The Issue Whether petitioner owes respondent premiums on account of insurance coverage (Family I) under the State Employees Group Health Insurance Program from March 1, 1979, to August 31, 1981? If so, whether petitioner is obligated to pay the underpayment as a condition of continued insurance coverage?
Findings Of Fact Until December 6, 1978, petitioner, who has worked as a forest ranger for Florida's Department of Agriculture and Consumer Services since 1967 or 1968, was married to Betty R. Brogdon, the mother of his two children. Betty Brogdon was employed by Florida's Department of Health and Rehabilitative Services at the time of the dissolution of her marriage to petitioner. A provision of the dissolution decree required petitioner to maintain health insurance in effect for the children. During the marriage, in April of 1978, petitioner applied for, and received Family I insurance in the Florida Employees Group Health Self Insurance Plan, Respondent's Exhibit No. 1, continuing the coverage under a predecessor policy. Petitioner paid a premium for the Family I coverage reduced by certain employer contributions, after formally bringing to his supervisor's attention the fact that Betty R. Brogdon was also a state employee, and signing forms to that effect. Before August 1, 1979, the employer contributed 75 percent of the amount of the premium for Individual I coverage for each employee. From August 1, 1979, until August 1, 1980, the employer contributed, in addition, 25 percent of the family premium. On and after August 1, 1980, the employer contribution for each employee increased to 75 percent of the amount of the premium for Individual I coverage plus 50 percent of the family premium. Since this amount exceeds the total premium for Family I, families with this coverage in which both spouses work for state government have paid no insurance premium for Family I coverage since April 1, 1980. After the marriage ended, Betty Brogdon applied, on February 6, 1979, for Individual I health insurance, by submitting a form through the personnel office at the Sunland Center in Marianna, where she was employed. Since she had been a beneficiary under the family policy that her husband kept in force while they were married, her application reflected no change in that policy. When it reached the Bureau of Insurance of the Department of Administration, it was indistinguishable from any other new application by an employee who had not signed up when beginning work. After medical approval on May 7, 1979, she received Individual I coverage for herself only. Petitioner works with four other forest rangers and a supervisor at a site seven miles west of Marianna. There is no "personnel technician" stationed there and none visits. He told his supervisor of the divorce and, on March 2, 1979, filled out a "personnel action request" form furnished by a district office of the Department of Agriculture and Consumer Services in Bonifay, Florida, indicating "[m]arital and dependent change," which reached the Director of the Division of Forestry on March 9, 1979. Like other forms of its kind, this form never reached the Bureau of Insurance of the Department of Administration. The Bureau of Insurance did receive, however, on August 13, 1981, a "change of information" form reporting the Brogdons' dissolution of marriage on December 6, 1978. Respondent's Exhibit No. 3. Effective the following month, on advice of the Bureau of Insurance, the Department of Agriculture and Consumer Services subtracted from petitioner's paychecks the same insurance premium other employees not married to state employees paid for Family I coverage. The Bureau of Insurance lacks authority to make such deductions itself. Between March of 1980 and December 31, 1982, the only claims submitted under the policy were for petitioner himself. But for the $100.00 deductible, these claims were paid. The difference between what a state employee married to another state employee paid for Family I insurance coverage between July 1, 1979, and August 31, 1981, and what a state employee not married to another state employee paid for the same coverage amounts to $864.42.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent direct petitioner to pay the sum of eight hundred sixty-four dollars and forty two cents ($864.42) within ninety (90) days of entry of final order. If petitioner fails to make timely payment, that respondent cancel his Family I State Employees Group Health Insurance Program policy. DONE and ENTERED this 11th day of May, 1983, in Tallahassee, Florida. ROBERT T. BENTON, II 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 11th day of May, 1983. COPIES FURNISHED: Ben R. Patterson, Esquire 1215 Thomasville Road Tallahassee, Florida 32315 Daniel C. Brown, Esquire Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Nevin G. Smith, Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32301
The Issue Does the Prescription Drug Services Plan administered by the Division of State Group Insurance provide coverage for the drug Xenical as prescribed to the Petitioner?
Findings Of Fact The Plan The Division of State Group Insurance is authorized to provide health insurance coverage to employees of the State of Florida through a fully insured plan or a self-insured plan. The decision to offer a self-insured plan is explained in the State of Florida Employees Group Health Self Insurance Plan Booklet and Benefits Document (the "Plan Booklet and Benefits Document"): As is the case with many major employers, the State of Florida determined that a self- insured plan would result in significant savings to the participating members, and, therefore, implemented the current self- insured program in 1978. Being self-insured means that Claims are paid directly from funds belonging to the State of Florida, with the State earning interest on all fund balances. In addition, the Plan avoids charges normally charged by insurance companies such as retentions, reinsurance, risk factors, and other insurance related charges. (Petitioner's Ex. 7, p. 2.) Denominated the State of Florida Employees' Group Health Insurance Plan, the Plan has both a Servicing Agent and a Prescription Drug Program Administrator. At the time the events leading to this case arose, the Servicing Agent was Blue Cross/ Blue Shield of Florida, Inc., and the Prescription Drug Program Administrator was Eckerd Health Services ("EHS"). By designation of the Florida Legislature, however, the Division is responsible for the administration of the Plan. In the capacity of Plan Administrator, "the Division . . . has full and final decision-making authority concerning eligibility, coverage, benefits, claims, or interpretation of the Benefit Document." (Id.) Mr. Magee, Diabetes and Hypercholesteremia Dennis J. Magee is an employee of the Department of Corrections. He has been covered by State Health Insurance since he commenced his employment with the state in 1971. Mr. Magee has participated in numerous health insurance plans over the course of his employment. For the past three or four years, at least, he has participated in the State of Florida Group Health Self-Insurance Plan administered by the Division. Approximately twelve years ago, Mr. Magee was diagnosed with diabetes. Since the initial diagnosis, his diabetes mellitus type 2 has become complicated by microangiopathy, nephropathy, retinopathy, hypercholesterolemia (elevated serum cholesterol) and obesity. With regard to obesity, Mr. Magee was determined near the time of hearing to have a body mass index of 32.25, an index beyond the threshold for obesity. Dr. Croom and Xenical Mr. Magee's physician is William P. Croom, M.D. Dr. Croom is an endocrinologist specializing in the treatment of types 1 and 2 diabetes mellitus. On July 22, 1999, Dr. Croom prescribed Xenical, a drug used in the control of obesity, at a dosage of 150 milligrams for Mr. Magee. The prescription was medically necessary in Dr. Croom's view because Mr. Magee "has been unsuccessful in managing his obesity with diet and exercise" (Petitioner's Ex. 2) and because "his diabetes and hyperlipidemia [elevated cholesterol] are driven by his obesity . . . ." (Petitioner's Ex. 3). Attempt to Fill the Prescription Mr. Magee presented the prescription to Express Pharmacy Services. It was not honored. On August 3, 1999, Express Pharmacy Services wrote to Mr. Magee that "[t]his item is not covered by your insurance. Please contact your benefits rep. if you have questions." Petitioner's Ex. 4. Appeal to the Division Eckerd Health Services, the Prescription Drug Program Administrator, affirmed the denial of the prescription. Mr. Magee appealed the decision to the Division. The Department of Management Services has an appeals committee, which reviews all denials of coverage by EHS. The appeals committee is composed of three members within the Division: the director, the assistant director and the Policy and Development Bureau Chief. The Director, at the time Mr. Magee's appeal was considered, Mr. Slavin, is a diabetic. The appeals committee looked into Xenical as a treatment for diabetes. It obtained information through literature and internet research and from consultation with physicians at Blue Cross/Blue Shield. On the basis of the research, the committee concluded that Xenical is used only for the treatment of obesity and not for the treatment of diabetes. The appeal resulted in the letter from Director Slavin (referenced in the Preliminary Statement of this order) in which the Director wrote, "I am writing in response to your appeal of the decision by Eckerd Health Services (EHS) to deny coverage for Xenical [and] [r]egrettably, we must concur with EHS' determination." The Plan Booklet and Benefits Document Basis for the Denial The Division's concurrence with EHS that coverage for Xenical should be denied was based on the Prescription Drug Program Section of the Plan Booklet and Benefits Document. The program is described in Part XXVIII, Section W. Subsection 1., Covered Drugs, on p. 57 lists "(a) [f]ederal legend drugs" and "(b) [s]tate restricted drugs" as among those drugs covered. Among the list under Subsection 5., entitled "Exclusions," however, is "(c) [a]nti-obesity drugs." The listing of anti- obesity drugs under Part XXVIII, Section W., Subsection 5, the "Exclusions" subsection, ultimately, is the basis for the Division's denial of coverage of Xenical as prescribed for Mr. Magee. The Plan Booklet and Benefits Document is prepared on an annual basis by the Division. Typically, the Plan Booklet and Benefits Document is "enacted by the Legislature every year through the appropriation[] process of Section 8 of the Appropriations Act." (Tr. 54). For example, the Conference Report on Senate Bill 2500, General Appropriations for 1999- 2000, under Specific Appropriation states: 9) All State Group Health Insurance Plan benefits as provided in the State of Florida Employees Group Health Insurance Plan Booklet and Benefit Document effective January 1, 1998, . . . shall remain in effect. Changes to the benefits provided by the Plan Booklet and Benefits Document are normally initiated by submission of the Governor in his Legislative Budget Request. Benefit changes must be approved by the Legislature. The Plan Booklet and Benefit Document provides, among many, the following definitions: "Covered Services and Supplies" shall mean those health care services, treatments, therapies, devices, procedures, techniques, equipment, supplies, products, remedies, vaccines, biological products, drugs, pharmaceutical and chemical compounds which expenses are covered under the terms of the Benefit Document. The Administrator has final authority to determine if a service or supply is covered or limited by the Plan. * * * "Medical Supplies or Equipment" means supplies or equipment that must be: ordered by a Physician; of no further use when medical need ends; usable only by the Participant patient; not primarily for the Participant patient's comfort or hygiene; not for environmental control; not for exercise; manufactured specifically for medical use. (Petitioner's Ex. 7, Definitions 21 and 50, pgs. 17 and 23, respectively.) Drugs are services as defined by the Plan Booklet and Benefits Documents. But drugs that are excluded from coverage, such as anti-obesity drugs, are not "covered services" as defined by the Plan Booklet and Benefits Document since by definition, an exclusion prevents them from being "covered." As a "service," moreover, Xenical is not covered by virtue of Section G. of the Benefits Document, also entitled "Exclusions." Petitioner's Ex. 7., p. 38. With regard to services "related to obesity and weight reduction," the Benefits Document states the following: G. EXCLUSIONS The following are not Covered Services and Supplies under the Plan. * * * All services and supplies related to obesity or weight reduction except: Medically Necessary intestinal or stomach by-pass surgery; or medically related services provided as part of a weight loss program when weight loss of a Participant is required by the surgeon prior to performing a Medically Necessary surgical procedure. (Petitioner's Ex. 7, pgs. 38, 41.) Xenical and Section 627.65745, Florida Statutes Subsection 627.65745(1), Florida Statutes, states: A health insurance policy or group health insurance policy sold in this state, including a health benefit plan issued pursuant to 727.6699, must provide coverage for all medically appropriate and necessary equipment, supplies and diabetes outpatient self management training and educational services used to treat diabetes, if the patient's treating physician or a physician who specializes in the treatment of diabetes certifies such services are necessary. Xenical, a drug, is obviously not "equipment." Nor would it fall under the category of "self management training and educational services used to treat diabetes." It does not fall under the category of "supplies" either. Under the coding system developed by the Health Care Financing Administration of the United States Department of Health and Human Services, the standard coding system for the payment of health claims, drugs are not supplies. Examples of supplies include prosthetics, testing supplies, artificial limbs, ventilators, needles, and insulin pumps. Update of the Basis for the Prescription In a letter dated June 13, 2000, Dr. Croom more fully explained the basis for the prescription. Xenical is medically necessary for the treatment of diabetes and is not for cosmetic purposes. Xenical is a part of Mr. Magee's outpatient management program which consists of other medications and education. Despite these medications, his most recent hemoglobin A1C is 9.1 significantly higher than the recommended target of 7.0. The use of Xenical would be instrumental in reducing this parameter. In my opinion, Xenical is medically appropriate and necessary. (Petitioner's Ex. 3). The appeals committee did not have the benefit of Dr. Croom's June 13, 2000, letter in which Dr. Croom opined that in the case of Mr. Magee, "Xenical is medically necessary for the treatment of diabetes and is not being used for cosmetic purposes." Other Purpose for the Prescription That a drug's effectiveness is primarily for the treatment of an excluded purpose may not necessarily exclude it from coverage if it were prescribed for some other purpose. This point was elicited during testimony of the Division's witness, C. Merrill Moody, the Division's Assistant Director: (Tr. 81). MR. MOODY: If [Xenical] was being prescribed for obesity, it would be excluded; if it was not, it would not. And I'll give you an example. We have a direct exclusion for contraceptives for contraceptive use . . . [b]ut contraceptives can be used for other purposes. . . . [P]articipants are required to provide us with a letter from the doctor describing what the contraceptive is being used for. We then cover that contraceptive. Mr. Moody went on to explain that oral contraceptives, because of certain properties, are used also in the management of conditions not related to prevention of contraception. For example, oral contraceptives are prescribed in the treatment of menopause because of their ability to maintain the levels of certain hormones. If prescribed for that purpose, then, despite the fact that they are oral contraceptives and normally excluded from coverage, they are covered because of the non-contraceptive basis for the prescription. The Division's position with regard to oral contraceptives is consistent with the exclusion contained in Section W.5. of the Plan Booklet and Benefits Document. There the "Exclusions List" states "(a) Oral contraceptives for contraception." Petitioner's Ex. 6, p. 59. In other words, it is not some policy of the Division that provides coverage for oral contraceptives when the prescription is for a purpose other than contraception. The coverage is provided by the Plan Booklet and Benefits Document, itself. If oral contraceptives are prescribed "for contraception" then they are excluded from coverage. If prescribed for some other medical purpose, then the exclusion contained in Section W, 5(a) does not prevent coverage of oral contraceptives.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that: the Division of State Group Insurance in the Department of Management Services enter a final order denying coverage of Dennis J. Magee's prescription for Xenical; and, the Division present to the Legislature the Plan Booklet and Benefits Document amended so as to allow coverage of anti-obesity drugs for diabetics if such drugs are prescribed as medically necessary for management of the subscriber's diabetes. DONE AND ENTERED this 28th day of July, 2000, in Tallahassee, Leon County, Florida. DAVID M. MALONEY 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 28th day of July, 2000. COPIES FURNISHED: Dennis J. Magee Post Office Box 636 Safety Harbor, Florida 34695 Cindy Horne, Esquire Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Thomas D. McGurk, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 J. Bruce Hoffmann, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue Is Petitioner entitled to reimbursement under the State of Florida Employees Group Health Self Insurance Plan for $300.00 she spent for chiropractic treatment between 11/16/83 and 01/23/84?
Findings Of Fact Petitioner is and has been an employee of the State of Florida for a number of years. In February of 1974, she subscribed to the general group health insurance plan offered by the State of Florida Employees Group Health Self Insurance Plan under contract no. 264158282. Blue Cross of Florida Inc. and Blue Shield of Florida Inc. are the designated claims agent/administrator for the general plan and its options/addenda. Petitioner was first treated by Dr. Steven M. Willis, D.C., in January, 1983. She did not initially present to Dr. Willis, a chiropractor, for trauma but for symptoms of chronic sciatica and leg pain. She was treated the remainder of that month for sciatica but did not subscribe to the state group health plan until February 1, 1983. Although her application for chiropractic coverage was not offered or admitted in evidence, Petitioner testified that she answered all questions thereon and Respondent did not affirmatively raise any issues of lack of coverage due to effective date of coverage, or due to addendum changes, or due to concealment or due to fraud and on the basis of Petitioner's exhibits as a whole, I find that she acquired chiropractic coverage during a period of open enrollment and that from February 1, 1983 on, the plan took her as it found her and provided complete chiropractic coverage. In dispute in this cause are a series of chiropractic treatments and charges incurred by the Petitioner with Dr. Willis. Claims for the following dates of treatment were made in the name of a health care provider, Robert G. Hildreth, D.C." Dr. Hildreth made the formal claims upon Petitioner's assignment to the Centerville Road Chiropractic Clinic in which both chiropractors are partners. There is no dispute that the following treatments were rendered by Dr. Willis and properly assigned for payment by Petitioner: 11/16/83 - $20.00 12/21/03 - $6.44 11/22/83 - $20.00 12/29/83 - $20.00 11/28/83 - $20.00 01/03/84 - $20.00 12/05/83 - $20.00 01/06/84 - $20.00 12/09/83 - $20.00 01/13/84 - $20.00 12/14/83 - $20.00 01/17/84 - $20.00 12/19/83 - $20.00 01/19/84 - $20.00 12/21/83 - $20.00 01/23/84 - $20.00 Claims for some or all of these treatments/amounts were submitted by the chiropractors a number of times and rejected by Blue Cross/Blue Shield as the state administrator a number of times. Petitioner conceded at hearing that the 12/21/83 charge in the amount of $6.44 was properly rejected for lack of coverage of supplies costs. The first rejection of some of the other charges was for failure of the doctors' bookkeeper to include the correct diagnosis and procedure codes on the claims forms. This was corrected and resubmitted and thereafter all of the charges for treatment were rejected (either together or piecemeal) for payment upon grounds that 26 visits had already been paid for and that after the maximum number of 26 visits has been paid the state plan pays for no more chiropractic visits. Blue Cross/Blue Shield resumed paying for chiropractic treatment for the chronic back and leg problems on 1/27/84. In light of Blue Cross/Blue Shield's earlier response, Petitioner and Dr. Willis concluded that this must be because a new year was beginning and a new 26 visits would be paid annually. However, Respondent stipulated at hearing, that although private Blue Cross/Blue Shield insurance plans may have such a maximum, the state plan has no such 26 visits annual maximum. Petitioner and Dr. Willis questioned Blue Cross/Blue Shield about its 26 visit annual maximum reason for rejection, so Blue Cross/Blue Shield sent a "review sheet" asking Dr. Willis to justify his diagnosis and treatment. His justification was supplied on the review sheet (R-1) dated February 27, 1984. After review, Blue Cross/Blue Shield advised Petitioner and Dr. Willis that payment for these treatments had been determined not to be "medically necessary" by its chiropractic board of review. Petitioner responded with a timely request for Section 120.57(1) hearing. Petitioner eventually paid for the treatments in question out of her own pocket. In support of her position that her treatments (all of which may be generically described as "spine adjustments") are "medically necessary, Petitioner offered the testimony of Dr. Willis, the treating chiropractor. In addition to relating facts, I find Dr. Willis by education, training, and experience is capable of giving expert opinions in the field of chiropractic medicine. Dr. Willis testified that he first saw Petitioner on 1/12/83 for sciatic pain in both legs. After taking a complete history revealing previous orthopedic treatment locally with Dr. Haney and previous podiatric treatment locally with Dr. Merritt, treatment with another doctor in Orlando and with another podiatrist in Texas, Dr. Willis initially diagnosed acute lumbosacral neuralgia and treated Petitioner 3 times per week for 6 weeks. He opined that Petitioner's case was unusual in that Petitioner wanted to remain as athletically active as possible, including but not limited to running 10-50 miles per week and participating in a number of sports. Dr. Willis subsequently revised his diagnosis to make it bilateral sacrilization at the L-5/S-1 vertebrae, anterior gravitational syndrome and hyperimbrication at the L4/L5 vertebrae. Put into laymen's terms, Petitioner's L-4 / L-5 vertebrae do not have full range of motion and this results in Petitioner's low back pain at that level. In Dr. Willis' opinion, due to a congenital abnormality, in Petitioner, her condition is not fully correctable. On 4/5/83, Petitioner came to Dr. Willis with back pain which he diagnosed as the result of a trauma occurring as a result of weight lifting Petitioner had done on 4/4/83, and subsequently she suffered a trauma to the unstable back while windsurfing. On 10/28/83, Petitioner reported pain in the medial aspect of her left foot which Dr. Willis diagnosed as tendonitis. In January, 1984 he referred her to Dr. Merritt, a local podiatrist for a severe left shin/ankle/ metatarsal problem. These various diagnoses, treatments, and referrals, are important to the instant issue involving spine adjustment treatments between 11/16/83 and 01/23/84 for chronic back pain at L-4 through S- 1 because they serve to illustrate diagnosis and treatment differences between trauma situations and continuing treatment for exacerbations of the chronic back and foot/leg problems for which cost of treatment reimbursement is sought. "Apparently, however, there was no problem with payment of any fees charged until 11/16/83 (the twenty-seventh visit in 1983), and clearly payments resumed as soon as the calendar rolled over to 1984. Dr. Willis further diagnosed concluded that there is pedal instability of Petitioner's foot resulting in ankle and shin problems and that these problems in turn create an imbalance; the imbalance in turn causes great wear and tear in the lumbar (low back) region. The low back is again exacerbated by increased periods of activity. During these periods of exacerbation he treats Petitioner's chronic back pain with spine adjustments. There may be long periods between exacerbations when treatments are not necessary. It is for the periods of exacerbation that the treatments in question were administered and for which Petitioner seeks reimbursement. Although Dr. Willis conceded on cross-examination that frequency of treatment in a case like Petitioner's is a matter of chiropractic judgment and also that opinions among health care providers and especially chiropractors may differ as to whether the treatments he has provided to Petitioner are medically necessary or not, he states emphatically that in his professional opinion they are medically necessary. Upon consideration of all the testimony and evidence, I find the treatments between 11/16/83 and 01/23/84 to be remedial as opposed to merely palliative in nature due to the considerable instability of both the back and foot which continued to be exacerbated by Petitioner's particular lifestyle. Both Petitioner and her doctor testified that chiropractic treatment sessions in her case have always included preventive counselling as well as therapeutic treatment. The goal of such counselling is to substitute non-exacerbating or less-exacerbating recreational activities for those Petitioner would otherwise pursue (i.e. weight training and swimming in place of running and wind surfing).
Recommendation Upon the foregoing findings of fact and conclusions of law it is RECOMMENDED that the Department of Administration enter a Final Order finding Petitioner's treatments in question "medically necessary and ordering the plan administrator (Blue Cross/Blue Shield) to reimburse her $300.00 therefor (amount claimed less the admittedly "not covered" $6.44 supplies charge on 12/21/83.). DONE and ORDERED this 2nd day of May, 1985, in Tallahassee, Florida. ELLA JANE P. DAVIS 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 2nd day of May, 1985. COPIES FURNISHED: Dara Houliston 2308 Notley Court Tallahassee, Florida 32308 Daniel C. Brown, Esquire General Counsel Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Gilda Lambert, Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32301
The Issue Whether the Respondent committed the violations alleged in the Amended Administrative Complaint filed with the Division of Administrative Hearings on September 15, 2000, and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department of Insurance is the state agency responsible for licensing insurance agents in Florida and with regulating their conduct. Section 624.307 and Chapter 626, Part I, Florida Statutes (1999). At the times material to this proceeding, Ingrid Machado was Florida-licensed insurance agent. In March 1999, Teresita Baldor was interested in purchasing health insurance. Ms. Baldor had previously owned a private school and had been insured through the school's group health insurance policy. After she sold the school and began teaching mathematics at Miami-Dade Community College and Saint Thomas University, she no longer had health insurance coverage. On or about March 10, 1999, Ms. Machado met with Ms. Baldor at Ms. Baldor's home. Ms. Baldor knew Ms. Machado only as an insurance agent and did not know whether Ms. Machado was affiliated with an insurance agency. Ms. Machado told Ms. Baldor during the March 10, 1999, visit that she would try to place Ms. Baldor in a group for health insurance purposes but that she did not know at that time the group Ms. Baldor would be placed in or the name of the insurance company that would provide the health insurance coverage. Ms. Machado told Ms. Baldor during the visit that she would let Ms. Baldor know the name of the company providing her coverage and that she would send Ms. Baldor the coverage information. During her March 10, 1999, visit to Ms. Baldor's home, Ms. Machado asked Ms. Baldor for general identification information, such as her name and social security number, and for other information, such as her weight. Ms. Baldor did not sign any document during this visit and cannot recall if Ms. Machado completed any form during their conversation. Ms. Machado asked Ms. Baldor to make out two checks, one in the amount of $175.00 and one in the amount of $100.00, but Ms. Baldor does not remember Ms. Machado's telling her the reason she needed two separate checks. Ms. Machado asked Ms. Baldor to leave the line for the name of the payee blank, again telling Ms. Baldor that she did not yet know which insurance company would ultimately provide health insurance coverage to Ms. Baldor. Ms. Machado told Ms. Baldor that the name of the company would be filled in on the checks at a later time. Ms. Machado told Ms. Baldor that she would have health insurance coverage effective March 15, 1999. On or about March 20, 1999, Ms. Baldor telephoned Ms. Machado because Ms. Baldor had not received any information regarding health insurance coverage. Ms. Machado told Ms. Baldor that she was having complications with her pregnancy and could no longer handle Ms. Baldor's insurance matters. Ms. Machado gave Ms. Baldor the telephone number of the "Durey Agency," told her that this agency would work with her to obtain health insurance coverage, and gave her Ray Gonzalez's name. Ms. Machado had no further contact with Ms. Baldor after the telephone conversation on or about March 20, 1999, during the times material to this proceeding. At some point, Ms. Baldor called the telephone number Ms. Machado had given her to find out why she had not received any information regarding her health insurance coverage. Ms. Baldor told the person who answered the phone, a woman named Maria, that she wanted her checks back if she could not give her any information "right then." Later the same day, Maria called Ms. Baldor and told her that she had been placed in a group for health insurance purposes. A Neighborhood Health Partnership Enrollment Form was submitted to the Neighborhood Health Partnership on behalf of Ms. Baldor. On the form, Ms. Baldor was identified as an employee of "International Marketing." A signature appeared on the bottom of the form purporting to be that of Ms. Baldor, and the date next to the signature was "5/10/99." Ms. Baldor never saw the Neighborhood Health Partnership Enrollment Form. A few weeks after Maria told Ms. Baldor that she had been placed in a group for health insurance purposes, Ms. Baldor received a package from the Neighborhood Health Partnership that contained an identification card indicating that she was enrolled in the "International Marketing Group" and indicating that her insurance coverage with the Neighborhood Health Partnership was effective as of June 15, 1999. During Ms. Baldor's conversations with Ms. Machado, Ms. Machado never mentioned the Neighborhood Health Partnership or International Marketing Group. The checks Ms. Baldor provided to Ms. Machado were made payable to the Durey Insurance Group and were processed by the bank on or about May 17, 1999. In addition, Ms. Baldor wrote checks to the Durey Insurance Group dated July 10, 1999, and August 9, 1999, as payment for her health insurance premiums. Ms. Baldor's insurance coverage with the Neighborhood Health Partnership was eventually cancelled. It was Ms. Baldor's understanding that it was cancelled because the Durey Insurance Group did not remit her premium to the Neighborhood Health Partnership and because the "International Marketing Group" in which she was placed by the Durey Insurance Group did not exist. Summary The evidence presented by the Department is not sufficient to establish with the requisite degree of certainty that Ms. Machado's actions with respect to her dealings with Ms. Baldor demonstrated a lack of fitness or trustworthiness or demonstrated that Ms. Machado lacked reasonably adequate knowledge and technical competence to engage in the transaction of insurance. The Department presented no evidence to establish any standards of skill, ability, knowledge, or competence by which Ms. Machado's acts or omissions can be judged to determine if she committed any of the violations with which Ms. Machado is charged. It is not possible to determine from the evidence presented if Ms. Machado's actions deviated from a standard of fitness or trustworthiness which a reasonably prudent insurance agent would be expected to exhibit under the circumstances or if Ms. Machado's conduct fell below a standard establishing the degree of knowledge and technical competence which a reasonably prudent insurance agent would be expected to exhibit under the circumstances. 2/ The evidence presented by the Department is not sufficient to establish with the requisite degree of certainty that Ms. Machado engaged in any unfair method of competition or deceptive practices or knowingly made any misrepresentations to Ms. Baldor regarding health insurance coverage. The uncontroverted evidence establishes that Ms. Machado took some minimal information from Ms. Baldor and told her she would place her in a group for health insurance coverage. The uncontroverted evidence further establishes that Ms. Machado did not represent to Ms. Baldor that she would place Ms. Baldor in any specific group, that she would place Ms. Baldor with any particular insurance company, 3/ or that Ms. Baldor would be provided with any specific coverage or benefits. The evidence presented by the Department is not sufficient to establish with the requisite degree of certainty that Ms. Machado knowingly collected from Ms. Baldor any sums in excess of premium because, at the time Ms. Machado collected the two checks from Ms. Baldor, Ms. Machado did not know which insurance company would write health insurance coverage for Ms. Baldor and, therefore, did not know what the premium would be. The evidence presented by the Department is not sufficient to establish with the requisite degree of certainty that Ms. Machado knowingly collected from Ms. Baldor any premium for insurance that was not, in due course, provided. The uncontroverted evidence establishes that Ms. Machado initially agreed to procure health insurance coverage for Ms. Baldor; however, because of her pregnancy, Ms. Machado referred Ms. Baldor to the Durey Insurance Group approximately ten days after Ms. Machado's only meeting with Ms. Baldor and advised Ms. Baldor that the Durey Insurance Group would assist Ms. Baldor in obtaining health insurance. There is no persuasive evidence establishing that Ms. Machado knew or should have known that Durey Insurance Group would not, in due course, provide legitimate health insurance coverage to Ms. Baldor. The evidence presented by the Department is not sufficient to establish that Ms. Machado had any involvement, directly or indirectly, in the transaction in which the Durey Insurance Group identified Ms. Baldor as an employee of "International Marketing" and obtained health insurance for Ms. Baldor with the Neighborhood Health Partnership as a member of the "International Marketing Group." 4/ Furthermore, the evidence presented by the Department is not sufficient to establish with the requisite degree of certainty that Ms. Machado's actions made her a source of injury to Ms. Baldor or anyone else. As noted above, the uncontroverted evidence establishes that, soon after Ms. Machado's visit with Ms. Baldor on March 10, 1999, Ms. Machado advised Ms. Baldor that she could not act as Ms. Baldor's agent in placing her with a health insurance company, that she had sent Ms. Baldor's information and checks to the Durey Insurance Group, and that Ms. Baldor should contact the Durey Insurance Group for further assistance. Ms. Baldor's contacts subsequent to the latter part of March 1999 with respect to her health insurance coverage were exclusively with personnel who purported to be affiliated with the Durey Insurance Group. A representative of the Durey Insurance Group notified Ms. Baldor that her health insurance would be provided by the Neighborhood Health Partnership, and Ms. Baldor's premium checks were made payable to the Durey Insurance Group. Finally, the Neighborhood Health Partnership Enrollment Form identifying Ms. Baldor as an employee of International Marketing is dated approximately two months after Ms. Machado's last contact with Ms. Baldor, and the Department failed to present any evidence tending to establish that Ms. Machado had any involvement in the preparation of this form.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance issue a final order dismissing the Amended Administrative Complaint against Ingrid Machado. DONE AND ENTERED this 15th day of November, 2000, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO 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 15th day of November, 2000.
The Issue Whether Petitioner is entitled to change from individual to family coverage under the State of Florida Employees' Group Insurance Plan retroactively to May 1, 1990.
Findings Of Fact The State of Florida makes available to its employees several group insurance programs. In the area of health insurance, employees may choose to participate in the State of Florida Employees Group Health Self Insurance Plan, or they may enroll in a number of different HMOs depending upon the county in which each employee resides. The State of Florida Employees Group Health Self Insurance Plan (hereinafter "the Plan") is a plan of self insurance established by the State, specifically described in a Benefit Document, and administered, under contract, by Blue Cross/Blue Shield (BCBS). In addition to the provisions of the Plan embodied in the Benefit Document, the self insurance plan is regulated by those rules contained in Chapter 22D, Florida Administrative Code. If an employee voluntarily chooses to participate in the Plan, the State as the employer contributes to the employee's costs by paying a portion of the premium for each employee. At the time that they commence employment with the State, employees may elect to participate in the Plan, in one of the HMOs approved for that particular geographical location, or may choose to not participate in any of the voluntary insurance programs offered through the State. Thereafter, employees may only join one of the insurance programs or switch between programs during an annual open enrollment period, unless an exception applies. An employee may purchase individual coverage, insuring only herself, or an employee may purchase family coverage, insuring that employee and one or more of her eligible dependents. During an open enrollment period, an employee may switch between individual coverage and family coverage for the following year. Under the State Plan, there is an exception to the restriction that employees may only change coverage and health plans during the open enrollment period. An employee having individual coverage may change to family coverage within 31 days after the date of acquisition of any eligible dependent. In that event, coverage for the eligible dependent does not relate back to the date of acquisition but rather will commence on some future date following the payment of the additional premium required for the additional family coverage. Similarly, an employee with only individual coverage may begin family coverage prior to acquiring eligible dependents and may obtain coverage for those dependents effective on the actual date the dependent is acquired by making application in time for a complete month's premium to be deducted prior to the first day of the month during which the dependent(s) will be acquired. At the time a new employee is hired and during open enrollment periods, all employees are given brochures with summary information regarding the various programs in which they are being given an opportunity to participate. Employees are advised, if they have questions regarding the Plan, to contact their personnel officer or the Division of State Employees' Insurance. After the employee makes a selection as to which health plan she wishes to participate in, if any, the employee will subsequently receive more detailed information about that plan. An employee choosing to participate in the Plan will subsequently receive a copy of the State of Florida Employees Group Health Self Insurance Plan Brochure. The first page of the Brochure specifically advises the employee that the brochure does not include all of the provisions, definitions, benefits, exclusions, and limitations of the Plan. The Brochure specifically advises the employee that it is a summary of the benefits and that any questions the employee might have should be presented to the employee's agency personnel offices or the Office of State Employees' Insurance, and provides that office's address and telephone numbers. The Plan itself is not distributed to each individual employee but rather is made available to each agency's personnel office for reference by any interested employee. Under the Plan, a woman with individual coverage is entitled to maternity or pregnancy benefits. As part of those benefits, charges for "well baby care," i.e., the charges for the nursery for the baby, are covered under the Plan as part of the maternity benefit of the mother. In well baby care, charges are not incurred by the baby as a separate patient. On the other hand, if a baby is ill and is admitted to the hospital as a separate patient, well baby care coverage does not apply, and family coverage must be in effect or the infant will be an uninsured individual under the Plan. The University of South Florida (USF) central personnel office is located on its main campus. The Health Sciences Center also maintains an adjunct personnel office for the convenience of employees of the Health Sciences Center at the adjunct personnel office where employees are able to gain assistance on personnel matters and obtain insurance benefit information. However, the employees' actual personnel files are located at the main campus personnel office. Robin Hudson is employed by the University of South Florida in the Health Sciences Center adjunct personnel office as a senior clerk. As part of her duties, Ms. Hudson counsels USF employees on their insurance benefits. Petitioner was employed by the University of South Florida Health Sciences Center on February 19, 1988, and chose to enroll in the State Employees' Group Health Program with family coverage effective March 1, 1988. Subsequently, Petitioner changed from family coverage to individual coverage effective July 1, 1988. Petitioner became pregnant in November 1988, with a due date of August 18, 1989, while she maintained individual coverage with the Plan. Sometime during November 1988, Petitioner telephoned the Health Science Center personnel office and spoke with "someone" regarding maternity coverage. Petitioner was advised that she was covered under the Plan. Also during this same time period, Petitioner referred to the Group Health Self Insurance Plan Brochure and could find no explanation of maternity or new born coverage. She did not seek additional information from the personnel office, nor did she contact the Division of State Employees' Insurance, at that time. The first communication involving Petitioner on the correspondence log maintained by Blue Cross and Blue Shield occurred on January 21, 1989, in a letter that was written to: Santiago and Arocho, M.D., P.A., Family Practice Physicians of Tampa, 5208 D. Fowler Avenue, #1, Tampa, Florida 33617-2152. The second correspondence occurred on May 9, 1989. It as an interpretation on lab work which had been performed on Petitioner. The third correspondence occurred on the same date when Blue Cross and Blue Shield advised provider 77566 was a preferred provided under Preferred Patient Care (PPC). On June 14, 1989, Petitioner enrolled with Tampa General Hospital. Petitioner was advised by hospital personnel that she had well and sick baby coverage at that time. This information was wrong. Sick baby coverage is not included for an employee with individual coverage. Petitioner delivered her daughter Lia at 32 weeks gestation by Cesarean Section on June 20, 1989, at Tampa General Hospital because her pregnancy was complicated by Severe Pre-Eclampsia with HELLP Syndrome. On the date Petitioner delivered her daughter, June 20, 1989, her husband called Blue Cross and Blue Shield of Florida inquiring if pre-admission certification was required for maternity. He was informed that it was not required for maternity. Due to the premature delivery, the child, Lia, was admitted as a patient and remained in the hospital for two weeks in order to gain weight. On February 17, 1989, Respondent's January 30, 1989 Insurance Memorandum 89-001 was received at USF Central Personnel Office. In Respondent's Memorandum 89-001, the Respondent reiterates the provisions of Rule 22K- 1.203(3), Florida Administrative Code, and advises personnel offices to advise "an insured pregnant employee . . . that she should change to family coverage shortly after the pregnancy is diagnosed so that insurance benefits will be available to the employee's child in the event of premature birth." The Personnel Office at USF printed the pertinent portions of Respondent's Memorandum 89-001 and distributed to each employee by placing an individually addressed copy of the Personnel Notes in each employee's mail box. Petitioner doesn't recall receiving the March 24 - April 3, 1989, edition of the news brochure; however, Petitioner asserts that she wouldn't have read it even if it was delivered, because the pertinent information was under the heading "Change in Appointment Status." The entire subject of the article under the heading Change in Appointment Status dealt with insurance benefits offered by Respondent and included a telephone extension number for interested employees to obtain additional information. Petitioner did not request any information of the maternity benefits offered to employees with single coverage from her personnel office or Respondent until after the birth of her daughter. Petitioner changed from single to family coverage, effective August 1, 1989, after consulting with Robin Hudson on July 21, 1989. The Plan has refused coverage for the hospitalization of Petitioner's child, Lia, the expenses of which totaled $9,178.95.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the petition which seeks payment for medical expenses incurred by Petitioner's newborn baby be DENIED. DONE AND ENTERED this 17th day of December, 1990, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE 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 17th day of December, 1990. APPENDIX TO RECOMMENDED ORDER CASE NO. 90-5513 The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on findings of fact submitted by the parties. Petitioner's Proposed Findings of Fact Petitioner did not submit proposed findings Respondent's Proposed Findings of Fact Accepted: paragraphs 1, 2, 3, 4, 5 (in part), 6, 7 (in substance), 8, 9, 10, 11. Rejected, as against the greater weight of evidence: paragraph 5 (in part). Rejected, as a conclusion of law: paragraph 12. COPIES FURNISHED: Marcela Gutierrez-Mayka 701 East River Drive Temple Terrace, FL 33617 Augustus D. Aikens, Jr., Esquire General Counsel Department of Administration 435 Carlton Building Tallahassee, FL 32399-1550 Aletta Shutes Secretary Department of Administration 435 Carlton Building Tallahassee, FL 32399-1550
The Issue Whether the Petitioner was entitled to enrollment for his son in the State of Florida Group Health Self Insurance Plan for the January 1, 2008, to December 31, 2008, plan year and, if so, whether he is entitled to reimbursement of $543 for student health insurance coverage that was added to his son's college tuition bill.
Findings Of Fact Petitioner, Bashere Bchara, has been employed by the Florida Department of Transportation for the past 9 years including the period October 2007 through December 2008. He is and was, on all relevant dates, entitled to state employees’ benefits, including participation for himself, his spouse, and eligible dependents in the State Group Health Insurance Program. On October 16, 2007, during the open enrollment period, the Petitioner accessed his state employee benefits from his computer to change his dental coverage, as he was required to do because of a change in State providers. Mr. Bchara believes that an error in the People First computer program, that is used to manage state human resources data, caused his son, Dani Bchara, to be removed from health insurance coverage as his dependent. He also said it was his first time using the computerized People First program to elect or change benefits. There is no dispute that Dani Bchara, who had been covered during the previous plan year, continued to be an eligible dependent. Mr. Bchara's witness, Michael Smith, testified that he too had problems trying to use People First to change dental plans. He found the People First computer screens confusing and disorganized. Dani Bchara was, at the time, a 22-year-old college student. As a part of his tuition and fees, Florida State University charged his account $543 for health insurance. In May 2008, after a claim for reimbursement for health expenses for Dani Bchara was rejected, Mr. Bchara, contacted plan insurer, Blue Cross Blue Shield; plan contract administrator, People First; and then Respondent, the Department of Management Services, Division of State Group Insurance (Respondent or DSGI). DSGI has the responsibility for administering the insurance program. See § 110.123, Fla. Stat. (2008). After reviewing his complaint, Sandi Wade, a benefits administrator for DSGI, notified Mr. Bchara that his son was not covered by the state health plan. She also determined that he could not add his son, at that time, due to the absence any qualifying status change, as required by federal and state law. There is no allegation nor evidence of a qualifying status change that would allow the addition of Mr. Bchara's son to his coverage. Ms. Wade was not aware of any other reports of possible computer glitches of the type Mr. Bchara believes he experienced during the open enrollment period in October 2007. James West, a manager for People First testified that, during the enrollment period in October 2007, computer screens for health insurance and dental insurance were entirely different. Each was displayed only after the appropriate tab was chosen. In addition, Mr. West noted that a "summary last step" had to be chosen and the final summary screen allowed employees to view changes from all prior screens before selecting the option to "complete enrollment." Mr. West examined logs of computer transactions on October 16, 2007. The logs showed that Mr. Bchara, using his People First identification number changed his health insurance by deleting coverage for his son. Mr. West reviewed correspondence logs that indicated that Mr. Bchara was sent a notice dated October 27, 2007, confirming the changes he had made to his benefits. The notice was sent from the Jacksonville service center of Convergys, the contract operator of the People First system, to an address that Mr. Bchara confirmed was correct. Mr. Bchara testified that he did not receive the letter. Mr. West testified that the letter was not returned, as confirmed by an electronic tracking system for mail. Scott Thompson, Director of Application Development for Convergys, testified that his records also show every time Mr. Bchara logged into the People First system using his identification number and password. The logs also show that his health plan was changed when he accessed the system on October 16, 2007. Based on the evidence in the computer records and logs that Mr. Bchara, albeit unintentionally, deleted coverage for his son in the group health insurance program, there is insufficient evidence of computer or human error attributable to Respondent. In the absence of sufficient evidence of any errors by DSIG or its agents, or any evidence of a qualifying status change in Mr. Bchara's employment or his family, DSIG correctly rejected the request for retroactive enrollment of his son in the state group health insurance.
Recommendation Based on the foregoing, it is recommended that the Respondent enter a final order denying Petitioner, Bashere Bchara, retroactive health insurance coverage for an additional dependent under the state plan for the 2008 plan year. DONE AND ENTERED this 16th day of January, 2009, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of January, 2009. COPIES FURNISHED: Sonja P. Matthews, Esquire Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399-0950 Bashere Bchara 10178 Southwest 53rd Court Cooper City, Florida 33328 John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
The Issue This case concerns the issue of whether the Petitioner should be required to pay back premiums for chiropractic coverage under his family health insurance with the State of Florida Employees Group Health Self Insurance Plan for the period August, 1981, to December, 1982. At the formal hearing, the Petitioner testified on his own behalf and the Respondent called one witness, Ms. Barbara Power. Petitioner had marked for identification eight exhibits. Exhibits 1 through 5 and Exhibit 7 were admitted and Exhibit 6 was withdrawn. Petitioner's Exhibit No. 8 was a copy of Rule 22K-1.20, Florida Administrative Code, and it was marked for identification only. The Respondent had marked for identification 10 exhibits. Respondent offered and had admitted Respondent's Exhibit Nos. 2, 3, 7, 8, 9, and 10. Both the Petitioner and Respondent submitted proposed findings of fact and conclusions of law for consideration by the undersigned Hearing Officer. The proposed findings of fact and conclusions of law were considered by the Hearing Officer and to the extent that those proposed findings of fact and conclusions of law are inconsistent with the facts contained herein, they were considered to be not supported by the evidence or were rejected as being unnecessary to the disposition of this cause.
Findings Of Fact In April, 1978, the Petitioner, Owen Sellers, enrolled in the State of Florida Employees Group Health Self Insurance Plan (hereafter referred to as the Plan) . At the time of his enrollment, the Petitioner elected coverage for himself and his eligible dependents, including coverage for chiropractic services. Under the Plan, a portion of the premium for the health insurance coverage is paid by the state agency who employs the individual and the remaining portion is paid by the employee through payroll deduction. In approximately November, 1980, the Petitioner'S spouse also became a full time state employee entitled to the health insurance benefit. As a result of the entitlement of both family members, the state began paying the entire cost of the Plan, except for chiropractic coverage. In order to obtain chiropractic coverage, an employee in 1981 and 1982 was required to pay an additional premium for such coverage. From August, 1981, to December 1, 1982, the Petitioner and his family were covered by the Plan including chiropractic coverage. On or about November 4, 1982, the Petitioner, Owen Sellers, submitted a Change of Information form dropping chiropractic coverage. This change became effective December 1, 1982. At no time prior to this had the Petitioner requested such a change. Because of an error on the part of the employing agency, the premium for chiropractic coverage was not deducted from Mr. Sellers' pay from August, 1981, through October, 1982. The total amount of premiums due for that period for chiropractic coverage is $92.20. The error was discovered in November, 1982, and at that time, the Petitioner was notified of the underpayment. Petitioner refused to pay the $92.20 and requested an administrative hearing. During the time period August, 1981, through October, 1982, the Petitioner did not file a claim for any benefits under the chiropractic coverage. However, claims were submitted for non-chiropractic medical treatment received by the Petitioner or other members of his family.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Respondent enter a Final Order directing the Petitioner to pay the sum of ninety-two dollars and twenty cents ($92.20) within ninety (90) days of entry of the Final Order. In the event Petitioner fails to make timely payment, that Respondent cancel his coverage under the State of Florida Employees Group Health Self Insurance Plan DONE and ENTERED this 3rd day of August, 1983, in Tallahassee, Florida. MARVIN E. CHAVIS, 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 3rd day of August, 1983. COPIES FURNISHED: Mr. Owen Sellers 1874 Woodleigh Drive West Jacksonville, Florida 32211 Daniel C. Brown, Esquire Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Mr. Nevin G. Smith Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32301
The Issue Whether the Petitioner, Robbie Reynolds, is eligible for family medical insurance coverage for medical expenses incurred by the Petitioner's son?
Findings Of Fact The Parties. At all times relevant to this proceeding, the Petitioner, Robbie W. Reynolds, was an employee of Department of Corrections, an agency of the State of Florida. The Respondent, the Department of Management Services, Division of State Employees' Insurance (hereinafter referred to as the "Division"), is an agency of the State of Florida. The Division is responsible for managing the State's employee health insurance system. Participation in the State of Florida Health Insurance Plan. The State of Florida makes health insurance available to its employees (hereinafter referred to as the "State Health Plan"). Employees may choose health insurance through the State of Florida Employees' Group Health Self Insurance Plan or through various health maintenance organizations (hereinafter referred to as "HMOs"). The Division has promulgated Chapter 60P, Florida Administrative Code, regulating the State Health Plan. Employees pay part of the premiums for their health insurance and the State contributes a part of the cost of premiums. The amount of premiums paid by an employee and the State depends on the type of coverage selected. Employees may elect coverage only for themselves ("individual" coverage), or coverage for themselves and certain qualified dependents ("family" coverage). Female employees who elect individual coverage are eligible for the payment of maternity or pregnancy benefits. Included in these benefits are certain benefits for the newborn child referred to as "well-baby care." In order for medical expenses attributable solely to a newborn baby that is ill at or after birth to be covered by the State Health Plan, an employee must elect family coverage for the employee and the child. The family coverage must be effective as of the date the medical expenses are incurred for the child. Open Enrollment Periods. Once an employee selects the type of health insurance he or she desires, that employee generally may change the election only during certain designated periods of time, referred to as "open enrollment periods." During an open enrollment period, an employee may change from HMO coverage to the State of Florida Employees' Group Health Self Insurance Plan, or vice versa, may change from individual coverage to family coverage, or vice versa, and may add or delete dependents to the employee's family coverage. Changes to an employees' State Health Plan coverage made during an open enrollment period are effective for the calendar year immediately following the open enrollment period. Other Changes in Health Insurance Coverage. An exception to the requirement of the State Health Plan that changes in coverage only be made during an open enrollment period is provided for certain specified events, referred to as "qualifying events." The acquisition of an "eligible dependent" during a year may constitute a qualifying event. For example, if an employee marries, the employee may elect family coverage for himself or herself and the employee's spouse. A change from individual coverage to family coverage may also be made if an employee or an employee's spouse gives birth to a child. The change to family coverage as a result of marriage or the birth of a child must be made within thirty-one days after the eligible dependent is acquired. An employee may also elect family coverage as a result of the employee or the employee's spouse becoming pregnant. If the employee or employee's spouse elects family coverage in time for the family coverage to be effective at the time of the child's birth, the child may then be added as a dependent to the family coverage by notifying the Division of the child's birth within thirty-one days after the child is born. In order to change to family coverage when an employee or employee's spouse becomes pregnant, the employee, must apply for the change to family coverage in time for the employee to make a month's premium payment on the first day of at least the month during which the child is born or an earlier month. For example, if an employee elects to change from individual coverage to family coverage for a yet to be born child in July effective for September, the first full month's premium is paid on September 1, and the child is born on September 2, the employee has family coverage for all of September and the child will be covered if the Division is notified of the child's birth within thirty-one days after the date of birth. In order for an employee to make a change in coverage as the result of a qualifying event, the employee must file a Change of Information form with the employee's personnel office. The personnel office forwards the form to the Division. Ms. Reynolds' Health Insurance. Ms. Reynolds, as an employee of the State of Florida, was eligible for state health insurance. She elected to participate in the HMO that was available in the Gainesville area where she is employed. AvMed is the name of the HMO for the Gainesville area and Ms. Reynolds' insurer. Although married, Ms. Reynolds initially elected individual coverage. Ms. Reynolds did not elect family coverage for her husband because he received health insurance benefits from his employer. During 1992, Ms. Reynolds became pregnant. The baby's projected due date was April 15, 1993. The Open Enrollment Period for 1993. The open enrollment period for the next calendar year (1993) after Ms. Reynolds became pregnant took place in October of 1992. During the October 1992 open enrollment period the Department of Corrections, through its personnel office, conducted meetings with employees to discuss health care benefits and coverage available to its employees. Two benefits consultants, trained by the Division, conducted the meetings, providing information to, and answering questions from, employees concerning the open enrollment period. Ms. Reynolds, who was approximately three months pregnant at the time of the benefit consultation meetings, attended one of the sessions. Ms. Reynolds attended the session for the purpose of determining what steps she should take to insure that her yet-to-be-born infant was covered by health insurance. Ms. Reynolds spoke for some time with Gail Page and Jordaina Chambers, benefits consultants of the Department of Corrections. Ms. Reynolds informed the benefits consultants that she was pregnant and that she wanted to insure that her yet-to-be-born infant was covered by her health insurance. Ms. Reynolds was incorrectly told that she could not elect family coverage for just her and her yet-to-be-born infant. This incorrect advice, however, did not have any effect on the effective date Ms. Reynolds ultimately decided to begin her family coverage. Ms. Reynolds also informed the benefits consultants that the baby was due April 15, 1993. The benefits consultants informed Ms. Reynolds that her pregnancy constituted a qualifying event and that she could, therefore, switch to family coverage in order to cover her baby. She was also informed that she would have to notify the Division of her child's birth with thirty-one days after birth to add the child to the policy. After being told that she would have to switch her coverage from individual coverage to family coverage, adding her husband as a dependent, Ms. Reynolds asked the benefits consultants when she should switch to family coverage. Consistent with the policies of the Division, and the training the benefits consultants had received from the Division, the benefits consultants advised Ms. Reynolds that she should elect family coverage effective two or three months prior to her due date. The Division makes this recommendation so that employees can save the increased premiums for family coverage a reasonable period of time before the child is born. In light of the fact that Ms. Reynolds' conversation with the benefits consultants took place during the 1992 open enrollment period and the fact that January 1, 1993 was three and one-half months prior to Ms. Reynolds' due date, Ms. Reynolds was advised by the benefits consultants that it would be reasonable to switch from individual coverage to family coverage through the open enrollment period. Based upon this advice, Ms. Reynolds' family coverage would be effective January 1, 1993. The benefits consultants did not advise Ms. Reynolds of any possible consequences of not electing to switch from individual coverage to family coverage with an effective date prior to January 1, 1993. The benefits consultants also did not tell Ms. Reynolds that she could not choose to switch from her individual coverage to family coverage with an effective date prior to January 1, 1993. On or about October 15, 1992, Ms. Reynolds executed and filed with the Division an Annual Benefit Election Form. Respondent's exhibit 1. Pursuant to this form Ms. Reynolds elected to change her health insurance coverage from individual to family effective January 1, 1993. Ms. Reynolds elected to add her husband as a covered dependent. Based upon the election made by Ms. Reynolds, her family coverage became effective on January 1, 1993. If her child was born before that date, any expenses attributable solely to medical services received by the child would not covered by Ms. Reynolds' medical coverage. If the child was born on or after that date and Ms. Reynolds notified the Division of the child's birth within thirty-one days after the child's birth, any expenses attributable solely to medical services received by the child would be covered by Ms. Reynolds' medical coverage. The evidence failed to prove that the advice given by the benefits consultants in October 1992 was not reasonable based upon the information available to them and to Ms. Reynolds. The evidence also failed to prove that either the benefits consultants or Ms. Reynolds unreasonably failed to realize that the child would be born more than three and one-half months premature. Ms. Reynolds, while reasonably relying on the advice of the benefits consultants, knew or should have known that the ultimate decision as to when to begin family coverage was hers to make. Ms. Reynolds also should have been somewhat wary of the advice she was given, in light of the fact that Ms. Reynolds admitted that she was told by the benefits consultants that they "did not know that much about what she was asking." Despite this warning, Ms. Reynolds testified during the final hearing that she followed their advice because she felt there was "no reason to believe they would be wrong." The Premature Birth of the Reynolds' Child. On December 29, 1992, Ms. Reynolds underwent surgery, due to unforeseen medical complications, to deliver her child. The child died on January 1, 1993. In order to add the child as a dependent to her medical insurance when the child was born, Ms. Reynolds had to have family coverage in effect as of December 1, 1992 or earlier. Unfortunately for Ms. Reynolds, on December 29, 1992 when her child was born, Ms. Reynolds only had individual coverage. The rules governing medical benefits of state employees do not allow employees with individual coverage to add dependents. Therefore, even though Ms. Reynolds attempted to get the Division, through the personnel office of the Department of Corrections, to add her child by notifying the personnel office of the birth of the child immediately after December 29, 1993, the child could not be added to her individual coverage. The child received medical services and incurred medical expenses between December 29, 1992 and January 1, 1993. Those expenses were not covered by the well-baby care provided by Ms. Reynolds' individual coverage. Because Ms. Reynolds did not have family coverage at the time the child was born and the child could not be added to her individual coverage, the medical expenses incurred for the child were not covered by Ms. Reynolds' health insurance. Although the child should be added as a dependent to Ms. Reynolds family coverage which took effect as of January 1, 1993, the evidence failed to prove that any medical expenses incurred for the care of the child on January 1, 1993, were not attributable to a preexisting condition. Therefore, expenses incurred for the care of the child on January 1, 1993, are not eligible for reimbursement. Should the Division be Estopped from Denying Coverage? The Division relies on benefits consultants to assist the Division in administering the State Health Plan. Benefits consultants are trained by the Division, they are state employees and they hold themselves out as representing the State in general and the Division in particular. The Division's rules provide for the active involvement of the various personnel offices in administering the State Health Plan. See, Rule 60P- 2.003(1), Florida Administrative Code. The Annual Benefit Election Forms issued by the Division during the open enrollment specifically provide that the forms are to be turned in to employees' personnel offices. The Division allows personnel offices of the various state agencies to hold themselves out to employees as agents of the Division. In this case, Ms. Reynolds was given advice by benefits consultants, on behalf of the Division and consistent with Division policy, which played a role in Ms. Reynolds making a decision which resulted in medical expenses incurred upon the premature birth of her child not being covered by her medical insurance. While Ms. Reynolds was given some incorrect advice, she was not given incorrect advice concerning the effective date of her family coverage. The advice given to Ms. Reynolds concerning when to start her family coverage was reasonable at the time given and, as she admitted during the hearing, there was no reason in October of 1992 to doubt the wisdom of the advice she received. Ultimately, it was Ms. Reynolds decision. While she may not have understood that advice, she made the decision to make choices and act on the advice even after being warned that the benefits consultants were not knowledgeable about what she was asking.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services, Division of State Employees' Insurance enter a Final Order dismissing Robbie W. Reynolds' petition in this matter. DONE AND ENTERED this 19th day of November, 1993, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of November, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-3731 The Division has submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Ms. Reynolds did not file a proposed recommended order. The Division's Proposed Findings of Fact Accepted in 2-3 and 19. Accepted in 4-5, 9 and hereby accepted. Hereby accepted. Accepted in 6 and 9. Accepted in 11-17. Accepted in 7-8. Accepted in 1 and 18-19. Accepted in 23-26. Accepted in 20, 28 and 30-32. But See 27-20. See 29-30. But see 27. Accepted in 34 and 38. See 40. Hereby accepted. Accepted in 40-41 COPIES FURNISHED: Robbie W. Reynolds 2635 South West 35th Place, #1304 Gainesville, Florida 32608 Augustus D. Aikens, Jr. Chief of Bureau of Benefits and Legal Services Division of State Employees' Insurance Department of Management Services 2002 Old St. Augustine Road, B-12 Tallahassee, Florida 32301-4876 William H. Lindner, Secretary Department of Management Services Knight Building, Suite 307 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950 Sylvan Strickland, Esquire Department of Management Services Knight Building, Suite 309 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950
The Issue Whether the State of Florida Employees Group Health Self Insurance Plan is responsible for paying medical expenses incurred by Petitioner's newborn child where Petitioner had only individual coverage in effect at the time of the child's birth.
Findings Of Fact The State of Florida makes available to its employees several group insurance programs. In the area of health insurance, employees may choose to participate in the State of Florida Employees Group Health Self Insurance Plan (State Group Plan), or they may enroll in other plans, such as HMOs. The State Group Plan is a plan of self insurance established by the State and administered by Blue Cross/Blue Shield. This plan is described in general terms by a Plan Brochure and is described in more detail by the contract of insurance contained in the State Self Insured Health Plan's Benefit Document (Plan Document). The State Group Plan is regulated by those rules contained in Chapter 22K, Florida Administrative Code. At the time employees begin their employment with the State, they may select which, if any, of the optional health insurance programs offered by the State they desire. Thereafter, employees may only join one of the insurance programs or switch between programs during an annual open enrollment period. An employee who elects coverage from the State Group Plan may purchase either individual coverage or family coverage. Individual coverage provides health insurance coverage for only the individual employee. Family coverage provides health insurance coverage for the individual employee and the employee's eligible dependents for whom the employee has elected coverage. Family coverage does not begin until after the application for coverage is processed and the premium for family coverage is paid. The monthly premium for family coverage is paid one month in advance. An employee can, but he does not have to, wait for an open enrollment period to switch from individual coverage to family coverage. An employee having individual coverage may change to family coverage at any time during the year prior to the acquisition of an eligible dependent or at a time that is within 31 days of the date of acquisition of any eligible dependent. If family coverage is requested after the acquisition of the dependent, there is a gap in the coverage of the dependent between the date of acquisition and the date coverage begins. There is no retroactive coverage. An employee who completes the pertinent application for family coverage, who submits the application, and who pays the first month's premium for family coverage prior to the acquisition of the dependent has family coverage in place at the time the dependent is acquired through birth, adoption, or other means. Consequently, there is no gap in coverage between the date of acquisition and the effective date of coverage for that dependent. Petitioner is an associate professor of management and Director of the Doctoral Studies Program in the College of Business Administration at Florida International University (FIU). Petitioner teaches courses in a variety of areas including business administration, wage and salary administration, and insurance benefits. Petitioner enrolled in the State Group Plan in 1982. Petitioner was knowledgeable about the State Group Plan and had, from time to time, compared its benefits to those of other plans. At the time of their marriage, Petitioner and his wife reviewed their insurance coverage and decided not to convert their individual policies to one policy with family coverage. From the date of his initial enrollment until April 1989, Petitioner had individual coverage. On March 8, 1989, Petitioner executed the forms that were necessary to change his individual coverage to family coverage. Petitioner's family coverage went into effect on April 1, 1989, after the application was processed and the premium was collected. In March 1988 Petitioner married Annette Wellinghoff. Petitioner and his wife retained their respective individual insurance policies after their marriage. Mrs. Kroeck was not a state employee so the insurance coverage she had was independent of her husband's coverage. In August 1988 Petitioner and his wife learned that Mrs. Kroeck was pregnant with an expectant due date in February 1989. In August 1988, Petitioner telephoned the personnel office at FIU to inquire as to obtaining coverage for the expected child. The general information given Petitioner in response to his questions was accurate. He was told that he could convert his individual coverage to family coverage, if he so desired, during the open enrollment period scheduled for December 1, 1988, through January 31, 1989. There was no evidence that Petitioner specifically inquired as to when he should begin family coverage in order to have the child's birth expenses covered. Likewise, there was no evidence that Petitioner was specifically told that he could convert his coverage to family coverage after the birth of his child and have the medical expenses covered from the time of birth. Petitioner did not request any written information about the conversion process, nor did he request an application form to effectuate the conversion. Petitioner did not know the name of the person with whom he was speaking, only that she was a representative of the personnel office. Petitioner did not contact the FIU Personnel Office again until after the birth of his son. Instead, Petitioner relied upon his wife to take care of securing health insurance. Petitioner delegated this responsibility to his wife because she was also experienced and knowledgeable in matters concerning employee benefits and health insurance plans. Mrs. Kroeck has had at least 3 years experience in health insurance benefits administration. In December 1988 general information relating to the open enrollment program was mailed to all state employees, including Petitioner. Included in the information package were a Plan Brochure for the State Group Plan and an enrollment form for the various insurance options offered to State employees. Mrs. Kroeck read the application form and a portion of the Plan Brochure. Neither Petitioner nor his wife read, prior to the birth of their child, the section of the Plan Brochure entitled "Purpose of This Brochure". That section states that the Plan Brochure is not intended to be a contract document, that it is intended to give a summary of available benefits, and that an employee should contact either his personnel office or the office of the Division of State Employees' Insurance for the answer to questions. The employee is told that the contract document is the Plan Document and that a copy of the Plan Document is on file at the employee's personnel office. That section also contains the following admonition: The agency personnel office will provide needed assistance to State officers and employees enrolling in the Plan; however, such officers or employees should take care to assure that they receive the coverage applied for and that proper deductions are made. On January 9, 1989, Mrs. Kroeck telephoned the personnel office at FIU with questions relating to listing the unborn child as a dependent on the application form that had been mailed to Petitioner in December. Her questioning centered on how to complete the name, date of birth and social security number for an unborn dependent. Clara Martinez, the employee in the personnel office to whom Mrs. Kroeck spoke, does not recall talking to Mrs. Kroeck on January 8, 1989. At the time of this conversation, Ms. Martinez knew that family coverage had to be in place prior to the acquisition of a dependent for the dependent to be covered as of the date of acquisition. If Ms. Kroeck had asked Ms. Martinez a question to which Ms. Martinez did not know the answer, Ms. Martinez would have contacted the office of the Division of State Employees Insurance in Tallahassee for the answer. The evidence fails to establish that Mrs. Kroeck was misinformed by Ms. Martinez or that she specifically inquired as to the effective date of the family coverage. On February 19, 1989, Mrs. Kroeck had her baby. The baby was admitted to the hospital in his own name and incurred, in his own name, expenses in the amount of $4,274.95, for which Petitioner and his wife were responsible. On March 8, 1989, Petitioner signed an application to change his individual coverage to family coverage. Family coverage became effective on April 1, 1989, after the application was processed and the premium for family coverage was collected. At the time of the birth of his son, Petitioner had individual coverage issued through the State Group Plan. Petitioner's son was not a beneficiary under the State Group Plan at the time the medical expenses which are at issue were incurred. Petitioner's request for payment of the medical expenses incurred by his son at birth was denied by Respondent and this proceeding followed.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent, Department of Administration enter a final order which denies the claim for payment of the medical expenses incurred by Petitioner's son prior to the effective date of family coverage. DONE AND ENTERED this , 27th day of December, 1989, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 27th day of December, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-4929 The following rulings are made on the proposed findings of fact submitted on behalf of Respondent. 1. The proposed findings of fact in paragraph 1 are adopted in material part by paragraph 7 of the Recommended Order. 2. The proposed findings of fact in paragraph 2 are adopted in material part by paragraph 7 of the Recommended Order. 3. The proposed findings of fact in paragraph 3 are adopted in material part by paragraph 8 of the Recommended Order. 4. The proposed findings of fact in paragraph 4 are adopted in material part by paragraph 9 of the Recommended Order. 5. The proposed findings of fact in paragraph 5 are adopted in material part by paragraph 9 of the Recommended Order. 6. The proposed findings of fact in paragraph 6 are adopted in material part by paragraph 9 of the Recommended Order. 7. The proposed findings of fact in paragraph 7 are adopted in material part by paragraph 11 of the Recommended Order. The proposed findings of fact in paragraph 8 are adopted in material part by paragraph 13 of the Recommended Order. The proposed findings of fact in paragraph 9 are rejected as being subordinate to the findings made. The proposed findings of fact in paragraph 10 are adopted in material part by paragraph 12 of the Recommended Order. The proposed findings of fact in paragraph 11 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 12 are adopted in material part by paragraph 12 of the Recommended Order. The proposed findings of fact in paragraph 13 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 14 are adopted in material part by paragraph 10 of the Recommended Order. The proposed findings of fact in paragraph 15 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 16 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 17 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 18 are rejected as being unsubstantiated by the evidence as to Ms. Alam and as being unnecessary to the conclusions reached as to Ms. Martinez. The proposed findings of fact in paragraph 19 are rejected as being subordinate to the findings made. The proposed findings of fact in paragraph 20 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 21 are adopted in material part by paragraph 13 of the Recommended Order. The proposed findings of fact in paragraph 22 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 23 are adopted in material part by paragraph 8 of the Recommended Order. The proposed findings of fact in paragraph 24 are adopted in material part by paragraph 18 of the Recommended Order. The proposed findings of fact in paragraph 25 are adopted in material part by paragraph 16 of the Recommended Order. The proposed findings of fact in paragraph 26 are adopted in material part by paragraph 5 of the Recommended Order. The proposed findings of fact in paragraph 27 are adopted in material part by paragraph 4 of the Recommended Order. COPIES FURNISHED: Augustus Aikens, Jr., Esquire Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550 Kark G. Kroeck 9853 Costa del Sol Boulevard Miami, Florida 33178 Alette A. Lhutes, Secretary Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550 William A. Grieder, Esquire Office of the General Counsel Department of Administration 435 Carlton Building Tallahassee, Florida 32399-1550
The Issue The issue in these consolidated cases is whether the Agency for Health Care Administration ("AHCA") properly disallowed Petitioners' expense for liability insurance and accrued contingent liability costs contained in AHCA's audit of Petitioners' Medicaid cost reports.
Findings Of Fact Based upon the oral and documentary evidence presented at the final hearing, and on the entire record of this proceeding, the following findings of fact are made: Petitioners operate licensed nursing homes that participate in the Florida Medicaid program as institutional providers. The 14 Palm Gardens facilities are limited liability companies operating as subsidiaries of New Rochelle Administrators, LLC, which also provides the facilities with management services under a management contract. AHCA is the single state agency responsible for administering the Florida Medicaid program. One of AHCA's duties is to audit Medicaid cost reports submitted by providers participating in the Medicaid program. During the audit period, Petitioners provided services to Medicaid beneficiaries pursuant to Institutional Medicaid Provider Agreements that they entered into with AHCA. The Provider Agreements contained the following relevant provision: (3) Compliance. The provider agrees to comply with local, state, and federal laws, as well as rules, regulations, and statements of policy applicable to the Medicaid program, including Medicaid Provider Handbooks issued by AHCA. Section 409.908, Florida Statutes (2002)1, provided in relevant part: 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. . . . * * * (2)(a)1. Reimbursement to nursing homes licensed under part II of chapter 400 . . . must be made prospectively. . . . * * * (b) Subject to any limitations or directions provided for in the General Appropriations Act, the agency shall establish and implement a Florida Title XIX Long-Term Care Reimbursement Plan (Medicaid) for nursing home care in order to provide care and services in conformance with the applicable state and federal laws, rules, regulations, and quality and safety standards and to ensure that individuals eligible for medical assistance have reasonable geographic access to such care. . . . AHCA has adopted the Title XIX Long-Term Care Reimbursement Plan (the "Plan") by reference in Florida Administrative Code Rule 59G-6.010. The Plan incorporates the Centers for Medicare and Medicaid Services ("CMS") Publication 15-1, also called the Provider Reimbursement Manual (the "Manual" or "PRM"), which provides "guidelines and policies to implement Medicare regulations which set forth principles for determining the reasonable cost of provider services furnished under the Health Insurance for the Aged Act of l965, as amended." CMS Pub. 15-1, Foreword, p. I. The audit period in these cases spans two versions of the Plan: version XXIII, effective July 1, 2002, and version XXIV, effective January 1, 2003. It is unnecessary to distinguish between the two versions of the Plan because their language is identical as to the provisions relevant to these cases. Section I of the Plan, "Cost Finding and Cost Reporting," provides as follows, in relevant part: The cost report shall be prepared by a Certified Public Accountant in accordance with chapter 409.908, Florida Statutes, on the form prescribed in section I.A. [AHCA form 5100-000, Rev. 7-1-90], and on the accrual basis of accounting in accordance with generally accepted accounting principles as established by the American Institute of Certified Public Accountants (AICPA) as incorporated by reference in Rule 61H1-20.007, F.A.C., the methods of reimbursement in accordance with Medicare (Title XVIII) Principles of Reimbursement, the Provider Reimbursement Manual (CMS-PUB. 15-1)(1993) incorporated herein by reference except as modified by the Florida Title XIX Long Term Care Reimbursement Plan and State of Florida Administrative Rules. . . . Section III of the Plan, "Allowable Costs," provides as follows, in relevant part: Implicit in any definition of allowable costs is that those costs shall not exceed what a prudent and cost-conscious buyer pays for a given service or item. If costs are determined by AHCA, utilizing the Title XVIII Principles of Reimbursement, CMS-PUB. 15-1 (1993) and this plan, to exceed the level that a prudent buyer would incur, then the excess costs shall not be reimbursable under the plan. The Plan is a cost based prospective reimbursement plan. The Plan uses historical data from cost reports to establish provider reimbursement rates. The "prospective" feature is an upward adjustment to historical costs to establish reimbursement rates for subsequent rate semesters.2 The Plan establishes limits on reimbursement of costs, including reimbursement ceilings and targets. AHCA establishes reimbursement ceilings for nursing homes based on the size and location of the facilities. The ceilings are determined prospectively, on a semiannual basis. "Targets" limit the inflationary increase in reimbursement rates from one semester to the next and limit a provider's allowable costs for reimbursement purposes. If a provider's costs exceed the target, then those costs are not factored into the reimbursement rate and must be absorbed by the provider. A nursing home is required to file cost reports. The costs identified in the cost reports are converted into per diem rates in four components: the operating component; the direct care component; the indirect care component; and the property component. GL/PL insurance costs fall under the operating component. Once the per diem rate is established for each component, the nursing home's reimbursement rate is set at the lowest of four limitations: the facility's costs; the facility's target; the statewide cost ceiling based on the size of the facility and its region; or the statewide target, also based on the size and location of the facility. The facility's target is based on the initial cost report submitted by that facility. The initial per diem established pursuant to the initial cost report becomes the "base rate." Once the base rate is established, AHCA sets the target by inflating the base rate forward to subsequent six- month rate semesters according to a pre-established inflation factor. Reimbursement for cost increases experienced in subsequent rate semesters is limited by the target drawn from the base rate. Thus, the facility's reimbursement for costs in future rate semesters is affected by the target limits established in the initial period cost report. Expenses that are disallowed during the establishment of the base rate cannot be reclaimed in later reimbursement periods. Petitioners entered the Medicaid program on June 29, 2002. They filed cost reports for the nine- month period from their entry into the program through February 28, 2003. These reports included all costs claimed by Petitioners under the accrual basis of accounting in rendering services to eligible Medicaid beneficiaries. In preparing their cost reports, Petitioners used the standard Medicaid Cost Report "Chart of Accounts and Description," which contains the account numbers to be used for each ledger entry, and explains the meaning of each account number. Under the general category of "Administration" are set forth several subcategories of account numbers, including "Insurance Expense." Insurance Expense is broken into five account numbers, including number 730810, "General and Professional Liability -- Third Party," which is described as "[c]osts of insurance purchased from a commercial carrier or a non-profit service corporation."3 Petitioners' cost report stated the following expenses under account number 730810: Facility Amount Palm Garden of Clearwater $145,042.00 Palm Garden of Gainesville $145,042.00 Palm Garden of Jacksonville $145,042.00 Palm Garden of Largo $171,188.00 Palm Garden of North Miami $145,042.00 Palm Garden of Ocala $217,712.00 Palm Garden of Orlando $145,042.00 Palm Garden of Pinellas $145,042.00 Palm Garden of Port St. Lucie $145,042.00 Palm Garden of Sun City $145,042.00 Palm Garden of Tampa $145,042.00 Palm Garden of Vero Beach $217,712.00 Palm Garden of West Palm Beach $231,151.00 Palm Garden of Winter Haven $145,042.00 AHCA requires that the cost reports of first-year providers undergo an audit. AHCA's contract auditing firm, Smiley & Smiley, conducted an examination4 of the cost reports of the 14 Palm Gardens nursing homes to determine whether the included costs were allowable. The American Institute of Certified Public Accountants ("AICPA") has promulgated a series of "attestation standards" to provide guidance and establish a framework for the attestation services provided by the accounting profession in various contexts. Attestation Standards 101 and 601 set out the standard an accountant relies upon in examining for governmental compliance. Smiley & Smiley examined the Palm Gardens cost reports pursuant to these standards. During the course of the audit, Smiley & Smiley made numerous requests for documentation and other information pursuant to the Medicaid provider agreement and the Plan. Petitioners provided the auditors with their general ledger, invoices, audited financial statements, bank statements, and other documentation in support of their cost reports. The examinations were finalized during the period between September 28, 2006, and October 4, 2006. The audit report issued by AHCA contained more than 2,000 individual adjustments to Petitioners' costs, which the parties to these consolidated proceedings have negotiated and narrowed to two adjustments per Palm Gardens facility.5 As noted in the Preliminary Statement above, the first adjustment at issue is AHCA's disallowance of Palm Gardens' accrual of expenses for contingent liability under the category of GL/PL insurance, where Palm Gardens could not document that it had purchased GL/PL insurance. The second adjustment at issue is ACHA's disallowance of a portion of the premium paid by Palm Gardens for the Mature Care Policies. The total amount of the adjustment at issue for each facility is set forth in the Preliminary Statement above. Of that total for each facility, $18,849.00 constituted the disallowance for the Mature Care Policies. The remainder constituted the disallowance for the accrual of GL/PL related contingent liabilities. Janette Smiley, senior partner at Smiley & Smiley and expert in Medicaid auditing, testified that Petitioners provided no documentation other than the Mature Care Policies to support the GL/PL entry in the cost reports. Ms. Smiley testified that, during much of the examination process, she understood Petitioners to be self-insured. Ms. Smiley's understanding was based in part on statements contained in Petitioners' audited financial statements. In the audited financial statement covering the period from June 28, 2002, through December 31, 2002, Note six explains Petitioners' operating leases and states as follows, in relevant part: The lease agreement requires that the Company maintain general and professional liability in specified minimum amounts. As an alternative to maintaining these levels of insurance, the lease agreement allows the Company to fund a self-insurance reserve at a per bed minimum amount. The Company chose to self-insure, and has recorded litigation reserves of approximately $1,735,000 that are included in other accrued expenses (see Note 9). As of December 31, 2002, these reserves have not been funded by the Company. . . . The referenced Note nine, titled "Commitments and Contingencies," provides as follows in relevant part: Due to the current legal environment, providers of long-term care services are experiencing significant increases in liability insurance premiums or cancellations of liability insurance coverage. Most, if not all, insurance carriers in Florida have ceased offering liability coverage altogether. The Company's Florida facilities have minimal levels of insurance coverage and are essentially self-insured. The Company has established reserves (see Note 6) that estimate its exposure to uninsured claims. Management is not currently aware of any claims that could exceed these reserves. However, the ultimate outcome of these uninsured claims cannot be determined with certainty, and could therefore have a material adverse impact on the financial position of the Company. The relevant notes in Petitioner's audited financial statement for the year ending December 31, 2003, are identical to those quoted above, except that the recorded litigation reserves were increased to $4 million. The notes provide that, as of December 31, 2003, these reserves had not been funded by Petitioners. Ms. Smiley observed that the quoted notes, while referencing "self-insurance" and the recording of litigation reserves, stated that the litigation reserves had not been funded. By e-mail dated April 21, 2005, Ms. Smiley corresponded with Stanley Swindling, the shareholder in the accounting firm Moore Stephens Lovelace, P.A., who had primary responsibility for preparing Petitioners' cost reports. Ms. Smiley noted that Petitioners' audited financial statements stated that the company "chose to self-insure" and "recorded litigation reserves," then wrote (verbatim): By definition from PRM CMS Pub 15-1 Sections 2162.5 and 2162.7 the Company does in fact have self-insurance as there is no shifting of risk. You will have to support your positioning a letter addressing the regs for self-insurance. As clearly the financial statement auditors believe this is self- insurance and have disclosed such to the financial statement users. If you cannot support the funding as required by the regs, the provider will have to support expense as "pay as you go" in accordance with [2162.6] for PL/GL. * * * Please review 2161 and 2162 and provide support based on the required compliance. If support is not complete within the regulations, amounts for IBNR [incurred but not reported] will be disallowed and we will need to have the claims paid reports from the TPA [third party administrator] (assuming there is a TPA handling the claims processing), in order to allow any expense. Section 2160 of the Manual establishes the basic insurance requirement: A. General.-- A provider participating in the Medicare program is expected to follow sound and prudent management practices, including the maintenance of an adequate insurance program to protect itself against likely losses, particularly losses so great that the provider's financial stability would be threatened. Where a provider chooses not to maintain adequate insurance protection against such losses, through the purchase of insurance, the maintenance of a self-insurance program described in §2161B, or other alternative programs described in §2162, it cannot expect the Medicare program to indemnify it for its failure to do so. . . . . . . If a provider is unable to obtain malpractice coverage, it must select one of the self-insurance alternatives in §2162 to protect itself against such risks. If one of these alternatives is not selected and the provider incurs losses, the cost of such losses and related expenses are not allowable. Section 2161.A of the Manual sets forth the general rule as to the reimbursement of insurance costs. It provides that the reasonable costs of insurance purchased from a commercial carrier or nonprofit service corporation are allowable to the extent they are "consistent with sound management practice." Reimbursement for insurance premiums is limited to the "amount of aggregate coverage offered in the insurance policy." Section 2162 of the Manual provides as follows, in relevant part: PROVIDER COSTS FOR MALPRACTICE AND COMPREHENSIVE GENERAL LIABILITY PROTECTION, UNEMPLOYMENT COMPENSATION, WORKERS' COMPENSATION, AND EMPLOYEE HEALTH CARE INSURANCE General.-- Where provider costs incurred for protection against malpractice and comprehensive general liability . . . do not meet the requirements of §2161.A, costs incurred for that protection under other arrangements will be allowable under the conditions stated below. . . . * * * The following illustrates alternatives to full insurance coverage from commercial sources which providers, acting individually or as part of a group or a pool, can adopt to obtain malpractice, and comprehensive general liability, unemployment compensation, workers' compensation, and employee health care insurance protection: Insurance purchased from a commercial insurance company which provides coverage after a deductible or coinsurance provision has been met; Insurance purchased from a limited purpose insurance company (captive); Total self-insurance; or A combination of purchased insurance and self-insurance. . . . part: Section 2162.3 of the Manual provides: Self-Insurance.-- You may believe that it is more prudent to maintain a total self- insurance program (i.e., the assumption by you of the risk of loss) independently or as part of a group or pool rather than to obtain protection through purchased insurance coverage. If such a program meets the conditions specified in §2162.7, payments into such funds are allowable costs. Section 2162.7 of the Manual provides, in relevant Conditions Applicable to Self-Insurance.-- Definition of Self-Insurance.-- Self- insurance is a means whereby a provider(s), whether proprietary or nonproprietary, undertakes the risk to protect itself against anticipated liabilities by providing funds in an amount equivalent to liquidate those liabilities. . . . * * * Self-Insurance Fund.-- The provider or pool establishes a fund with a recognized independent fiduciary such as a bank, a trust company, or a private benefit administrator. In the case of a State or local governmental provider or pool, the State in which the provider or pool is located may act as a fiduciary. The provider or pool and fiduciary must enter into a written agreement which includes all of the following elements: General Legal Responsibility.-- The fiduciary agreement must include the appropriate legal responsibilities and obligations required by State laws. Control of Fund.-- The fiduciary must have legal title to the fund and be responsible for proper administration and control. The fiduciary cannot be related to the provider either through ownership or control as defined in Chapter 10, except where a State acts as a fiduciary for a State or local governmental provider or pool. Thus, the home office of a chain organization or a religious order of which the provider is an affiliate cannot be the fiduciary. In addition, investments which may be made by the fiduciary from the fund are limited to those approved under State law governing the use of such fund; notwithstanding this, loans by the fiduciary from the fund to the provider or persons related to the provider are not permitted. Where the State acts as fiduciary for itself or local governments, the fund cannot make loans to the State or local governments. . . . The quoted Manual provisions clarify that Ms. Smiley's message to Mr. Swindling was that Petitioners had yet to submit documentation to bring their "self-insurance" expenses within the reimbursable ambit of Sections 2161 and 2162 of the Manual. There was no indication that Petitioners had established a fund in an amount sufficient to liquidate its anticipated liabilities, or that any such funds had been placed under the control of a fiduciary. Petitioners had simply booked the reserved expenses without setting aside any cash to cover the expenses. AHCA provided extensive testimony regarding the correspondence that continued among Ms. Smiley, Mr. Swindling, and AHCA employees regarding this "self-insurance" issue. It is not necessary to set forth detailed findings as to these matters, because Petitioners ultimately conceded to Ms. Smiley that, aside from the Mutual Care policies, they did not purchase commercial insurance as described in Section 2161.A, nor did they avail themselves of the alternatives to commercial insurance described in Section 2162.A. Petitioners did not purchase commercial insurance with a deductible, did not self- insure, did not purchase insurance from a limited purpose or "captive" insurance company, or employ a combination of purchased insurance and self-insurance. Ms. Smiley eventually concluded that Petitioners had no coverage for general and professional liability losses in excess of the $25,000 value of the Mutual Care Policies. Under the cited provisions of the Manual, Petitioners' unfunded self- insurance expense was not considered allowable under the principles of reimbursement. Petitioners were uninsured, which led Ms. Smiley to further conclude that Section 2162.13 of the Manual would apply: Absence of Coverage.-- Where a provider, other than a governmental (Federal, State, or local) provider, has no insurance protection against malpractice or comprehensive general liability in conjunction with malpractice, either in the form of a limited purpose or commercial insurance policy or a self-insurance fund as described in §2162.7, any losses and related expenses incurred are not allowable. In response to this disallowance pursuant to the strict terms of the Manual, Petitioners contend that AHCA should not have limited its examination of the claimed costs to the availability of documentation that would support those costs as allowable under the Manual. Under the unique circumstances presented by their situation, Petitioners assert that AHCA should have examined the state of the nursing home industry in Florida, particularly the market for GL/PL liability insurance during the audit period, and further examined whether Petitioners had the ability to meet the insurance requirements set forth in the Manual. Petitioners assert that, in light of such an examination, AHCA should have concluded that generally accepted accounting principles ("GAAP") may properly be invoked to render the accrued contingent liabilities an allowable expense. Keith Parnell is an expert in insurance for the long- term care industry. He is a licensed insurance broker working for Hamilton Insurance Agency, which provides insurance and risk management services to about 40 percent of the Florida nursing home market. Mr. Parnell testified that during the audit period, it was impossible for nursing homes to obtain insurance in Florida. In his opinion, Petitioners could not have purchased commercial insurance during the audit period. To support this testimony, Petitioners offered a study conducted by the Florida Department of Insurance ("DOI") in 2000 that attempted to determine the status of the Florida long-term care liability insurance market for nursing homes, assisted living facilities, and continuing care retirement communities. Of the 79 companies that responded to DOI's data call, 23 reported that they had provided GL/PL coverage during the previous three years but were no longer writing policies, and only 17 reported that they were currently writing GL/PL policies. Six of the 17 reported writing no policies in 2000, and five of the 17 reported writing only one policy. The responding insurers reported writing a total of 43 policies for the year 2000, though there were approximately 677 skilled nursing facilities in Florida. On March 1, 2004, the Florida Legislature's Joint Select Committee on Nursing Homes issued a report on its study of "issues regarding the continuing liability insurance and lawsuit crisis facing Florida's long-term care facilities and to assess the impact of the reforms contained in CS/CS/CS/SB 1202 (2001)."6 The study employed data compiled from 1999 through 2003. Among the Joint Select Committee's findings was the following: In order to find out about current availability of long-term care liability insurance in Florida, the Committee solicited information from [the Office of Insurance Regulation, or] OIR within the Department of Financial Services, which is responsible for regulating insurance in Florida. At the Committee's request, OIR re-evaluated the liability insurance market and reported that there has been no appreciable change in the availability of private liability insurance over the past year. Twenty-one admitted insurance entities that once offered, or now offer, professional liability coverage for nursing homes were surveyed by OIR. Six of those entities currently offer coverage. Nine surplus lines carriers have provided 54 professional liability policies in the past year. Representatives of insurance carriers that stopped providing coverage in Florida told OIR that they are waiting until there are more reliable indicators of risk nationwide to re-enter the market. Among the Joint Select Committee's conclusions was the following: In the testimony the Committee received, there was general agreement that the quality of care in Florida nursing homes is improving, in large part due to the minimum staffing standards the Legislature adopted in SB 1202 during the 2001 Session. There was not, however, general agreement about whether or not lawsuits are abating due to the tort system changes contained in SB 1202. There was general agreement that the long-term care liability insurance market has not yet improved. After hearing the testimony, there is general agreement among the members of the Joint Select Committee that: * * * General and professional liability insurance, with actual transfer-of-risk, is virtually unavailable in Florida. "Bare- bones" policies designed to provide minimal compliance with the statutory insurance requirement are available; however, the cost often exceeds the face value of the coverage offered in the policy. This situation is a crisis which threatens the continued existence of long-term care facilities in Florida. To further support Mr. Parnell's testimony, Petitioners offered actuarial analyses of general and professional liability in long-term care performed by AON Risk Consultants, Inc. (AON) on behalf of the American Health Care Association. The AON studies analyzed nationwide trends in GL/PL for long-term care, and also examined state-specific issues for eight states identified as leading the trends in claim activity, including Florida. They provided an historical perspective of GL/PL claims in Florida during the audit period. The 2002 AON study for Florida was based on participation by entities representing 52 percent of all Florida nursing home beds. The study provided a "Loss Cost per Occupied Bed" showing GL/PL liability claims losses on a per bed basis. The 2002 study placed the loss cost for nursing homes in Florida at $10,800 per bed for the year 2001. The 2003 AON study, based on participation by entities representing 54 percent of Florida nursing home beds, placed the loss cost for nursing homes in Florida at $11,810 per bed for the year 2002. The studies showed that the cost per bed of GL/PL losses is materially higher in Florida than the rest of the United States. The nationwide loss per bed was $2,360 for the year 2001 and $2,880 for the year 2002. The GL/PL loss costs for Texas were the second-highest in the country, yet were far lower than the per bed loss for Florida ($5,460 for the year 2001 and $6,310 for the year 2002). Finally, Petitioners point to the Mature Care Policies as evidence of the crisis in GL/PL insurance availability. The aforementioned SB 1202 instituted a requirement that nursing homes maintain liability insurance coverage as a condition of licensure. See Section 22, Chapter 2001-45, Laws of Florida, codified at Subsection 400.141(20), Florida Statutes. To satisfy this requirement, Petitioners entered the commercial insurance market and purchased insurance policies for each of the 14 Palm Gardens facilities from a carrier named Mature Care Insurance Company. The policies carried a $25,000 policy limit, with a policy premium of $34,000. These were the kind of "bare bones" policies referenced by the Joint Select Committee's 2004 report. The fact that the policies cost more than they could ever pay out led Mr. Swindling, Petitioners' health care accounting and Medicaid reimbursement expert, to opine that a prudent nursing home operator in Florida at that time would not have purchased insurance, but for the statutory requirement.7 The Mature Care Policies were "bare bones" policies designed to provide minimal compliance with the statutory liability insurance coverage requirement. The policies cost Petitioners more than $37,000 in premium payments, taxes, and fees, in exchange for policy limits of $25,000. In its examination, AHCA disallowed the difference between the cost of the policy and the policy limits, then prorated the allowable costs because the audit period was nine months long and the premium paid for the Mature Care Policies was for 12 months. AHCA based its disallowance on Section 2161.A of the Manual, particularly the language which states: "Insurance premiums reimbursement is limited to the amount of aggregate coverage offered in the insurance policy." Petitioners responded that they did not enter the market and voluntarily pay a premium in excess of the policy limits. They were statutorily required to purchase this minimal amount of insurance; they were required to purchase a 12-month policy; they paid the market price8; and they should not be penalized for complying with the statute. Petitioners contend they should be reimbursed the full amount of the premiums for the Mature Care Policies, as their cost of statutory compliance. Returning to the issue of the contingent liabilities, Petitioners contend that, in light of the state of the market for GL/PL liability insurance during the audit period, AHCA should have gone beyond the strictures of the Manual to conclude that GAAP principles render the accrued contingent liabilities an allowable expense. Under GAAP, a contingent loss is a loss that is probable and can be reasonably estimated. An estimated loss from a loss contingency may be accrued by a charge to income. Statement of Financial Accounting Standards No. 5 ("FAS No. 5"), Accounting for Contingencies, provides several examples of loss contingencies, including "pending or threatened litigation" and "actual or possible claims and assessments." Petitioners assert that the contingent losses reported in their cost reports were actual costs incurred by Petitioners. The AICPA Audit and Accounting Guide for Health Care Organizations, Section 8.05, provides: The ultimate costs of malpractice claims, which include costs associated with litigating or settling claims, are accrued when the incidents that give rise to the claims occur. Estimated losses from asserted and unasserted claims are accrued either individually or on a group basis, based on the best estimates of the ultimate costs of the claims and the relationship of past reported incidents to eventual claims payments. All relevant information, including industry experience, the entity's own historical experience, the entity's existing asserted claims, and reported incidents, is used in estimating the expected amount of claims. The accrual includes an estimate of the losses that will result from unreported incidents, which are probable of having occurred before the end of the reporting period. Section 8.10 of AICPA Guide provides: Accrued unpaid claims and expenses that are expected to be paid during the normal operating cycle (generally within one year of the date of the financial statements) are classified as current liabilities. All other accrued unpaid claims and expenses are classified as non-current liabilities. As noted above, Petitioners' audited financial statements for the fiscal years ending December 31, 2002, and December 31, 2003, showed that the accrual was incurred and recorded by Petitioners during the audit period. Mr. Swindling prepared Petitioners' cost reports, based on information provided by Petitioners, including trial balances reflecting their costs, statistics on patient days, cost data related to square footage, and revenue information. Mr. Swindling advised Petitioners to include the accrued losses. He believed that the loss contingency was probable and could be reasonably estimated. The losses were probable because it was "a given in the state of Florida at that time period that nursing homes are going to get sued." Mr. Swindling testified that the accrual reflected a per bed loss amount of $1,750, which he believed to be a reasonable estimate of the contingent liabilities faced by Petitioners during the audit period. This amount was much less than the per bed loss indicated by the AON studies for Florida. Mr. Swindling used the criteria set forth in Section 8.05 of the AICPA Guide to establish the estimate. He determined that the lesser amount was adequate based on his discussions with Petitioners' management, who indicated that they had a substantial risk management program. Management also disclosed to Mr. Swindling that Petitioners' leases required $1,750 per bed in liability coverage. See Finding of Fact 22, supra. Mr. Swindling believed that the estimated loss per bed was reasonable based on the AON studies and his knowledge and experience of the state of the industry in Florida during the audit period, as further reflected in the DOI and Joint Committee on Nursing Homes materials discussed above. Mr. Swindling's opinion was that the provisions of the Manual relating to GL/PL insurance costs do not apply under these circumstances. The costs at issue in this proceeding are not general and professional liability insurance costs subject to CMS Pub. 15-1; rather, they are loss contingencies related to general and professional liability, including defense costs, litigation costs, and settlement costs. Mr. Swindling placed the loss contingency under number 730810, "General and Professional Liability -- Third Party" because, in the finite chart of accounts provided by Medicaid, that was the most appropriate place to record the cost.9 Despite the initial confusion it caused the agency's auditors, the placement of the loss contingency under number 730810 was not intended to deceive the auditors. Mr. Swindling opined that, under these circumstances, Sections 2160 through 2162 are in conflict with other provisions in the Manual relating to the "prudent buyer" concept, and further conflict with the Plan to the extent that the cited regulations "relate to a retrospective system as opposed to prospective target rate-based system." Mr. Swindling agreed that the application of Sections 2160 through 2162 to the situation presented by Petitioners would result in the disallowance of the loss contingencies. Mr. Swindling observed, however, that Sections 2160 through 2162 are Medicare regulations. Mr. Swindling testified that Medicare reimbursements are made on a retrospective basis.10 Were this situation to occur in Medicare -- in which the provider did not obtain commercial insurance, self-insurance, or establish a captive insurer -- the provider would be deemed to be operating on a pay-as-you-go basis. Though its costs might be disallowed in the current period, the provider would receive reimbursements in subsequent periods when it could prove actual payment for its losses. Mr. Swindling found a conflict in attempting to apply these Medicare rules to the prospective payment system employed by Florida Medicaid, at least under the circumstances presented by Petitioners' case. Under the prospective system, once the contingent loss is disallowed for the base period, there is no way for Petitioners ever to recover that loss in a subsequent period, even when the contingency is liquidated. During his cross-examination, Mr. Swindling explained his position as follows: . . . Medicare allows for that payment in a subsequent period. Medicaid rules would not allow that payment in the subsequent period; therefore you have conflict in the rules. When you have conflict in the rules, you revert to generally accepted accounting principles. Generally accepted accounting principles are what we did. Q. Where did you find that if there's a conflict in the rules, which I disagree with, but if there is a conflict in the rules, that you follow GAAP? Where did you get that from? I mean, we've talked about it and it's clear on the record that if there is no provision that GAAP applies, but where did you get that if there's a conflict? Just point it out, that would be the easiest way to do it. A. The hierarchy, if you will, requires providers to file costs on the accrual basis of accounting in accordance with generally accepted accounting principles. If there's no rules, in absence of rules -- and I forget what the other terms were, we read it into the record before, against public policy, those kind of things -- or in my professional opinion, if there is a conflict within the rules where the provider can't follow two separate rules at the same time, they're in conflict, then [GAAP] rules what should be recorded and what should be reimbursed. * * * Q. [T]he company accrued a liability of $2 million for the cost reporting period of 2002-2003, is that correct? A. Yes. * * * Q. Do you have any documentation supporting claims paid, actually paid, in 2002-2003 beyond the mature care policy for which that $2 million reserve was set up? A. No. Q. So what did Medicaid pay for? A. Medicaid paid the cost of contingent liabilities that were incurred by the providers and were estimated at $1,750 per bed. Generally accepted accounting principles will adjust that going forward every cost reporting period. If that liability in total goes up or down, the differential under [GAAP] goes through the income statement, and expenses either go up or they go down. It's self-correcting, which is similar to what Medicare is doing, only they're doing it on a cash basis. Mr. Swindling explained the "hierarchy" by which allowable costs are determined. The highest governing law is the Federal statutory law, Title XIX of the Social Security Act, 42 U.S.C. Subsection. 1396-1396v. Below the statute come the federal regulations for implementing Title XIX, 42 C.F.R. parts 400-426. Then follow in order Florida statutory law, the relevant Florida Administrative Code provisions, the Plan, the Manual, and, at the bottom of the hierarchy, GAAP. Mr. Swindling testified that in reality, a cost report is not prepared from the top of the hierarchy down; rather, GAAP is the starting point for the preparation of any cost report. The statutes, rules, the Plan and the Manual are then consulted to exclude specific cost items otherwise allowable under GAAP. In the absence of an applicable rule, or in a situation in which there is a conflict between rules in the hierarchy such that the provider is unable to comply with both rules, the provider should fall back on GAAP principles as to recording of costs and reimbursement. John A. Owens, currently a consultant in health care finance specializing in Medicaid, worked for AHCA for several years up to 2002, in positions including administrator of the audit services section and bureau chief of the Office of Medicaid Program Analysis. Mr. Owens is a CPA and expert in health care accounting and Medicare/Medicaid reimbursement. Mr. Owens agreed with Mr. Swindling that AHCA's disallowance of the accrued costs for GL/PL liability was improper. Mr. Owens noted that Section 2160 of the Manual requires providers to purchase commercial insurance. If commercial insurance is unavailable, then the Manual gives the provider two choices: self-insure, or establish a captive program. Mr. Owens testified that insurers were fleeing the state during the period in question, and providers were operating without insurance coverage. Based on the state of the market, Petitioners' only options would have been to self-insure or establish a captive. As to self-insurance, Petitioners' problem was that they had taken over the leases on their facilities from a bankrupt predecessor, Integrated Health Services ("IHS"). Petitioners were not in privity with their predecessor. Petitioners had no access to the facilities' loss histories, without which they could not perform an actuarial study or engage a fiduciary to set up a self-insurance plan.11 Similarly, setting up a captive would require finding an administrator and understanding the risk exposure. Mr. Owens testified that a provider would not be allowed to set up a captive without determining actuarial soundness, which was not possible at the time Petitioners took over the 14 IHS facilities. Thus, Petitioners were simply unable to meet the standards established by the Manual. The options provided by the Manual did not contemplate the unique market situation existing in Florida during the audit period, and certainly did not contemplate that situation compounded by the problems faced by a new provider taking over 14 nursing homes from a bankrupt predecessor. Mr. Owens agreed with Mr. Swindling that, under these circumstances, where the requirements of the Manual could not be met, Petitioners were entitled to seek relief under GAAP, FAS No. 5 in particular. In situations where a loss is probable and can be measured, then an accounting entry may be performed to accrue and report that cost. Mr. Owens concluded that Petitioners' accrual was an allowable cost for Medicaid purposes, and explained his rationale as follows: My opinion is, in essence, that since they could not meet -- technically, they just could not meet those requirements laid out by [the Manual], they had to look somewhere to determine some rational basis for developing a cost to put into the cost report, because if they had chosen to do nothing and just moved forward, those rates would be set and there would be nothing in their base year which then establishes their target moving forward. So by at least looking at a rational methodology to accrue the cost, they were able to build something into their base year and have it worked into their target system as they move forward. Steve Diaczyk, an audit evaluation and review analyst for AHCA, testified for the agency as an expert in accounting, auditing, and Medicaid policy. Mr. Diaczyk was the AHCA auditor who reviewed the work of Smiley & Smiley for compliance with Medicaid rules and regulations, and to verify the accuracy of the independent CPA's determinations. Mr. Diaczyk agreed with Mr. Swindling's description of the "hierarchy" by which allowable costs are determined. Mr. Diaczyk affirmed that Petitioners employed GAAP rather than Medicaid regulations in preparing their cost reports. Mr. Diaczyk testified regarding the Notes to Petitioners' audited financial statements, set forth at Findings of Fact 22-24, supra, which left AHCA's auditors with the understanding that Petitioners were self-insuring. Mr. Diaczyk pointed out that Section 2162.7 of the Manual requires a self- insurer to contract with an independent fiduciary to maintain a self-insurance fund, and that the fund must contain monies sufficient to cover anticipated losses. The fiduciary takes title to the funds, the amount of which is determined actuarially. Mr. Diaczyk explained that, in reimbursing a provider for self-insurance, Medicaid wants to make sure that the provider has actually put money into the fund, and has not just set up a fund on its books and called it "self-insurance" for reimbursement purposes. AHCA's position is that it would be a windfall for a provider to obtain reimbursement for an accrued liability when it has not actually set the money aside and funded the risk. Medicaid wants the risk transferred off of the provider's books and on to the self-insurance fund. Mr. Diaczyk testified as to the differing objectives of Medicaid and GAAP. Medicaid is concerned with reimbursing costs, and is therefore especially sensitive regarding the overstatement of costs. Medicaid wants to reimburse a provider for only those costs that have actually been paid. GAAP, on the other hand, is about report presentation for a business entity and is concerned chiefly with avoiding the understatement of expenses and overstatement of revenue. Under GAAP, an entity may accrue a cost and not pay it for years. In the case of a contingent liability, the entity may book the cost and never actually pay it. Mr. Diaczyk described the self-insurance and liquidation provisions of 42 C.F.R. Section 413.100, "Special treatment of certain accrued costs." The federal rule essentially allows accrued costs to be claimed for reimbursement, but only if they are "liquidated timely." Subsection (c)(2)(viii) of the rule provides that accrued liability related to contributions to a self-insurance program must be liquidated within 75 days after the close of the cost reporting period. To obtain reimbursement, Petitioners would have had to liquidate their accrued liability for GL/PL insurance within 75 days of the end of the audit period. Mr. Diaczyk also noted that, even if the 75-day requirement were not applicable, the general requirement of Section 2305.2 of the Manual would apply. Section 2305.2 requires that all short-term liabilities must be liquidated within one year after the end of the cost reporting period in which the liability is incurred, with some exceptions not applicable in this case. Petitioners' accrued liability for general and professional liability insurance was not funded or liquidated for more than one year after the cost reporting period. It was a contingent liability that might never be paid. Therefore, Mr. Diaczyk stated, reimbursement was not in keeping with Medicaid's goal to reimburse providers for actual paid costs, not for potential costs that may never be paid. Petitioners responded that their accrued liabilities constituted non-current liabilities, items that under normal circumstances will not be liquidated within one year. Mr. Parnell testified that there is great variation in how long it takes for a general and professional liability claim against a nursing home to mature to the point of payment to the claimant. He testified that a "short" timeline would be from two to four years, and that some claims may take from eight to eleven years to mature. From these facts, Petitioners urge that 42 C.F.R. Section 413.100 and Section 2305.2 of the Manual are inapplicable to their situation. As to Section 2305.2 in particular, Petitioners point to Section 2305.A, the general liquidation of liabilities provision to which Section 2305.2 provides the exceptions discussed above. The last sentence of Section 2305.A provides that, where the liability is not liquidated within one year, or does not qualify under the exceptions set forth in Sections 2305.1 and 2305.2, then "the cost incurred for the related goods and services is not allowable in the cost reporting period when the liability is incurred, but is allowable in the cost reporting period when the liquidation of the liability occurs." (Emphasis added.) Petitioners argue that the underscored language supports the Medicare/Medicaid distinction urged by Mr. Swindling. In its usual Medicare retroactive reimbursement context, Section 2305.2 would operate merely to postpone reimbursement until the cost period in which the liability is liquidated. Applied to this Medicaid prospective reimbursement situation, Section 2305.2 would unfairly deny Petitioners any reimbursement at all by excluding the liability from the base rate. Mr. Diaczyk explained that, where the Medicaid rules address a category of costs, the allowable costs in a provider's cost report are limited to those defined as allowable by the applicable rules. He stated that if there is a policy in the Manual that addresses an item of cost, the provider must use the Manual provision; the provider cannot use GAAP to determine that cost item. In this case, Mr. Diaczyk agreed with Ms. Smiley as to the applicable rules and the disallowance of Petitioners' contingent liability costs. According to Mr. Diaczyk, GAAP may be used only if no provisions farther up the chain of the "hierarchy" are applicable. In this case, the Medicaid rules specifically addressed the categories of cost in question, meaning that GAAP did not apply. Under cross-examination, Mr. Diaczyk testified that the accrual made by Petitioners in their cost reports would be considered actual costs under GAAP, "[a]ssuming that they had an actuarial study done to come up with the $1.7 million that they accrued." Mr. Diaczyk acknowledged that AICPA Audit and Accounting Guide for Health Care Organizations, Section 8.05, does not limit the provider to an actuarial study in estimating losses from asserted and unasserted claims. See Finding of Fact 49, supra, for text of Section 8.05. Mr. Diaczyk pointed out that the problem in this case was that Petitioners gave AHCA no documentation to support their estimate of the accrual, despite the auditor's request that Petitioners provide documentation to support their costs. Mr. Diaczyk's testimony raised a parallel issue to Mr. Swindling's concern that Medicaid's prospective targeting system permanently excludes any item of cost not included in the base rate. Mr. Swindling solved the apparent contradiction in employing Medicare rules in the Medicaid scenario by applying GAAP principles. Responding to the criticism that GAAP could provide a windfall to Petitioners by reimbursing them for accrued costs that might never actually result in payment, Mr. Swindling responded that GAAP principles would adjust the cost for contingent liabilities going forward, "truing up" the financial statements in subsequent reporting periods. This truing up process would have the added advantage of obviating the agency's requirement for firm documentation of the initial accrual. Mr. Swindling's "truing up" scenario under GAAP would undoubtedly correct Petitioners' financial statements. However, Mr. Swindling did not explain how the truing up of the financial statements would translate into a correction of Petitioners' reimbursement rate.12 If costs excluded from the base rate cannot be added to future rate adjustments, then costs incorrectly included in the base rate would also presumably remain in the facility's rate going forward.13 Thus, Mr. Swindling's point regarding the self-correcting nature of the GAAP reporting procedures did not really respond to AHCA's concerns about Petitioners' receiving a windfall in their base rate by including the accrual for contingent liabilities. On April 19, 2005, Petitioners entered into a captive insurance program. Petitioners' captive is a claims-made GL/PL policy with limits of $1 million per occurrence and $3 million in the aggregate. Under the terms of the policy, "claims-made" refers to a claim made by Petitioners to the insurance company, not a claim made by a nursing home resident alleging damages. The effective date of the policy is from April 21, 2005, through April 21, 2006, with a retroactive feature that covers any claims for incidents back to June 29, 2002, a date that corresponds to Petitioners' first day of operation and participation in the Medicaid program. The Petitioners' paid $3,376,906 for this policy on April 22, 2005. Mr. Parnell testified that April 2005 was the earliest time that the 14 Palm Gardens facilities could have established this form of insurance program. In summary, the evidence presented at the hearing regarding the contingent liabilities established that Petitioners took over the 14 Palm Gardens facilities after the bankruptcy of the previous owner. Petitioners were faced with the virtual certainty of substantial GL/PL expenses in operating the facilities, and also faced with a Florida nursing home environment market in which commercial professional liability insurance was virtually unavailable. Lacking loss history information from their bankrupt predecessor, Petitioners were unable to self-insure or establish a captive program until 2005. Petitioners understood that if they did not include their GL/PL expenses in their initial cost report, those expenses would be excluded from the base rate and could never be recovered. Petitioners' leases for the facilities required them to fund a self-insurance reserve at a per bed minimum amount of $1,750. Based on the AON studies and the general state of the industry at the time, Petitioners' accountant concluded that, under GAAP principles, $1,750 per bed was a reasonable, conservative estimate of Petitioners' GL/PL loss contingency exposure for the audit period.14 Based on all the evidence, it is found that Petitioners' cost estimate was reasonable and should be accepted by the agency. Petitioners included their GL/PL loss contingency expenses in their initial Medicaid cost report, placing those expenses under a heading indicating the purchase of insurance from a third party. The notes to Petitioners' audited financial statements stated that the facilities were "essentially self- insured." These factors led AHCA to request documentation of Petitioners' self-insurance. Petitioners conceded that they were not self-insured and carried no liability insurance aside from the Mature Care policies. The parties had little dispute as to the facts summarized above. The parties also agreed as to the applicability of the "hierarchy" by which allowable costs are determined. Their disagreement rests solely on the manner in which the principles of the hierarchy should be applied to the unique situation presented by Petitioners in these cases.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that AHCA enter a final order that allows Petitioners' accrual of expenses for contingent liability under the category of general and professional liability ("GL/PL") insurance, and that disallows the Mature Care policy premium amounts in excess of the policy limits, prorated for a nine- month period. DONE AND ENTERED this 24th day of October, 2008, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 24th day of October, 2008.
