteriorate. Arguably a lay person with proper training could perform the activities involving the gastric tube and repositioning. However, the evidence did not show that Petitioner is adequately trained or able to perform the tasks required for proper use of the gastric tube or repositioning. Moreover, the evidence did not show that such training was available. Likewise, the evidence did not show that a trained lay person was available to perform the care required in relation to the gastric tube or repositioning or that such a person would be more efficient or economical to hire. In fact, the evidence showed that a trained nurse's aide would be more expensive than hiring an LPN to perform the same tasks. Therefore, it would seem appropriate that an LPN perform these services. The same economic analysis applies to all aspects of Veronica’s Care Plan. Additionally the evidence was clear that the care required which involves the gastric tube is not simply care or treatment given for the sole purpose of assisting Veronica with her activities of daily living. Veronica’s condition necessitates the use of special expertise to feed her because she does not feed normally. In order to maintain her status to prevent her deterioration and even death and to prevent infection, which are recognized medical goals, she must receive additional care such as checking her stomach fluids, and cleaning and maintenance of the gastric tube. The amount she is fed must be carefully monitored. The actual feeding of Veronica is a minimum part of the care which is required because she has a gastric tube. The greater activities are the care functions performed for the purpose of maintaining her current status and preventing infection. Since the care and treatment Veronica receives involving the gastric tube are not designed for the sole purpose of assisting Veronica to eat, they do not fall within the exclusion for custodial activities. Similarly, Veronica’s care concerning repositioning is not for the sole purpose of assisting Veronica in her activities of daily living. Repositioning maintains Veronica’s circulation and must be done in order to maintain her current health status and current level of atrophy. Repositioning also prevents the formation of pressure sores. Therefore, because repositioning has multiple medical purposes such care does not fall under the custodial care exclusion. Veronica cannot breathe without a tracheotomy tube. All of the care given to Veronica which involve the tracheotomy tube are medically necessary to maintain her current medical state and to maintain an appropriate level of oxygen in Veronica’s blood and tissues. The same is true of the John Bunn mist administered to Veronica to keep her secretions moist so that she can cough them up or have them suctioned out of her air passageway. Blockage of the air passageways is a real danger with Veronica. The tube coming out is a danger to Veronica. Without these treatments or procedures Veronica’s oxygen level would drop and she would deteriorate. As indicated earlier, the tracheotomy care is constant. Because her breathing is so impaired, Veronica needs to be monitored constantly in addition to the cardiopulmonary assessment done every eight hours and oxygen saturation check done two times per shift. Such monitoring is a nursing assessment requiring special training which is best done by a nurse. Nothing involving the tracheotomy is done for the sole purpose of aiding with Veronica’s activities of daily living. Therefore the custodial exclusion does not apply. Except for the replacement of the tracheotomy tube every month, none of the care or treatment rendered to Veronica is required to be performed by a registered nurse (RN) or under the supervision of a RN. However, some of the care and treatment requires nursing expertise of at least the training of an LPN. However, all of the care can be part of a nurse's function and, at least in this case, is better supplied by a nurse, given Veronica’s fragile condition, level of impairment and the fact that the care is provided most efficiently and economically by an LPN. Therefore, Petitioner is entitled to payment of her claim under the State Plan.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner’s claim be paid. DONE AND ENTERED this 29th day of October, 1999, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of October, 1999. COPIES FURNISHED: Lamar Winegeart III, Esquire 219 Newman Street, 4th Floor Jacksonville, Florida 32202 Cindy Horne, Esquire Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Thomas D. McGurk, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue The issue is whether petitioners' request to terminate, without penalty, their participation in the state group health insurance plan should be granted.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioners, Terri K. Cassano (Cassano) and Edward M. McDonald (McDonald), are employees of the Office of State Attorney, Tenth Judicial Circuit, in Bartow, Florida. As such, they are eligible to participate in the State Group Health Insurance Program (program) administered by respondent, Department of Administration, Division of State Employees' Insurance (Division). At issue in this case is approximately $1,500 paid by petitioners and their employer for health insurance coverage under the program during the period October through December 1989. Effective July 1, 1989 the State of Florida implemented the first phase of a two-phase Flexible Benefits Plan (plan) which allowed, among other things, for employees who participate in the program to make their required monthly insurance premium contribution through a salary reduction agreement which has the effect of reducing the employee's taxable income by the amount of such contribution. Although not made clear in the record, it may be inferred that the plan is embodied in Chapters 22FB-1, 2 and 3, Florida Administrative Code (1987), which rules became effective on August 3, 1989. In federal bureaucratic parlance, the plan is known as a ``cafeteria'' plan /1 and was implemented after approval was obtained from the Internal Revenue Service (IRS). All state employees were automatically enrolled in the plan unless they signed a waiver form. Cassano and McDonald chose to participate in the plan, and they acknowledge that they received a Division brochure describing the plan prior to their enrollment. Under the rules of the plan, a participant was required to remain in the plan for the entire plan year, which in this case ended on November 30, 1989, unless a so-called "qualifying status change" occurred. Rule 22BF-1.008(13) cites a number of events as constituting a "qualifying status change". However, the event defined in subparagraph (13)(b) as a "change in a participant's health insurance coverage resulting in cessation of coverage" is the event upon which petitioners rely. The manner in which that rule should be interpreted is the source of controversy in this proceeding. In July 1989 petitioners were utilizing as their health insurer Health Alliance Plan (HAP), a health maintenance organization (HMO) serving Polk County. HAP was designated as a qualifying HMO under the program. In late July petitioners learned that HAP would cease doing business in Polk County effective September 30, 1989. Because of this, it was necessary that they consider other insurance alternatives to replace their existing coverage. After considering enrollment in Blue Cross Blue Shield (BCBS), which was the only other health alternative offered by the Division,/2 Cassano decided to enroll as a dependent in her husband's health insurance program because of the lower monthly premiums and she would not have to meet a new deductible as she would with BCBS. As for McDonald, who is also a military retiree, he considered BCBS but opted instead for Medicare because he was being treated for an existing ailment and his physicians were not listed as primary providers with BCBS. Consequently, it would cost him approximately $200 per visit with those doctors if he elected to use BCBS. Under these circumstances, petitioners' health coverage under the program ended since their HMO was no longer in business and their only other option, BCBS, would result in petitioners paying significantly higher costs. Cassano was able to immediately obtain coverage with her husband's health plan effective on July 28, 1989 while McDonald's coverage with Medicare became effective on October 1, 1989, the day after his HAP coverage ended. When the Division learned that HAP was ceasing doing business in Polk County, it mailed to petitioners a "health care provider selection form" which offered them a special enrollment period from August 15 through 31, 1989. The form offered the choice of enrolling in HOPC, BCBS or to cancel their health insurance coverage. However, respondent contends that even though the form offered petitioners the option of cancelling their insurance, it did not apply and that petitioners' only choice was to transfer coverage to one of the two remaining state insurers. The form also noted that if petitioners had any questions they should contact their personnel office or the Division by telephone. Although their personnel office later informed them that respondent might not agree they could do so, Cassano and McDonald executed the form on August 23 and 28, 1989, respectively, and elected to cancel their coverage. They also executed a "qualifying status change form" so that they could cease participation in the plan even though the plan year did not end until November 30, 1989. In so doing, they noted on the form that the qualifying status change event was "cessation of coverage by Health Alliance Plan" and relied in part upon a Division document sent to them which outlined the plan and listed a qualifying status change event as being a "change in participant's health coverage: resulting in cessation of coverage". That same document noted that in order to prove that such an event had occurred, the employee had to furnish a "letter from carrier stating that coverage has ceased due to change in insurance plan". In addition, explanatory literature concerning the plan previously disseminated: by the Division reflected that "a cafeteria plan may also allow for revocation of health plan elections of all affected participants in the event coverage is significantly curtailed or completely terminated in connection with a health plan, if the coverage is provided by an independent third party." Thus, petitioners reasonably assumed that a qualifying status change had occurred by virtue of the cessation of coverage by HAP. After informal efforts to resolve the matter were unsuccessful, on September 28, 1989 Cassano and McDonald formally requested by letter the right to discontinue their participation, without penalty, in the state program. Their requests were essentially denied by letters dated October 5, 1989 from the Division director. In the proposed agency action, the Division stated that it would be happy to comply with their requests but "since the premiums you pay for such coverage have been pretaxed for the five month period ending December 1, 1989, we will continue to deduct these premiums through October 1989 payroll pursuant to rule 22FB-2.005 F.A.C." /3 As a consequence, petitioners were involuntarily required to pay for coverage in BCBS during the months of October through December 1989 even though they were enrolled in other health insurance plans, and their employer (the office of state attorney) was forced to make its required contribution. Through testimony of the state benefits administrator, William R. Seaton, it was established that the Division interprets the term "cessation of (insurance) coverage" as the cessation of all health insurance coverage by the state, including BCBS, an event unlikely to ever occur. Indeed, the administrator acknowledged that such an event would not occur unless the state no longer functioned as a viable entity. Because the state offered petitioners the option of enrolling in BCBS, Seaton contended there was no cessation of insurance coverage, even if petitioners' former HMO in Polk County went out of business. Seaton also opined that petitioners' request was prohibited by IRS regulations and, if approved, would subject the Division to a possible fine if audited by IRS. However, he could not identify a regulation that prohibited approval of their request. Further, there is no evidence that the Division has received specific advice from the IRS on the subject or made inquiry as to whether or not petitioners' request is permissible under federal regulations. Petitioners construe the termination of coverage by their HMO to be a qualifying status change since they no longer could be covered by that HMO. Relying on the plain language in the rule and Division explanatory literature, they did not telephone the Division to ascertain whether they could discontinue state coverage since they had no reason to do so. Through a proffer of agency counsel at hearing, it was pointed out that the federal regulation that allegedly prohibits petitioners from obtaining relief is found on page 14,847-6 of the Standard Federal Tax Reports published by Commerce Clearing House and received in evidence as a part of respondent's composite exhibit 1. 4/ It reads as follows: (2) Coverage changes. If the coverage under a health plan provided by an independent, third-party provider is significantly curtailed or ceases during a period of coverage, a cafeteria plan may permit all affected participants to revoke their election of the health plan and, in lieu thereof, to receive on a prospective basis coverage under another health plan with similar coverage.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the requests of Terri K. Cassano and Edward M. McDonald to discontinue participation in the state health program be granted and that appropriate refunds be given to petitioners and their employer. DONE and ORDERED this 9 day of February, 1990 in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9 day of February, 1990.
The Issue Whether Petitioner timely notified Respondent, Division of State Group Insurance of a "qualifying status change" (QSC) event, so as to allow Petitioner to cancel her participation in the State Group Health Insurance Program during the Plan Year- 2006. Petitioner seeks a refund of amounts deducted/paid because her insurance was continued.
Findings Of Fact Petitioner has been a covered participant in the Program, authorized by Section 110.123, Florida Statutes, at all times material. As provided in Section 110.123(3)(c), Florida Statutes, Respondent DMS, through its administrative entity, DSGI, is responsible for contract management and day-to-day administration of the Program. DMS has contracted with Convergys, Inc., to provide human resources management services including assisting in the administration of the Program. Convergys performs these tasks in part through an on-line system known as "People First." However, as provided in Section 110.123(5), Florida Statutes, final decisions concerning the existence of coverage or covered benefits under the Program are not delegated, or deemed to have been delegated, by DMS. Section 110.161, Florida Statutes, requires DSGI, as the responsible administrative entity, to administer the Program consistent with Section 125 of the Internal Revenue Code, so that participants will obtain the pre-tax advantages provided by Section 125. One of the federal requirements to maintain the pre-tax status is that the plan's sponsor (e.g., the State of Florida) administer the plans and apply each plan's rules in a manner that does not discriminate and that treats all participants equally. In this case, Petitioner was enrolled in the Health Program Plan Year 2006, i.e. from January 1, 2006, through December 31, 2006. Allowing a Plan member to retroactively cancel her participation during a Plan Year without having properly reported a QSC could put the entire pre-tax program in jeopardy. A QSC is a change in status as listed in the Plan which would allow an employee to cancel or otherwise change participation in the Plan during the Plan Year if requested by the employee within 31 days of the change in status. Converting from full-time to part-time state employment is a QSC event. On April 21, 2006, Petitioner converted from full-time employee status to part-time employee status. Therefore, the QSC event in this case occurred on April 21, 2006, when Petitioner went from being a full-time to a part-time employee. However, in order to effect a change in health insurance coverage, Petitioner was required to request a change in health insurance coverage no later than May 22, 2006. To request a change in health insurance coverage, Petitioner would have needed to contact Convergys in a timely manner, i.e. within 31 days of April 21, 2006. For People First, Convergys maintains a tracking system known as "Siebel," which tracks written correspondence to or from state employees and notes telephone calls between state employees and Convergys associates. Standard business procedure for Convergys is that the telephone logs are not verbatim notations of the conversations, but are a summary of those conversations, including a description of the reason for the call and the action taken by any Convergys associate that took the call. The Convergys policy is that all calls are to be notated. All service associates are trained to note all calls. Convergys employees are trained to make the call notes during the telephone conversation or soon thereafter. A notation is to be made by the Convergys employee in the Siebel system, and a case is opened when the service representative cannot assist the caller or when further action is required. The case notes are also to be recorded in the system. None of the People First, DGS/DGSI, or Convergys records reflect any contact by Petitioner within the 31 days following April 21, 2006, although they reflect several later contacts concerning her complaint that her coverage was not timely cancelled. Petitioner testified that she used her sister's cell phone to telephone People First "after two or three weeks" and that she discussed cancellation of her participation in the state insurance program and flirted with the Black male who answered the phone, but who seemed not to have much experience in the cancellation process. Petitioner was not able to provide the name or position of the person with whom she allegedly spoke or the date or time of her telephone call. The fact that Petitioner testified that she knew that she "had to around the middle or so" of the month to request her change of coverage, illustrates Petitioner's rather loose interpretation of when this alleged call occurred. Petitioner presented no witness or documentation to corroborate her testimony that she had received oral assurances during that phone call to the effect that the change she requested had been completed through People First. Petitioner's representation that the telephone company could not get the phone records of this telephone call due to the passage of time is not credible.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services enter a final order ratifying its October 13, 2006, denial of Petitioner's requested retroactive cancellation of enrollment in the State Group Health Insurance Plan. DONE AND ENTERED this 19th day of July, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 2007. COPIES FURNISHED: Ericka L. Ledbetter 739 South Shelfer Stree Quincy, Florida 32351 Sonja P. Matthews, Esquire Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399-0950 John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 John J. Matthews, Director Department of Management Services Division of State Group Insurance 4050 Esplanade Way Tallahassee, Florida 32399-0949
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.
The Issue Whether Respondents violated various provisions of the Florida Insurance Code, and, if so, what disciplinary action should be taken against them, if any.
Findings Of Fact At all times material hereto, Respondent The Administrators Corporation (hereinafter "TAC") has been an authorized administrator, and Respondent Charles N. Zalis (hereinafter "Zalis") has been licensed or eligible for licensure as a life insurance agent, a life and health insurance agent, and a legal expense insurance sales representative in the State of Florida. Zalis is the chief executive officer of TAC. TAC is not licensed in Florida as an insurer. An authorized administrator in Florida may engage in the solicitation, negotiation, transaction and/or sale of insurance in Florida if such activity takes place pursuant to an agreement between the authorized administrator and an authorized insurer. Life and Health Insurance Company of America (hereinafter "Life & Health"), which is not a party to this administrative proceeding, is an authorized insurer in Florida. On April 13, 1988, TAC entered into a contract with Life & Health to market and service group health insurance. The term of that contract was for four years and one month. Life & Health attempted to terminate its Administrator Agreement with TAC by letter dated March 16, 1989, effective immediately. The date on which the responsibilities under that Administrator Agreement terminated, if ever, is an issue in dispute between Life & Health and TAC. The Department takes no position on that issue. That issue is the subject of a civil lawsuit filed in Broward County, between Life & Health and TAC, which is currently being litigated. Although Life & Health's original position was that the contract between it and TAC terminated as of March 16, 1989, that position apparently changed because Life & Health continued paying claims up to July 1, 1989. TAC's position was that Life & Health's responsibilities under that contract did not terminate until September 26, 1989, when George Washington, an authorized group health insurance carrier in Florida, agreed to assume the risk for the block of business retroactive to July 1, 1989. TAC could have obtained a replacement carrier earlier than September 26, 1989, if the Department had advised TAC and Zalis as to the procedure involved to allow Summit Homes, an authorized property and casualty insurer, to broaden the scope of its certificate of authority to include group health insurance. The simple procedure could have been accomplished in as little as 24 to 48 hours. A group health insurance carrier remains on the risk to its policyholders until there has been a valid cancellation or termination of that coverage. In the pending Circuit Court litigation between Life & Health and TAC, the validity of the termination or cancellation and the date of same are ultimate issues in that law suit and have not yet been determined by the Court. On March 27, 1989, Life & Health sent a letter to agents informing them of its termination of its relationship with TAC and that it would not accept any new business written after March 16, 1989. The evidence in this cause, however, indicates that Life & Health did continue to accept new business after that date. The Department became aware of the dispute between Life & Health and TAC on June 8, 1989. The Department knew as of July 12, 1989, that TAC was continuing to write business on Life & Health "paper." At some point after the attempted March 16, 1989, termination of the contract by Life & Health, TAC and Life & Health informally agreed to a July 1, 1989, date after which Life & Health would no longer be responsible for any claims and TAC would have a replacement insurer in place to take over the block of business. That agreement was based upon TAC and Life & Health each agreeing to cooperate with each other and to take certain actions to facilitate the transfer of the book of business. Both the Department and the Circuit Court were aware of the informal agreement whereby Life & Health agreed to remain on the risk for the block of business at least through July 1, 1989, and Zalis and TAC would issue no further policies on Life & Health "paper" and would not remain involved in the processing or payment of claims after July 1, 1989. Prior to July 12, 1989, those matters required to take place in connection with the July 1, 1989, "cutoff" date had not been accomplished, and Zalis and TAC continued writing new business on Life & Health "paper" believing that Life & Health was still legally responsible. Zalis informed the Department's investigator on July 12, 1989, that he was writing and that he intended to continue to write new business on Life & Health "paper." No evidence was presented to show that the Department notified Zalis or TAC that they could not do so, and the Department took no action to stop that activity. Additionally, Life & Health took no action to enjoin TAC or Zalis from writing new business on Life & Health "paper." The evidence does suggest that Life & Health may have continued to accept the benefits and liabilities. The premiums for policies written by TAC on Life & Health "paper" after July 1, 1989, were not forwarded to Life & Health; rather, they were retained by TAC in a trust account. Zalis and TAC offered to deposit those monies with the Circuit Court in which the litigation between TAC and Life & Health was pending or to transmit those monies to the Department to insure that the monies would be available for the payment of claims. Pursuant to an agreement with the Department, the monies representing those premium payments were transmitted to the Department On September 26, 1989, George Washington Insurance Company, an authorized health insurance company in the State of Florida, agreed to take over the block of business from Life & Health, retroactive to July 1, 1989. Life & Health, however, had not yet signed the assumption agreement to transfer its responsibility to George Washington Insurance Company as of the time of the final hearing in this cause. TAC and Zalis did not place any Florida insurance business with any companies not authorized to do business in Florida. Respondent Zalis has been in the insurance business for 26 years and enjoys a good reputation for honesty and integrity. Zalis and TAC have never had prior administrative action taken against them. As of the date of the final hearing in this matter, there had been no Circuit Court determination of the effectiveness or ineffectiveness of Life & Health's termination of the Administrators Agreement nor of the date of that termination, if any.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondents not guilty of the allegations contained in the Order to Show Cause and dismissing the Order to Show Cause filed against them. DONE and ENTERED this 9th day of July, 1990, at Tallahassee, Florida. LINDA M. RIGOT, 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 9th day of July, 1990. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 89-5981 Petitioner's proposed findings of fact numbered 1-3, 6-9, 14-17, 20, 21, and 25-27 have been adopted either in substance or verbatim in this Recommended Order. Petitioner's proposed findings of fact numbered 4 and 5 have been rejected as not constituting findings of fact but rather as constituting conclusions of law or argument of counsel. Petitioner's proposed findings of fact numbered 10, 11, 13, and 22 have been rejected as being unnecessary for determination of the issues in this cause. Petitioner's proposed findings of fact numbered 12 and 19 have been rejected as being irrelevant to the issues under consideration in this cause. Petitioner's proposed findings of fact numbered 18, 23, and 24 have been rejected as not being supported by the weight of the evidence in this cause. Respondents' proposed findings of fact numbered 1-17 have been adopted either verbatim or in substance in this Recommended Order. COPIES FURNISHED: Peter D. Ostreich, Esquire Office of Treasurer and Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Jerome H. Shevin, Esquire Wallace, Engels, Pertnoy, Martin, & Solowsky, P.A. CenTrust Financial Center 21st Floor 100 Southeast 2nd Street Miami, Florida 33131 William M. Furlow, Esquire Katz, Kutter, Haigler, Alderman, Davis, Marks & Rutledge, P.A. Post Office Box 1877 Tallahassee, Florida 32302-1877 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that the Respondent, the Department of Administration, enter a final order denying coverage for the orthodontia recommended for Sandra Walsh. RECOMMENDED this 18th day of March, 1988, in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 18th day of March, 1988.
The Issue Whether Petitioner's claim for medical expenses from August 6, 1982 through February 27, 1983 should be approved, pursuant to the State of Florida Employees Group Health Self Insurance Plan. Petitioner appeared at the hearing accompanied by legal counsel. The Hearing Officer thereupon explained his rights and procedures to be followed in the administrative hearing. Petitioner acknowledged that he understood his rights and elected to represent himself. Petitioner testified in his own behalf at the hearing and the parties stipulated to the introduction of Respondent's Exhibits 1 and 2. A late filed exhibit, Respondent's Exhibit 3, was also admitted in evidence. Respondent presented the testimony of one witness, William R. Seaton, Benefit Analyst for the Respondent's Bureau of Insurance.
Findings Of Fact Petitioner Thomas J. Appleyard, III, is a former state employee who retired with disability in 1976 as a result of cardiac disease. At the time Petitioner retired, he maintained coverage in the state Employees Group Health Self Insurance Plan under which the Blue Cross/Blue Shield of Florida, Inc. serves as the administrator of the plan for the state. Petitioner also receives disability benefits under the Medicare program for medical expenses. (Testimony of Petitioner) The State Group Health Self Insurance Plan provides in Section X, COORDINATION OF BENEFITS, that if an insured has coverage under Medicare, the benefits payable under the state plan will be coordinated with similar benefits paid under the other coverage to the extent that the combination of benefits will not exceed 100 percent of the costs of services and supplies to the insured. Paragraph D of Section X provides that the state plan will be the secondary coverage in such situations and will pay benefits only to the extent that an insured's existing insurance coverage does not entitle him to receive benefits equal to 100 percent of the allowable covered expenses. This provision applies when the claim is on any insured person covered by Medicare. (Testimony of Seaton, Respondent's Exhibit 3) Petitioner was hospitalized at the Tallahassee Memorial Regional Medical Center on three occasions in 1982-33. His Medicare coverage paid all but $261.75 of the hospital expenses. In February 1983, Petitioner also incurred medical expenses to his cardiologist, Dr. J. Galt Allee, in the amount of $248.33. Petitioner was originally denied his remaining hospital expenses by the administrator of the state plan under the erroneous belief that he was receiving regular Medicare benefits for persons over the age of 65. In addition, Dr. Allee's bill was only partially paid by Medicare, subject to the receipt of additional information from the physician. Payment under the state plan was limited to an amount sufficient to reimburse petitioner 100 percent of the amount originally allowed by Medicare. (Testimony of Seaton, petitioner, Respondent's Exhibit 1, 3) Respondent does not receive information on claims filed under the state plan until contacted by an employee. In February 1984, Petitioner requested assistance from William R. Seaton, Benefit Analyst, of Respondent's Bureau of Insurance, regarding his difficulties in receiving proper claims payments. Seaton investigated the matter with the Insurance administrator for the state, Blue Cross/Blue Shield of Florida, and discovered that the latter had not coordinated the hospital expense balance with Medicare. They thereafter did so and as of the date of hearing, there was no longer a balance due to Tallahassee Memorial Regional Medical Center. Seaton also gave written instructions to Blue Cross to review all of Petitioner's claims and make sure that they were paid properly, and to install controls on his and his wife's records. (Testimony of Petitioner, Seaton, Respondent's Exhibit 1-2) The full claim of Dr. Allee had not been paid by Medicare since it had been awaiting requested additional in formation from the physician. Such information was provided after a personal visit had been made to Dr. Allee by Seaton and Medicare then recognized additional eligible expenses. However, a balance of $36.00 is still owed to the physician due to the fact that Blue Cross/Blue Shield had not received the necessary payment information from Medicare as of the day before the hearing. (Testimony of Seaton, Respondent's Exhibit 1) Section XVII of the state's Group Health Self Insurance Plan benefit document provides that an employee who wishes to contest decisions of the state administrator considering the employee's coverage under the plan may submit a petition for a hearing for consideration by the Secretary of Administration. (Respondent's Exhibit 3)
Findings Of Fact Respondent administers the State of Florida Employees' Group Health Self Insurance Plan as a self insurance plan pursuant to Section 110.123(5), Florida Statutes. Prior to October 1 1981, Petitioner was an employee of the Department of Natural Resources. For some period of time, Petitioner purchased coverage under that health insurance plan. When she married an employee of the federal postal service, she dropped her health insurance with the State of Florida, since she preferred health insurance coverage under her husband's Policy with the federal government. Petitioner's employment with the Department of Natural Resources was reclassified so that she became a member of the Senior Management Service during September or October 1981. One of the benefits available to Senior Management Service employees is coverage under the State of Florida Employees' Group Health Self Insurance Plan free of charge to the employee. In the case of a Senior Management Service employee who accepts coverage under that Plan, the employing agency pays the full premium cost for the employee. On September 18, 1981, Ginger Bailey, an employee in the personnel office of the Department of Natural Resources, typed in the required information on insurance application forms for the various insurance policies available to Petitioner when her Senior Management status became effective on October 1, 1981. Bailey took the application forms to Petitioner, who was too busy at the time to discuss with Bailey the different insurance policies available and the forms themselves. Bailey left the forms with Petitioner. On October 8, 1981, Petitioner went to the personnel office so that Bailey could review with her the insurance benefits available to Senior Management status employees. Bailey explained each available insurance policy to the Petitioner individually and, for each, offered Petitioner an application form already completed by her. Petitioner accepted the offer of State-paid life insurance and disability insurance by signing the application form for such insurance in the acceptance block. When Bailey explained to Petitioner the health insurance, Petitioner commented that she would not need the insurance because her husband's policy was so good. Accordingly, Bailey directed Petitioner's attention to the portion of the application marked in bold letters, "Refusal." Petitioner signed the refusal portion of the application and dated her signature. Bailey struck through the September 18, 1981, date she had previously filled in for Petitioner in the acceptance section of the application. At no time did Bailey or any other agent or employee of the Department of Natural Resources or of the Department of Administration represent or state to Petitioner that she was covered by or was a member of the State of Florida Employees' Group Health Self Insurance Plan. In June 1982, Petitioner obtained a copy of the State of Florida Employees' Group Health Self Insurance Booklet containing an explanation of benefits effective July 1, 1982. On a sheet of paper, Petitioner typed the name of the Plan, the name and address of the administrator of the Plan, the group number, and the policy number. She taped this slip of paper to the front of the Booklet. During the month of June 1982, Petitioner's husband's 20-year-old daughter was admitted to a hospital. Petitioner showed hospital employees the health insurance explanation Booklet with the information she had placed on the front of it, since she could not "find" her insurance card, and the hospital accepted Petitioner's representations as proof of insurance. Coverage for Petitioner's stepdaughter was no longer available on Petitioner's husband's insurance policy, since she was over 19 years of age. Petitioner submitted a claim form to Blue Cross and Blue Shield of Florida, Inc., the administrator of the State of Florida Employees' Group Health Self Insurance Plan. The claim submitted by Petitioner to the Plan was rejected for lack of coverage. No evidence was presented as to whether a Senior Management Service employee's family members receive free coverage under the State's health insurance plan, and no evidence was presented as to whether Petitioner had any legal or financial responsibility for her adult stepdaughter.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying Petitioner's request that she be deemed covered by the State of Florida Employees' Group Health Self Insurance Plan from and after October 1, 1981, without prejudice to the Petitioner's right to apply, if she desires, for prospective coverage under the Plan in accordance with the Plan's requirements, rules and regulations. DONE and RECOMMENDED this 25th day of April, 1983, in Tallahassee, Leon County, Florida. LINDA M. RIGOT, 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 25th day of April, 1983. COPIES FURNISHED: Ms. Mary L. Davis Post Office Box 753 Havana, Florida 32333 Kevin X. Crowley, Esquire Department of Natural Resources Douglas Building, Suite 1003 3900 Commonwealth Boulevard Tallahassee, Florida 32303 Daniel C. Brown, Esquire Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Nevin G. Smith, Secretary Department of Administration 530 Carlton Building Tallahassee, Florida 32301
