The Issue The issue is whether petitioners' request to terminate, without penalty, their participation in the state group health insurance plan should be granted.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioners, Terri K. Cassano (Cassano) and Edward M. McDonald (McDonald), are employees of the Office of State Attorney, Tenth Judicial Circuit, in Bartow, Florida. As such, they are eligible to participate in the State Group Health Insurance Program (program) administered by respondent, Department of Administration, Division of State Employees' Insurance (Division). At issue in this case is approximately $1,500 paid by petitioners and their employer for health insurance coverage under the program during the period October through December 1989. Effective July 1, 1989 the State of Florida implemented the first phase of a two-phase Flexible Benefits Plan (plan) which allowed, among other things, for employees who participate in the program to make their required monthly insurance premium contribution through a salary reduction agreement which has the effect of reducing the employee's taxable income by the amount of such contribution. Although not made clear in the record, it may be inferred that the plan is embodied in Chapters 22FB-1, 2 and 3, Florida Administrative Code (1987), which rules became effective on August 3, 1989. In federal bureaucratic parlance, the plan is known as a ``cafeteria'' plan /1 and was implemented after approval was obtained from the Internal Revenue Service (IRS). All state employees were automatically enrolled in the plan unless they signed a waiver form. Cassano and McDonald chose to participate in the plan, and they acknowledge that they received a Division brochure describing the plan prior to their enrollment. Under the rules of the plan, a participant was required to remain in the plan for the entire plan year, which in this case ended on November 30, 1989, unless a so-called "qualifying status change" occurred. Rule 22BF-1.008(13) cites a number of events as constituting a "qualifying status change". However, the event defined in subparagraph (13)(b) as a "change in a participant's health insurance coverage resulting in cessation of coverage" is the event upon which petitioners rely. The manner in which that rule should be interpreted is the source of controversy in this proceeding. In July 1989 petitioners were utilizing as their health insurer Health Alliance Plan (HAP), a health maintenance organization (HMO) serving Polk County. HAP was designated as a qualifying HMO under the program. In late July petitioners learned that HAP would cease doing business in Polk County effective September 30, 1989. Because of this, it was necessary that they consider other insurance alternatives to replace their existing coverage. After considering enrollment in Blue Cross Blue Shield (BCBS), which was the only other health alternative offered by the Division,/2 Cassano decided to enroll as a dependent in her husband's health insurance program because of the lower monthly premiums and she would not have to meet a new deductible as she would with BCBS. As for McDonald, who is also a military retiree, he considered BCBS but opted instead for Medicare because he was being treated for an existing ailment and his physicians were not listed as primary providers with BCBS. Consequently, it would cost him approximately $200 per visit with those doctors if he elected to use BCBS. Under these circumstances, petitioners' health coverage under the program ended since their HMO was no longer in business and their only other option, BCBS, would result in petitioners paying significantly higher costs. Cassano was able to immediately obtain coverage with her husband's health plan effective on July 28, 1989 while McDonald's coverage with Medicare became effective on October 1, 1989, the day after his HAP coverage ended. When the Division learned that HAP was ceasing doing business in Polk County, it mailed to petitioners a "health care provider selection form" which offered them a special enrollment period from August 15 through 31, 1989. The form offered the choice of enrolling in HOPC, BCBS or to cancel their health insurance coverage. However, respondent contends that even though the form offered petitioners the option of cancelling their insurance, it did not apply and that petitioners' only choice was to transfer coverage to one of the two remaining state insurers. The form also noted that if petitioners had any questions they should contact their personnel office or the Division by telephone. Although their personnel office later informed them that respondent might not agree they could do so, Cassano and McDonald executed the form on August 23 and 28, 1989, respectively, and elected to cancel their coverage. They also executed a "qualifying status change form" so that they could cease participation in the plan even though the plan year did not end until November 30, 1989. In so doing, they noted on the form that the qualifying status change event was "cessation of coverage by Health Alliance Plan" and relied in part upon a Division document sent to them which outlined the plan and listed a qualifying status change event as being a "change in participant's health coverage: resulting in cessation of coverage". That same document noted that in order to prove that such an event had occurred, the employee had to furnish a "letter from carrier stating that coverage has ceased due to change in insurance plan". In addition, explanatory literature concerning the plan previously disseminated: by the Division reflected that "a cafeteria plan may also allow for revocation of health plan elections of all affected participants in the event coverage is significantly curtailed or completely terminated in connection with a health plan, if the coverage is provided by an independent third party." Thus, petitioners reasonably assumed that a qualifying status change had occurred by virtue of the cessation of coverage by HAP. After informal efforts to resolve the matter were unsuccessful, on September 28, 1989 Cassano and McDonald formally requested by letter the right to discontinue their participation, without penalty, in the state program. Their requests were essentially denied by letters dated October 5, 1989 from the Division director. In the proposed agency action, the Division stated that it would be happy to comply with their requests but "since the premiums you pay for such coverage have been pretaxed for the five month period ending December 1, 1989, we will continue to deduct these premiums through October 1989 payroll pursuant to rule 22FB-2.005 F.A.C." /3 As a consequence, petitioners were involuntarily required to pay for coverage in BCBS during the months of October through December 1989 even though they were enrolled in other health insurance plans, and their employer (the office of state attorney) was forced to make its required contribution. Through testimony of the state benefits administrator, William R. Seaton, it was established that the Division interprets the term "cessation of (insurance) coverage" as the cessation of all health insurance coverage by the state, including BCBS, an event unlikely to ever occur. Indeed, the administrator acknowledged that such an event would not occur unless the state no longer functioned as a viable entity. Because the state offered petitioners the option of enrolling in BCBS, Seaton contended there was no cessation of insurance coverage, even if petitioners' former HMO in Polk County went out of business. Seaton also opined that petitioners' request was prohibited by IRS regulations and, if approved, would subject the Division to a possible fine if audited by IRS. However, he could not identify a regulation that prohibited approval of their request. Further, there is no evidence that the Division has received specific advice from the IRS on the subject or made inquiry as to whether or not petitioners' request is permissible under federal regulations. Petitioners construe the termination of coverage by their HMO to be a qualifying status change since they no longer could be covered by that HMO. Relying on the plain language in the rule and Division explanatory literature, they did not telephone the Division to ascertain whether they could discontinue state coverage since they had no reason to do so. Through a proffer of agency counsel at hearing, it was pointed out that the federal regulation that allegedly prohibits petitioners from obtaining relief is found on page 14,847-6 of the Standard Federal Tax Reports published by Commerce Clearing House and received in evidence as a part of respondent's composite exhibit 1. 4/ It reads as follows: (2) Coverage changes. If the coverage under a health plan provided by an independent, third-party provider is significantly curtailed or ceases during a period of coverage, a cafeteria plan may permit all affected participants to revoke their election of the health plan and, in lieu thereof, to receive on a prospective basis coverage under another health plan with similar coverage.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the requests of Terri K. Cassano and Edward M. McDonald to discontinue participation in the state health program be granted and that appropriate refunds be given to petitioners and their employer. DONE and ORDERED this 9 day of February, 1990 in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9 day of February, 1990.
Findings Of Fact At all times pertinent to the issues herein, the Petitioner, Department of Insurance, was the state agency responsible for the licensure of insurance agents and the regulation of the insurance business in Florida. Respondent, Richard M. Rinker, was licensed by the Petitioner as a health insurance agent engaged in the business of soliciting, selling and servicing health insurance policies for National States Insurance Company. Levon H. and Joan D. Sprague, husband and wife, moved to Florida from New York in August, 1991. Prior to moving to Florida, the Spragues operated a restaurant in New York and purchased health insurance from Blue Cross/Blue Shield for themselves and some of their employees. They also owned a H.I.P. policy which was similar to a health maintenance organization, but both that coverage and the Blue Cross/Blue Shield coverage were dropped when they moved to Florida. Because both Mr. and Mrs. Sprague were getting older, and because both had indications of possible future health problems based on experience and family history, upon the recommendation of Mrs. Sprague's father, who had purchased coverage from Respondent and was satisfied with the service received, they contacted Respondent and met with him about purchasing health insurance. The first meeting was on January 6, 1992. At that time, the Sprague's made Respondent aware of the fact that they had no health insurance coverage at that time and that they wanted to purchase coverage which would give them 100 percent reimbursement of all bills for medical care rendered. After some discussion, they agreed to accept less coverage for doctors' bills and other professional services, but were quite adamant in reiterating they wanted a policy that would cover 100 percent of the cost of hospitalization. They emphasized this because of Mr. Sprague's family's history of heart problems and they wanted to be sure the hospital expense would be covered in full. They felt the doctors could wait a while for payment of the full amount of their bills. During the course of his presentation, Respondent utilized a document called a National States Limited Medical-Surgical Hospital Confinement Plan which purportedly outlined the specifics of policy coverage. Under that portion entitled "Specific Benefits", the form read, "This policy pays percent of usual and customary expenses of the following type:". Under the blank space, in smaller type, were the numbers "10, 20, 30, 40". In the blank area, Respondent, by hand, inserted 80 percent. Above, and to the right of that insertion, he also placed the numbers, "100 percent" and "40 percent." Respondent explains this as being his attempt to provide answers to questions asked of him by Mrs. Sprague. He noted that his company does not offer a major medical policy such as desired by the Spragues, and that the only way he could provide coverage close to that which they wanted was to combine policies. Using a yellow highlighter, he also highlighted the words, "Doctor's charges", "doctor's office", "clinic", "hospital", "home", and "surgical or medical center." He also highlighted the terms "annual mammography screening" because Mrs. Sprague had specifically inquired about coverage of that procedure. On that visit, Respondent sold the Spragues two policies each. These were "MSH-1" and "MSH-2" policies which, the Spragues recall, Respondent indicated would provide the total coverage they wanted. Initially, the premium was to be $3,600.00 for the year, but when the Spragues indicated they could not afford that much, after calling his office, Respondent was able to offer them 6 months coverage for one half the price. They were satisfied with this and accepted the policies. Mr. Rinker received as his commission 45 percent of the premium paid in by the Spragues for the first year of the policy. When he departed the Spragues' home, he left with them the policy outline he utilized in his presentation, a large manila envelope containing information regarding his office hours and phone number, and a MSP form required by law. The coverage was not heavily used at first. When, during the first six month period, claims were initially denied because of the waiting period, the Spragues accepted that. After the expiration of the waiting period, all claims submitted for doctors' visits and mammography were covered to at least 80 percent of the amount expected by the Spragues. This was, however, because of the combined benefits paid by the two policies. Neither policy, alone, paid 100 percent percent of the claim. The Spragues were satisfied with this because it was not hospitalization. Later on, however, it became apparent that Mr. Sprague would have to enter the hospital for coronary bypass surgery, and he was admitted on an emergency basis. Before the surgery was done, however, the Spragues wanted to be sure the hospital bills would be paid in full, and they had their daughter- in-law, who had extensive experience in the insurance business prior to that time, to examine the policies. Her review of the policies generated some questions in her mind as to whether they provided 100 percent coverage of all hospital costs. To satisfy herself and her in-laws, utilizing the telephone number for Respondent on the materials left by him with the Spragues, she contacted him and asked, specifically, whether the policies he had sold to the Spragues, provided the 100 percent coverage they desired. His answer was somewhat evasive and non- responsive to her inquiry. He said, "Don't worry. She'll [Ms. Sprague] be able to sleep at night. She has a good policy." This did not satisfy either Ms. Sprague or her mother-in-law, and so she called Respondent again. During this second conversation he admitted that for at least a part of the cost, there was a 40 percent coinsurance provision. Respondent claims that during these calls, Ms. Sprague did not tell him that her father-in-law was to have surgery but only told him about tests. The tests were covered and the bills therefor paid by National States. By the time of these calls, however, Mr. Sprague was already in the hospital and facing the surgery the following morning. There was little that could be done. Mr. Sprague wanted to cancel the surgery but his wife would not allow this and the operation was accomplished. The hospital bills received by the Spragues amounted to approximately $140,000. Of this, the insurance company paid approximately $18,000. Ultimately, the Spragues and the hospital were able to reach an agreement for settlement of the obligation for $40,000. In order to satisfy this, Mr. Sprague was required to liquidate all his investments. He still owes the doctors a substantial sum but is making periodic payments to liquidate those obligations. The policies which Respondent sold to the Spragues were limited medical and surgical expense policies which pay only a limited percentage of incurred medical expenses over a limited period of time. Neither policy pays 100 percent of any medical or surgical expense. Respondent did not clearly communicate this fact to the Spragues. They suffered from the misconception that the policies sold to them by the Respondent paid 100 percent coverage for hospital expense, 80 percent for doctor fees, and 40 percent for medication. Petitioner presented no evidence that what Respondent did was below the standards accepted of sales agents within the health insurance industry. On the other hand, James Quinn, an insurance agent since 1975, who has taught life and health insurance and the legal responsibility of agents in the health insurance area with the approval of the Department since 1985, testified on behalf of Respondent. Mr. Quinn noted that there are three types of medical policies in use, including basic medical expense, major medical, and comprehensive major medical. The first of these, basic medical expense, permits liberal underwriting and pays policy limits. In Mr. Quinn's opinion, based on the age and preexisting conditions that the Sprague's have, major medical coverage, like they wanted, would cost between seven and ten thousand dollars annually, excluding deductibles. Health insurance coverage outlines, such as used by Respondent in his presentation to the Spragues are, according to Mr. Quinn, reasonably self-explanatory and are left with the insured either when the policy is applied for or is delivered. In the former case, the client is able to read the outline and cancel the policy before delivery, if he so desires. In the latter case, the insured has a set number of days to read the policy after delivery and cancel if he so desires. These outlines do not substitute for the policy, however, and generally, the agent prefers to deliver the policy personally so he can go over it again with the insured. According to Mr. Quinn, it is difficult to explain coverage to prospective insureds because of their unfamiliarity with the terminology and the available benefits. He concluded that the action of the Respondent, in issue here, whereby he used the coverage outline to explain the coverages to the Spragues, was consistent with proper agent conduct and was within industry standards. He also concluded that based on what Respondent had available to sell to the Spragues, he sold them the best package he could, at the time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be issued in this matter finding Respondent, Richard Michael Rinker, guilty of a violation of Sections 626.611(5), (7), (9), and (13); 626.621(2) and (6); 626.9521, and 626.9541(1)(a)(1), (1)(e)(1), and (1)(k)(1), Florida statutes, and suspending his license as a health insurance agent for nine months. RECOMMENDED this 13th day of October, 1994, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of October, 1994. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 94-0089 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: & 2. Accepted and incorporated herein. 3. & 4. Accepted and incorporated herein. & 6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. & 10. Accepted and incorporated herein. FOR THE RESPONDENT: Accepted and incorporated herein. Accepted as to finding Mr. Quinn is an expert regarding insurance standards and business practices, but rejected as insinuating those opinions are binding on the Hearing Officer. Rejected notwithstanding the opinions of Mr. Quinn. Accepted, as there is no evidence to the contrary. Rejected as contra to the weight of the evidence. First sentence rejected as contra to the evidence. Second sentence accepted as to the furnishing, but the quality of the information was less than clear. Balance accepted. & 8. Rejected. COPIES FURNISHED: Daniel T. Gross, Esquire Department of Insurance and Treasurer Division of Legal Services 612 Larson Building Tallahassee, Florida 32399-0333 Thomas F. Woods, Esquire Gatlin, Woods, Carlson & Cowdery 1709-D Mahan Drive Tallahassee, Florida 32308 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neill General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
Findings Of Fact Respondent is licensed in the state as a life and health insurance agent and as a health insurance agent. Respondent was employed by H.B. Barach and Associates during the month of April, 1991. Respondent and his employer began selling insurance policies for Farmers Health Trust ("Farmers") sometime in April, 1991. North American Life Insurance was the prospective underwriter for Farmers. Respondent was informed by Petitioner's West Palm Beach office that no complaints had ever been filed against Farmers but that no verification could be made as to whether Farmers was licensed to do business in the state. Respondent reviewed the policy and began selling policies to be issued by Farmers. Pursuant to the customary business practice in the community, Respondent included the paper work required to be licensed to sell policies for Farmers when Respondent submitted the first premiums. Farmers has never been licensed to do business in this state. North American Life Insurance never agreed to be the underwriter for Farmers. Respondent was never licensed to sell insurance policies to be issued by Farmers. On or about April 1 and 16, 1991, respectively, Respondent solicited and sold to Ms. Clarice Hunt and Mr. Milton Seagrave, separate health insurance policies to be issued by Farmers. Ms. Hunt and Mr. Seagrave each issued a check in the amount of $480 payable to Respondent's employer pursuant to Respondent's instructions. Respondent advised Ms. Hunt and Mr. Seagrave that their money would be refunded to them if Farmers declined to issue a policy. Ms. Hunt had difficulty obtaining health insurance due to a previous back injury for which she had filed a workers' compensation claim. Mr. Seagrave had been previously rejected by Mutual of Omaha. Ms. Hunt's check and Mr. Seagrave's check was deposited and negotiated by Respondent's employer. No policy was ever issued by Farmers to either Ms. Hunt or Mr. Seagrave, and neither was ever refunded their money. After April 16, 1991, Respondent was informed by his employer that Farmers did not have an underwriter. Respondent sold no other insurance policies to be issued by Farmers. Respondent made repeated, good faith attempts to obtain refunds for Ms. Hunt and Mr. Seagrave. Respondent was willing but financially unable to personally refund the moneys to Ms. Hunt and Mr. Seagrave. When it was apparent to Respondent that his employer would not refund the money to Ms. Hunt, Respondent assisted Ms. Hunt in filing a complaint with Petitioner. Respondent knowingly solicited insurance on behalf of Farmers without holding an agency appointment to do so. On June 5, 1992, a Consent Order was issued incorporating the terms of a Settlement Stipulation between Petitioner and Mr. Herbert Barach. Pursuant to the terms of the Settlement Stipulation, Mr. Barach agreed to reimburse Ms. Hunt and Mr. Seagrave for the premium paid by each in the amount of $480. Respondent has no other disciplinary history.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondent guilty of violating Sections 626.611(8) and (10), 626.561(1), 626.621(8), and 626.901, Florida Statutes, placing Respondent's licenses on probation for one year, and assessing a fine against Respondent in the amount of $500.00. RECOMMENDED this 14th day of January, 1993, in Tallahassee, Florida. DANIEL MANRY 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 14th day of January, 1993.
The Issue Whether the charges contained in the Administrative Complaint, which is the subject of Case Number 01-2295, reflect statements of agency policy which should have been adopted as rules pursuant to Chapter 120, Florida Statutes.
Findings Of Fact The Parties United is a foreign insurer, domiciled in the State of Wisconsin holding a certificate of authority from the Department to transact the business of insurance in this state. It is a wholly-owned subsidiary of American Medical Securities Group, Inc. The Department, through its agency head, the Treasurer and Insurance Commissioner, has regulatory jurisdiction over United in connection with certain matters set forth in the Complaint. The regulatory scheme for out-of-state health insurance companies Health insurance companies operating pursuant to in-state regulatory schemes are subject to oversight regulation of the corporate entity including financial solvency and market conduct. Rates are required to be filed and approved prior to being used in the state. The review process involves a review of the rates to determine if they are reasonable in relation to the benefits provided. In regard to this, the Department has rules which it has adopted pursuant to Chapter 120, Florida Statutes, which it uses to determine the standards and formulae for making that determination. Certain out-of-state health insurers, such as United, are not subject to such stringent regulation. No review of premium rates is conducted by the Department in the case of these insurers, but it would be incorrect to state that they are not subject to regulation by the Department at all. Approximately 40 percent of the health insurance market in Florida is written through out-of-state group arrangements that do not provide policyholders consumer protections afforded to policyholders holding in-state policies regulated by the Department. United is required by Florida law to provide certain types of coverage. United must also ensure that certificates of coverage provided to residents of Florida contain the following language: The benefits of the policy providing your coverage are governed primarily by the law of a state other than Florida. Indent Background At all times pertinent, American Medical Security, Inc. (AMS), was a Florida-licensed administrator authorized to market and administer United's out-of-state group health insurance plans in Florida. AMS, like United, is a wholly-owned subsidiary of American Medical Securities Group, Inc. In May 1993, United, through AMS, filed for approval with the Department pursuant to Section 627.5515(2), Florida Statutes (1993), as an out-of-state group health insurer who would provide policies to be offered through an Alabama entity called the Prescription For Good Health Trust, which was formed primarily for the purpose of providing group insurance. The Department approved this filing. On March 2, 1995, the Department participated by conference call in a Regulatory Task Force of the National Association of Insurance Commissioners. The mission of the task force was to attempt to address a number of problems facing the insurance market. One of the problems discussed was rate protection for consumers when faced with "tier rating" or "tier blocking." The two terms are synonymous and mean, as to group health insurance, reclassifying insureds subsequent to having been initially placed in a class. This practice will be discussed in more detail below. In 1996, United made a filing for the Prescription For Good Health Trust which proposed tier rating. Sometime during 1996, after the Department objected to the filing, United withdrew it. The Department had never seen such a filing previously. United is the only health insurer to assert before the Department that reclassification by movement between classes would be permissible under the Florida Insurance Code. Section 627.6515(1), Florida Statutes, provides that a group health insurance policy issued or delivered outside this state under which a resident of Florida is provided coverage, shall comply with the provisions of Part VII, of Chapter 627, Florida Statutes, in the same manner as health policies issued within the state. Part VII of Chapter 627, Florida Statutes, provides for a comprehensive regulatory scheme for group health insurance. Section 627.6515(2), Florida Statutes, however, sets forth a number of exemptions. Section 627.6515(2), Florida Statutes, provides an exemption for an insurer like United, which provides health insurance through an association formed for a purpose other than that of offering insurance, which provides the language referred to in paragraph 5, supra, on the face of the certificate, and which offers the bundle of coverages provided in Subsection (c). This exemption applied to the Prescription For Good Health Trust. The Department concedes that it has no authority to set premium rates for out-of-state insurers like United. In November 1996, United through AMS, filed with the Department, pursuant to Section 627.6515(2), Florida Statutes, a request for approval of an out-of-state group health insurance policy termed the "MedOne Choice" plan. This plan was to be offered through an Ohio association called the Taxpayers' Network, Inc. (TNI). The association was formed primarily for purposes other than providing insurance. In January, 1997, the filing was accepted by the Department as meeting the requirements of Section 627.6515(2), Florida Statutes. Chapter 96-223, Laws of Florida, created Section 627.6425, Florida Statutes, effective May 25, 1996. When created, the section only addressed the renewability of individual coverage. Chapter 97-179, Laws of Florida, substantially amended Section 627.6425, Florida Statutes, effective May 30, 1997. Subsequent to the amendment, the section addressed certificates of coverage offered to individuals in the state as part of a group policy. This statute, along with Sections 627.6571 and 627.6487, Florida Statutes, implemented the federal Health Insurance Portability and Accountability Act (HIPAA). The basic theory of the HIPAA legislation is that an insurance company cannot simply cancel a health insurance policy without providing other options. On or about September 25, 1998, United, through AMS, notified all Prescription For Good Health Trust certificate holders that the policy forms through which their coverage had been provided were being discontinued, effective as of each certificate holder's 1999 renewal date. Upon discontinuance of the Prescription For Good Health Trust Plans, the only United health insurance plans available in Florida were the MedOne Choice plans offered through TNI. Membership in TNI was available to anyone upon submitting an application form and paying the membership fee. Membership in TNI was a prerequisite to continuance of a persons' health insurance coverage under United's MedOne Choice plan. United guaranteed each certificate holder, upon joining TNI, that upon request, they would be issued coverage under the Classic Benefit Plan (one of the TNI MedOne Choice plans) without regard to their health status. However, there was no guarantee that premiums would not rise. Certificate holders were also advised that if they desired coverage under a MedOne Choice plan other than the guaranteed issue Classic Benefit plan, they could apply for any of the other TNI plans. Only if the applicant met the underwriting guidelines for the plan for which they applied, would they be issued coverage under another MedOne Choice plan. Between October 1998 and early January 1999, United responded to questions and concerns raised by the Department about the decision to discontinue the Prescription For Good Health Trust plan, and whether the plan of discontinuance was in compliance with Section 627.6425, Florida Statutes. Specifically, discussions were had concerning the movement of insureds from the class in which they were originally assigned to another class at the time of renewal. United entered an agreement with the Department on January 14, 1999, whereby United would offer to certificate holders an additional guaranteed issue TNI plan and would cap the rate for the guaranteed issue plans at no more than twice the premium then currently being paid for the discontinued Prescription For Good Health Trust plan. In accordance with this agreement, United notified certificate holders of the additional guaranteed issue option available to them. Later in 1999, United discontinued the trust plan in accordance with their agreement with the Department. During the process of discontinuance, no certificate holder requested conversion coverage under Section 627.6675, Florida Statutes. Section 627.6675, Florida Statutes, provides that an insured may assert his or her right to a "converted policy," which provides for certain health insurance continuation rights. The Department determined that United's rate for the conversion policy, pursuant to the agreement, was within 200 percent of the standard risk rate and that the notice of the conversion privilege was contained in the certificate of coverage issued to Florida residents. Thus, the Department concluded that United was in compliance with the agreement of January 14, 1999. On May 19, 1999, a Department letter informed a consumer that the discontinuance of her coverage by United did not mean she was being discriminated against because the policy had been terminated for all members. The letter further recited that the Department did not have the ability to regulate United because it was not domiciled in Florida and her insurance was being provided to a group, referring to TNI, that was not registered in Florida. On July 27, 1999, a Department letter informed a consumer that United had an obligation to offer a replacement policy but that United had the right to underwrite the policy and charge additional premium. This statement also referred to TNI. Section 627.6425(1), Florida Statutes, provides that "except as otherwise provided in this section, an insurer that provides individual health insurance coverage to an individual shall renew or continue in force such coverage at the option of the individual." For the purpose of the aforementioned Section, the term "individual health insurance" means health insurance coverage, as described in Section 627.6561(5)(a)2, Florida Statutes, offered to an individual in the state, "including certificates of coverage offered to individuals in the state as part of a group policy issued to an association outside this state. " As noted earlier, Section 627.6425, Florida Statutes, is one of the statutes enacted in Florida which implemented HIPAA. HIPAA provides for continuation of health insurance of an insureds health policy but does not limit the premiums which an insurer can charge for coverage. Although Section 627.6425, Florida Statutes, does not have the words "guaranteed renewable" contained within the statute, the gist of the statute is that if a person has a health policy, the person has the right to continued coverage. The Department contends that the statute also means that there can be no reclassification or movement between classes at the time of renewal. On March 30, 2000, the Department notified United that it believed the discontinuance of Prescription For Good Health Trust plan, in accordance with the January 1999 agreement, may have violated Section 627.6425, Florida Statutes. A Department publication dated January 4, 2001, entitled, "The Florida Health Insurance Market, Issues and Possible Market Reform Measures," noted that there are "an increasing number of carriers attempting to establish HIPAA eligible individuals as a separate rating class with premium charges ranging from 300 to 500 percent of standard rates. While the Department has found such a rating practice to be in violation of the Florida Insurance Code, many carriers have continued to protest this interpretation. Carriers contend the surcharge practice is both actuarially sound and interpreted as a HIPAA permissible practice by other states." In the 2001 legislative session, the Department sought additional regulatory authority concerning out-of-state group insurers, such as United, along with numerous other changes to the Florida Insurance Code which are unrelated to the issues addressed in this Order. The Florida Legislature failed to approve the requested legislation. Tier rating When a group health policy is underwritten, the members of the group may be divided into classes. The classes are based on risk, which is a function of the probability of claims and the cost of claims. Classes may be denominated, for example, as preferred, manual, and substandard. Very healthy persons are put in the preferred class and pay lower premiums relative to other classes. Average persons are put in the manual class because the likelihood and cost of claims may be average. Persons who for actuarial reasons are determined to have an above-average likelihood of claims and whose claims are apt to be costly, are placed in the substandard class. It, perhaps, goes without saying that the individuals in the substandard class must pay higher premiums for the same coverage as others in the group. If the group health policy is guaranteed renewable, certificate holders may continue their coverage. However, premiums within a class can be increased. It is general industry practice to increase the premiums by class when the time for renewal occurs, if the loss experience is such that there is a requirement to increase premiums. As earlier noted, the Department asserts that only by raising premiums for an entire class may premiums be raised. The Department insists that this requirement is part of the definition of "guaranteed renewable." It became United's practice to move insureds between classes. Therefore, for instance, if a person in the group who had been a member of the preferred class experienced the need for costly medical services, then that person might be moved to the manual or substandard class. This would inevitably result in that person paying an increased premium. On the other hand, a person in the substandard class, who was subsequently determined to be a good risk, might be moved to the preferred or manual class and experience reduced premiums as a result. When a substandard class becomes populated with persons who cause the payment of costly claims, premiums increase within that class. Premiums may increase to the point where persons egress the plan, which leaves the class with fewer and sicker members. Eventually, under such a plan, there will be no members, because the premiums will inflate to the point that the benefits, in relation to the amount of the premium, will render the plan uneconomical. This sequence of events is often referred to as the health insurance "death spiral." One of the asserted evils which the Department seeks to combat in the Complaint is the "death spiral." HIPAA eligibles In 1996, when HIPAA became law and Florida enacted laws to implement it, a practice sometimes referred to as "rating up" occurred among some carriers in the industry. As noted earlier, HIPAA and the state statutes implementing it, guarantee that an individual, who through no fault of his own, loses his or her group health insurance coverage has the opportunity to obtain substitute health insurance. A person in this category is referred to as HIPAA eligible. Companies providing insurance under these laws are cognizant of the fact that persons in good health generally decline to purchase this type of insurance but that persons who are in bad health, and who will, therefore, likely have costly claims, will purchase it if they can afford it. This results in a desire on the part of insurers, to charge higher premiums for HIPAA eligible persons than they might charge persons in a comparable, non-HIPAA plan. It is a permissible underwriting practice to take into consideration age, health, and a myriad of other actuarial considerations when developing premium rates for HIPAA eligibles. If an insurer factors in the knowledge that unhealthy persons are more likely than healthy persons to obtain a policy based on HIPAA and charge higher premiums as a result, then "rating up" occurs. The Department contends in its Complaint that "rating up" is discriminatory and, therefore, forbidden by the Unfair Insurance Trade Practices Act (UITPA), Section 626.951, et seq., Florida Statutes. United allegedly arrives at rates for HIPAA eligibles solely based on the fact that the individuals are HIPAA eligible which if true, would be "rating up." Immediately prior to April 30, 1998, the Department received a memorandum from the federal Health Care Financing Administration addressing three general problems with insurance practices regarding HIPAA eligibles. One of the three problems addressed in the memorandum was the practice of "rating up." In response, the Department issued Informational Memorandum 98-103M on April 30, 1998, addressing the three problems. The Department announced that it had concerns similar to that of the Health Care Financing Administration, and would address them in administrative rules implementing HIPAA and Chapter 97-179, Laws of Florida. However, no rules addressing these concerns have been adopted. Insurance carriers disagree with the Department as to whether "rating up" is unfairly discriminatory and therefore a violation of the UITPA. The Department is addressing these differences on a case-by-case basis in the course of market conduct examinations. The evidence adduced at the hearing did not elucidate exactly what "addressing these differences on a case-by-case basis in the course of market conduct examinations" means. Count Three in the Complaint represents the first time an administrative action has been brought against an insurer addressing this practice. The definition of guaranteed renewable Chapter 4-149, Florida Administrative Code, is entitled "Filing of Forms and Rates for Life and Health Insurance." Rule 4-149.006(4)(o)3, Florida Administrative Code, provides for a definition of "guaranteed renewable." However, Chapter 4-149, Florida Administrative Code, does not address out-of-state group health insurers, such as United, because the Department has no authority to require the filing of forms and rates in the case of out-of-state health insurers like United. A life and health insurance treatise written by Black and Skipper states that the definitions of the categories of renewable health insurance policies are not uniform among the states. It is the Department's position that Section 627.6425, Florida Statutes, applies to out-of-state trusts, such as United's Prescription For Good Health Trust, even though the word "trust" is not used in the statute. It is apparent that if there is no limit on the amount of premium a health insurer can charge at the time of renewal, a guarantee of renewal can be meaningless. This fact is ameliorated by rate-setting in the case of highly regulated health insurers such as domestic insurers. In the context of this case, it is not the renewability of a policy that is the gist of the problem. Rather, it is whether rates can be increased on persons through the movement of insureds from one class to another. The allegations of the Complaint In order to determine which statements are alleged to be unadopted rules, it is necessary to refer to Counts Two through Seven of the Complaint. These counts will be summarized, in seriatim. Count Two alleges that persons who continued their participation in TNI were unlawfully and unfairly discriminated against because some members were reclassified based on their health status present at that time (1999), rather than being retained in the class in which they resided when the policy was initially issued. The Petition alleges, inter alia, that this practice violated Section 626.9541(1)(g)2., Florida Statutes, which is a section in the UITPA. This statement is alleged in the Petition to be a statement of general applicability. Count Three alleges that all of those individuals formerly covered through the Prescription For Good Health Trust who were at the time of their discontinuance HIPAA eligible, were, arbitrarily and without regard to health status, assigned a premium rate of either three or five times the base rate for TNI as a whole. Count Three alleges that this assignment unfairly discriminated against the HIPAA eligible individuals who were of the same actuarially supportable class and essentially the same hazard. Count Three further alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes. This statement is alleged in the Petition to be a statement of general applicability. Count Four alleges that the enactment of Section 627.6425, Florida Statutes, in 1996, as amended in 1997, statutorily determined that the Prescription For Good Health Trust plan was "guaranteed renewable" as that term is used and understood in the insurance industry. It further alleged that the term "guaranteed renewable” means that once an insurer classifies an individual as a member of an actuarially supportable class for rate and premium applicable to the specified coverage, that individual may not thereafter be charged a premium which is different from any other member of the same class and cannot be moved to another class. The complaint states that United unlawfully moved insureds from one class to another. Count Four additionally alleged that when United discontinued the Prescription For Good Health Trust, the prerequisite for individuals to obtain renewed health insurance coverage was reclassification of some of those individuals to different actuarially supportable classes based on their health status then pertinent to those individuals. It was further alleged that higher premiums were charged to approximately 70 percent of those who renewed or continued, and that premium increases of 200 percent to 300 percent were experienced. Count Four asserted that Section 627.6425(3), Florida Statutes, prohibits such reclassification. Count Four also alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because such reclassification was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Five alleges that on the one year anniversary of renewal with TNI, United unlawfully reclassified additional individuals which resulted in a premium increases of up to 60 percent. Count Five alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because this action was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Six alleges that within the tier blocks described in Count Two, United unlawfully established numerous sub- classifications based on health related factors pertinent to each individual within that class. It is alleged in the Complaint that these sub-classifications resulted in individuals within the same class being charged a different premium than are other members of the class. Count Six alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes, because this action was discriminatory. This statement is alleged in the Petition to be a statement of general applicability. Count Seven alleges that United used a point debit system where an arithmetic number of points are assigned to a corresponding health hazard. The higher the cumulative debit score, the higher the premium. United will decline to insure at all if the cumulative debit score gets sufficiently high. Count Seven alleges that the assignment of points with no criteria for decision-making results in arbitrary and discriminatory point scores. Count Seven alleges, inter alia, that this violated Section 626.9541(1)(g)2., Florida Statutes. This statement is alleged in the Petition to be a statement of general applicability. In summary, the three statements alleged to be rules are: Practicing tier rating is discriminatory and violates the UITPA. Placing HIPAA-eligible individuals in a premium classification solely on the basis of their HIPAA eligible status is discriminatory and violates the UITPA. The term "guaranteed renewable" prohibits the classification of individuals in a health insurance group at a time other than at the inception of coverage.
The Issue The issue is whether Petitioner's request for an upgrade in her insurance coverage from individual to family status should be granted with a retro-active effective date of October 13, 1994; the date of birth of Respondent's son.
Findings Of Fact Stipulated Facts Petitioner was initially employed and covered under the State Employees' State Group Health Self Insurance Plan on July 1, 1993. Petitioner selected individual coverage and completed the appropriate forms indicating such coverage. Effective January 1, 1994, Petitioner's coverage for the 1994 Plan Year continued with individual coverage. Petitioner became pregnant in April, 1994, with an estimated due date of December 6, 1994. However, she went into premature labor on October 12, 1994, at 32 weeks gestation. Attempts to stop her labor were unsuccessful and she delivered a son, Gavon K. Brown, by caesarean delivery on October 13, 1994. On October 22, 1994, Petitioner completed the required forms to change from individual coverage to family coverage. Respondent changed Petitioner's coverage to family coverage effective December 1, 1994. Other Facts Petitioner did not inform the personnel office at her place of state employment, Columbia Correctional Facility in Lake City, Florida of her pregnancy. Petitioner saw a private physician in Gainesville, Florida. The physician was concerned about Petitioner's excessive weight and referred her to the Park Avenue Women's Center in Gainesville sometime near the end of April, 1994. The Park Avenue Women's Center, associated with the University of Florida College of Medicine, treats women with at risk pregnancies. Petitioner was seen there by Dr. Kenneth Kelner, also a professor of the Department of Obstetrics and Gynecology of the University of Florida College of Medicine. As a registered nurse, Petitioner was aware that she was at an increased general risk for difficulty with her pregnancy as a result of her excessive weight. On August 5, 1994, as a result of problems with getting a medical bill paid by the State Employees' State Group Health Self Insurance Plan, Petitioner called offices of the administrator of the Plan, Blue Cross and Blue Shield (BCBS) in Jacksonville, Florida. In the course of her telephone conversation, Petitioner maintains that she was told she could switch to family coverage in order to cover expenses of her unborn child as late as 30 days prior to the birth, estimated and expected to occur on December 6, 1994. Petitioner had previously received The Benefit Payment Schedule on July 13, 1994, which contained a warning to pregnant women policyholders that single or individual coverage did not include coverage for a child following its birth and that family coverage would need to be in effect prior to the month of the child's birth to afford coverage for the child. During the August 5, 1994 telephone conversation with the representative of BCBS in Jacksonville, Petitioner inquired regarding the amount of the monthly premium for family coverage. Petitioner was referred to the Division of State Employees' Insurance (DSEI) and provided with that telephone number in order to acquire coverage for her unborn child and get further detailed information. Petitioner did not call DSEI. On October 12, 1994, in the course of a routine check-up, it was determined that Petitioner's cervix was dilated. Subsequently, Petitioner gave birth to her son at 1 a.m. on October 13, 1994. On October 13, 1994, Petitioner called the personnel office at her place of employment with the Department of Corrections and informed that office of the birth of her son. Although Petitioner maintains that she was told at that time by someone in the personnel office that her son would immediately be afforded insurance coverage, Petitioner presented no direct admissible evidence in corroboration of this allegation and her testimony in this respect is not credited. On October 22, 1994, while sitting in the hospital lobby waiting to visit her son, who remained in hospital care following his premature birth, Petitioner signed the required papers and forms to change from individual to family coverage. The forms, bearing an effective date for coverage change of December 1, 1994, were returned to Petitioner's personnel office without an accompanying check or other payment for any employee premium co-payment which would have permitted a construction that an earlier coverage effective date should have been assigned the policy change. Based upon the timing of the election made by Petitioner, expenses attributable solely to medical services received by the child prior to December 1, 1994, were not covered by the State Employees' State Group Health Self Insurance Plan.
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 Susie Simone Brown's petition in this matter. DONE and ENTERED in Tallahassee, Florida, this 6th day of September, 1995. DON W. DAVIS, 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 6th day of September, 1995. APPENDIX In accordance with provisions of Section 120.59, Florida Statutes, the following rulings are made on the proposed findings of fact submitted on behalf of the parties. Respondent's Proposed Findings 1.-24. Adopted, not verbatim. 25.-28. Rejected, unnecessary. 29.-40. Adopted by reference. 41.-42. Rejected, unnecessary. Petitioner's Proposed Findings Petitioner's proposed findings consisted of one paragraph requesting that Respondent provide coverage for Petitioner's son effective on the date of his birth, October 13, 1994. The proposed finding is rejected as not supported by the greater weight of the evidence. COPIES FURNISHED: Augustus D. Aikens, Jr., Chief Department of Management Services Division of State Employees' Insurance 2002 Old St. Augustine Rd., B-12 Tallahassee, FL 32301-4876 Susie Simone Brown 2931 Bay Rd. Orange Park, FL 32065 William H. Linder Secretary Department of Management Services 2737 Centerview Dr., Ste. 307 Tallahassee, FL 32399-0950 Paul A. Rowell General Counsel Department of Management Services 2737 Centerview Dr., Ste. 312 Tallahassee, FL 32399-0950
Findings Of Fact At all times material hereto, Respondent was an Ordinary Life, including Disability Agent, and a Disability Agent licensed by the State of Florida. During this period, Respondent was licensed to sell life and health insurance policies for National States Insurance Company, American Guaranty Life Insurance Company, and Old Southern Life Insurance Company. Respondent was employed as an agent by Diversified Health Services, an insurance agency whose office is located in St. Petersburg, Florida. At no time material hereto was Respondent employed by any agency of the State of Florida. As indicated above, there remain viable in the Administrative Complaint ten counts charging Respondent with various violations of provisions of the Florida Insurance Code. For purposes of clarity, the findings of fact with regard to each of those remaining counts will be set forth separately. COUNT I On February 12, 1983, Respondent visited Lucille Shock at her home in Bradenton, Florida. Mrs. Shock had earlier purchased a Medicare supplement policy from National States Insurance Company through another agent, but had decided to cancel that policy. Respondent visited Mrs. Shock's home in response to her notice of cancellation in hopes of persuading her to reinstate coverage. In paragraph three of Count I of the Administrative Complaint, Respondent is charged with having told Mrs. Shock that he was ". . . authorized by the Florida Department of Insurance to investigate the Diversified Health Agency" when, in fact, he was not employed by any state agency. While it is true that Respondent was not at the time of his visit to Mrs. Shock employed by any state agency, the record in this cause is insufficient to establish the foregoing allegation of the Administrative Complaint. Respondent denies having made any c representation to Mrs. Shock that he was employed by the State of Florida. Further, Mrs. Shock's testimony in this regard is inconsistent and conflicting. In a February 21, 1983, letter to a representative of the Florida Department of Insurance, Mrs. Shock stated that at the time of his visit to her home the Respondent represented that he ". . . was an investigator for the Diversified Health Agency. . . . At final hearing, Mrs. Shock testified that Respondent told her that he was an investigator for the "insurance department," but also, on cross-examination, testified that Respondent told her that he was an investigator for Diversified Health. Despite these inconsistencies, it is clear from the record in this proceeding that before the end of Respondent's visit with Mrs. Shock on February 12, 1983, she knew that Respondent was an insurance agent for National States Insurance Company. Because of the inconsistencies in Mrs. Shock's testimony, it is specifically concluded that her testimony concerning Respondent's representation about his employment is unreliable. Other than Mrs. Shock's testimony, there is no other record basis to establish that Respondent represented himself to be an employee of the Department of Insurance as alleged in Count I. Respondent is also charged in paragraph five of Count I of the Administrative Complaint with having "falsely represented the financial condition of several insurance companies licensed to do business in Florida as part of your sales presentation to induce Mrs. Shock to buy insurance policies from you." The record in this cause establishes that Respondent and Mrs. Shock discussed several insurance companies, including Vulcan Insurance Company, Tara Life Insurance Company, and Bankers Life during their visit on February 12, 1983. Respondent reviewed with Mrs. Shock data contained in certain A. M. Best Company reports concerning these insurance companies.Respondent advised Mrs. Shock that Vulcan Insurance Company was "a rather shaky company" and that Tara Life Insurance Company had been experiencing "financial problems." There is, however, nothing of record in this proceeding to establish either that these companies are licensed in Florida or that the representations made by Respondent to Mrs. Shock concerning these insurance companies were false. Accordingly, the allegations contained in paragraph five of Count I have not been established. COUNT II On or about February 10, 1983, Respondent visited Koy B. Cook at his home in Port Orange, Florida. The purpose of Respondent's visit to Mr. Cook was to dissuade Mr. Cook from cancelling a policy with National States Insurance Company whichir. Cook had previously bought from another agent. After buying the National States policy initially, Mr. Cook had attempted to cancel a preexisting policy with Bankers Life Insurance Company, but had been advised by that company that the policy could not be cancelled. Mr. Cook determined that he could not afford duplicated coverage, so he contacted National States Insurance Company and advised them of his desire to cancel his National States policy. Be was advised, in writing, by National States, that his policy had been cancelled and that his premium had been returned to the insurance agency which had sold him the policy for refund. Sometime prior to January 12, 1983, Respondent contacted Mr. Cook by telephone, identified himself by name, and arranged an appointment to visit with Mr. Cook in his home. Mr. Cook understood from the conversation with Respondent that the purpose of their appointment was to return Mr. Cook's refund check from his cancelled National States policy. Immediately prior to Respondent's arrival at Mr. Cook's home, Mr. Cook had been asleep. When Respondent arrived at Mr. Cook's door, Mr. Cook was still in a "daze," having just awakened. This fact is of significance, because at various times in his testimony Mr. Cook testified that Respondent identified himself as . . . an adjuster with Bill Gunter out of Tallahassee, or . . . an adjuster for the insurance company out of Tallahassee." Mr. Cook also testified that Respondent showed him some identification which bore a photograph of Insurance Commissioner Bill Gunter. This photograph was apparently attached to a document, the contents of which were unknown to Mr. Cook. Respondent denies having represented that he was an employee of the Department of Insurance. During the course of their conversation, Mr. Cook advised Respondent that he preferred the coverage offered under the National States policy to that of the Bankers Life policy, but simply could not afford duplicate coverage. Respondent and Mr. Cook discussed the amount of unearned premium outstanding on the Bankers Life policy as compared to the cost of reinstating the National States policy. Mr. Cook had originally paid $630 for the issuance of the National States policy. Respondent returned to Mr. Cook a check in that amount during the course of their visit. Further, by offering to reinstate the National States policy for a $526 annual premium, Respondent demonstrated to Mr. Cook that he would save approximately the amount that remained in unearned premiums on the Bankers Life policy. Mr. Cook agreed to this proposal, Respondent completed an application form, and Mr. Cook gave Respondent a check for approximately $526 to reinstate the National States policy, with the understand- ing that the National States and Bankers Life policies would overlap for some period of time. Upon leaving Mr. Cook's house, Respondent gave Mr. Cook one of his business cards, which identi- fied Respondent as an agent of National States Insurance Company. In Count II of the Administrative Complaint, Respondent is charged with having told Mr. Cook that he was an "insurance adjuster working out of Tallahassee" and that he "worked for the Florida Department of Insurance. Respondent is further charged with having told Mr. Cook that he "had a refund check for a cancelled Bankers Life policy when in fact the] had no such check." The testimony of Mr. Cook and Respondent on the issues alleged in Count II are diametrically oooosed. Viewing the transaction between Mr. Cook and Respondent in its totality, it is concluded that Respondent's version of the transaction is the more credible. Mr. Cook's testimony concerning Respondent's representations about his employment status contained several contradictions and inconsistencies. In addition, it is clear that Mr. Cook expected to receive a refund check from National States Insurance Comoany, that Mr. Palesky contacted him by telephone prior to his February 10 visit to advise him that he had his refund check, and that Respondent conducted himself during the entire transaction in a manner which clearly identified him as an insurance salesman. Finally, Respondent furnished Mr. Cook with a business card during the course of their meeting which clearly showed Respondent to be an agent of National States Insurance Company. It is also clear that Mr. Cook was aware during this entire transaction that his Bankers Life policy had not been cancelled, and that as a result of his transaction with Respondent he would be carrying policies with National States and Bankers Life which afforded duclicate coverage, and that he was advised of this fact by Respondent. These facts are clearly inconsistent with Mr. Cook's testimony that Respondent advised him that he had a refund for a cancelled Bankers Life policy in his possession. COUNT IV On or about March 2, 1982, Respondent visited Marjorie Brubaker in her home in Bradenton, Florida. The purpose of Respondent's visit to Mrs. Brubaker was to dissuade her from cancelling an insurance policy with National States Insurance Company which she had previously purchased through another agent and had subsequently cancelled. Mrs. Brubaker testified that, upon arrival at her home, Respondent represented to her that he was an "investigator for the state" or a "state investigator," looking into her cancellation of her policy with National States Insurance Company. Respondent denies having made that representation. The record is clear, however, that shortly after entering Mrs. Brubaker's home, Respondent showed Mrs. Brubaker materials which clearly identified him as an agent of National States Insurance Company, and that Mrs. Brubaker clearly understood within minutes after his entering her home that he was, in fact, a salesman for National States Insurance Company. Under these circumstances, it is specifically found that Respondent's testimony concerning his employment status is more credible. If, as is clear from the record, Respondent intended to sell insurance to Mrs. Brubaker, there is little logic to his having represented himself as a state employee at the door to her home, and within minutes clearly divulging to her that that was indeed not the case. Petitioner also alleges in the Administrative Complaint that Respondent displayed a photograph of Insurance Commissioner Bill Gunter to Mrs. Brubaker to establish his position as an investigator for the state. Mrs. Brubaker, however, was unable to identify the person in the photograph displayed to her by Respondent, other than to assert that the person in the photograph was not the Respondent, but instead a clean-shaven person with light hair and fair, reddish complexion. Those facts, standing alone, are insufficient to establish that the person in the photograph was, in fact, Mr. Gunter. Respondent is alleged in paragraph twenty of Count IV of the Administrative Complaint of having ". . . . falsely represented the status of Medicare coverage in this state in order to induce Mrs. Brubaker to purchase' new insurance policies from you." The only evidence in the record on this issue is Mrs. Brubaker's testimony that Respondent told her that Blue Cross-Blue Shield would soon cease to be the Medicare carrier in Florida, and that there existed a substantial possibility that National States Insurance Company would be designated as the new Medicare carrier in Florida. The record in this cause is absolutely devoid of any evidence that that representation, even if it had been made, was false. Accordingly, Petitioner has failed to establish facts to support the allegations that Respondent has falsely represented the status of Medicare coverage in Florida. Finally, paragraph twenty-one of Count IV of the Administrative Complaint alleges that Respondent falsely told Mrs. Brubaker that her present insurer, Orange State Life Insurance Company, was cancelling its Medicare Supplement policies. . . . It is undisputed that Mrs. Brubaker, at the time she was visited by Respondent, had insurance coverage through Orange State Life Insurance Company. Mrs. Brubaker, it is clear from the record, was under the impression that her policy with Orange State Life Insurance Company was a Medicare supplement policy. Respondent testified that her policy was not a Medicare supplement policy, and, in fact, bore a statement across the top of the policy to the effect that the policy was not a Medicare supplement policy. Petitioner offered no evidence to rebut Respondent's testimony in this regard, and neither party sought to introduce the policy into evidence. The only evidence offered by Petitioner to support the allegation that Respondent's representation that Orange State Life Insurance Company was cancelling its Medicare supplement policv was the fact that Mrs. Brubaker had continued to pay premiums on her policy after the representation was made by Respondent without receiving notice of any cancellation. However, any inference that might be drawn from continued payment of premiums fails if, in fact, the policy held by Mrs. Brubaker was not a Medicare supplement policy. Neither party having offered competent evidence to establish that Mrs. Brubaker's Orange State Life Insurance Company policy was in fact a Medicare supplement policy, the allegations contained in paragraph twenty-one of Count IV of the Administrative Complaint are deemed to be without factual support. COUNT VI In Count VI f the Administrative Complaint, it is alleged that Respondent visited the home of Leila Mueller on October 18, 1979. It is further alleged that at that time Respondent told Mrs. Mueller that he was ". . . from Medicare and that [Respondent] had called at one of [Mrs. Mueller's] neighbor's homes to explain the changes in Medicare coverage." It is further alleged that Respondent ". . . misrepresented [his] actual employment in order to induce Mrs. Mueller to buy insurance policies. The record in this cause establishes that on or about October 18, 1979, Mrs. Mueller was visited in her home by two insurance salesmen whom she believed to be in some way affiliated with Medicare. Mrs. Mueller did not recall the names of either of the two men, was not asked to physically identify the Respondent, and could not recall which of the two men led her to believe that they were affiliated with "Medicare." Mrs. Mueller inquired about whether there existed any written material that she could review to decide whether to purchase insurance coverage. One of the men furnished her a brochure which had the name "Palesky" on it. There is no evidence of record in this proceeding to establish that Respondent was ever in the home of Mrs. Mueller or that he in any fashion ever represented to her or to anyone else that he was a representative of Medicare. The only testi- mony in this record that in any way connects Respondent with Mrs. Mueller was her testimony that she was given a brochure, which was not introduced into evidence, containing Respondent's name. This fact, standing alone, is insufficient to establish the factual allegations contained in Count VI of the Adminis- trative Complaint. COUNT XI On or about March 21, 1982, Respondent visited William F. and Winifred M. Bell in their home in Sarasota, Florida. The purpose of Respondent's visit to the Bells was to sell them a Medicare supplement policy. The Bells had previously purchased a policy from Union Fidelity Insurance Company. During the course of Respondent's visit with the Bells, Respondent advised them that Union Fidelity was "not a good company" and that the policy they had with Union Fidelity was "not a good policy." In addition, Respondent advised the Bells that if anything happened to Mr. Bell that Mrs. Bell would not be insured within two months after Mr. Bell's death. Paragraph fifty-five of Count XI of the Administrative Complaint alleges that Respondent told the Bells ". . . that their present insurance coverage was no good" and that if Mr. Bell died, Mrs. Bell would not be insured when in fact [Respondent] knew that both of those statements were false." The record in this cause contains no evidence that the representations set forth above made by Respondent to the Bells were false. The Bells' insurance policy was not received into evidence because Petitioner failed to respond fully to Respondent's Request for Production of Documents, and had further failed to fully exchange exhibits with Respondent, including a copy of the Bells' policy, as required by the Pre-hearing Order entered by the Hearing Officer approximately two months prior to the date set for final hearing in this cause. Accordingly, there are no facts to substantiate the allegations contained in Count XI of the Administrative Complaint. COUNT XII On or about February 4, 1983, Respondent visited Louise S. Donovan at her home in Daytona Beach, Florida. Respondent visited Mrs. Donovan in response to her cancellation of a previous policy purchased from National States Insurance Company from another agent on or about November 17, 1982. Soon thereafter, she cancelled that policy but on December 22, 1982, reinstated the policy after having available coverages explained to her by the other agent. Sometime thereafter she again can- called the National States policy. By letter dated January 17, 1983, from the home office of National States Insurance Company, Mrs. Donovan was advised that her refund-check had been returned to her agency for refund to her. On February 4, 1983, Respondent visited Mrs. Donovan in her home. Under direct examination, Mrs. Donovan testified as follows concerning that visit: Q So, you showed [the January 27, 1983] letter to Mr. Palesky; and, how did he respond to the letter? A He said sort of -- it's a little vague now after all these months -- that, oh, well, they didn't pay any attention to those things, or some- thing like that, and that the company would not refund any money on the policy. Q Be made the statement to you that the company was not going to refund? A The company would not -- now, I believe his interpretation of that, but it wasn t clear to me, was that there was a certain clause in that policy that I was not satisfied with and that he would not reissue the same policy under the same conditions. Well, I'm a lay person. I don't know all these fine points. And, I under- stood that he meant that the company would not refund any money to me at all... During the course of their discussions, Mrs. Donovan advised Respondent that she had cancel led the policy because she did not have nursing home coverage. Respondent explained to her that, under those circumstances she would have to either add nursing home coverage to the policy she had cancelled, which he was not sure that he could do for her because the so-called "RS 100 feature" was in the process of being discontinued, or she could take out a separate nursing home policy. Resnondent advised her that in order to keep the RS 100 feature she would have to reinstate the policy which she had cancelled, and take out a separate nursing home policy at a later date. This is the option which Respondent recommended to Mrs. Donovan, and the option that she ultimately chose. Accordingly, Mrs. Donovan opted to fill out an application reinstating the cancelled policy. She had originally paid $659 for the policy she took out on December 22, 982, but premium rates had increased since that time. The application filled out by Mrs. Donovan on February 4, 1983, reflects the premium rate increased to $691. Mrs. Donovan testified that she did not recall endorsing a refund check in the amount of $659 from National States Insurance Company and allowing Respondent to submit the endorsed check to National States along with the application dated February 4, 1983. Respondent testified that she did, in fact, endorse that check, which he forwarded to National States Insurance Company with the February 4, 1983, application. According to Respondent's testimony, which is uncontradicted, he submitted the $659 check to National States, notwithstanding the fact that the premium rate had increased to $691, with the understanding that the company had the option of either reinstating the policy for $659 or insisting upon the increased premium rate. Thereafter, Mrs. Donovan again decided to cancel the coverage she received as a result of the February 4, 1983, application submitted through Respondent. Mrs. Donovan signed a sworn statement on March 30, 1983, which provided, in part, as follows: Mr. Palesky has shown me the com- plaint filed against him by the Department of Insurance. I totally disagree with the accusa- tions in the complaint. My only problem with Mr. Pale sky was a misunderstanding concerning the fact that the RS 100 rider could not be refunded and reissued (as it was being discontinued) [sic] I thought he meant the entire policy could not be refunded. . . . Count XII of the Administrative Complaint alleges that Respondent ". . . refused to return [premium] money to Mrs. Donovan. . ., and that ". . . as a result of your refusal Mrs. Donovan felt pressured into applying for a new policy at a higher premium." Further, Count XII alleges that ". . . the new policy was written for a higher premium, that [Resoondent] signed a receipt acknowledging receipt of the higher premium, and that Mrs. Donovan gave [Respondent] no money during [the] visit [of] February 4, 1983." The evidence in this cause does not establish that Respondent refused to return premium money to Mrs. Donovan, nor does the evidence establish that Mrs. Donovan was pressured into applying for a new policy at a higher premium. Finally, the evidence in this cause establishes that Respondent attempted to have National States Insurance Company reinstate Mrs. Donovan's coverage at the premium originally paid in December of 1982, notwithstanding a premium increase that had occurred in the interim, a procedure which has not been shown by the record in this cause to be in any way improper. COUNT XV On or about January 24, 1983, Kenneth E. Fritz bought a National States Insurance Company policy from an agent other than Respondent. On or about February 12, 1983, Mr. Fritz cancelled that policy and asked for a full refund. Mr. Fritz subsequently received a letter dated March 11, 1983, from National States Insurance Company acknowledging his request for cancellation, and advising him that a full refund of his premium was being sent to the agency office which had sold the policy to him, with instructions to deliver the refund to him. On or about March 24, 1983, Respondent visited Mr. Fritz in his home in Largo, Florida, with Mr. Fritz' refund check. In paragraph eighty-eight of Count XV of the Administrative Complaint, Respondent is charged with having ". told Mr. Fritz that [Respondent was] an `investigator with Florida' and that [Respondent] pointed to an emblem on [Respondent's] jacket which gave [Mr. Fritz] the idea [Respondent was] employed by the State of Florida' when in fact [Respondent was] not and are not employed by the Florida Deoartment of Insurance in any capacity." It is further alleged that Resoondent made this representation to influence Mr. Fritz to buy insurance policies, and that Mr. Fritz did not realize that Respondent was not a government employee until reading a newspaper article on or about April 2, 1983, concerning the emergency suspension of Respondent's licensed. Respondent denies ever having represented to Mr. Fritz that he was an employee of the State of Florida. Indeed, Mr. Fritz testified on this issue only that: Mr. Palesky came here, and he had a thing on his coat, and he says[sic] you bought some policies from the -- and he mentioned the name of the company in St. Louis, and he says[sic] I'm here to check on that, and he rattles this thing and give [sic] me the impression that he was the--was from the State of Florida checking this. . . . As mentioned above, Respondent is charged with representing to Mr. Fritz that Respondent was an "investigator with Florida." Nothing contained in the record in this cause establishes that Respondent ever made such a representation to Mr. Fritz. Indeed, Mr. Fritz clearly testified that he could not remember exactly what Respondent said to him to give him the "impression" that he was an employee of the State of Florida. It is, however, clear from the record in this cause that the allegation of the Administrative Complaint that Mr. Fritz did not know that Respondent was not a state employee until reading of Respondent's emergency suspension in a newspaper article on or about April 2, 1983, is false. What is clear is that Respondent made a sales presentation to Mr. Fritz which resulted not only in Mr. Fritz' reinstating the policy he had earlier purchased from another agent and cancelled, but in fact buying another policy from Respondent at the same time. It is also clear that Respondent gave Mr. Fritz a business card during the course of their conversation which clearly identified Respondent as a salesman for National States Insurance Company. In short, this record does not establish that Respondent ever represented himself as an employee of the State of Florida during the course of his sales presentation to Mr. Fritz, nor did Mr. Fritz reinstate his cancelled policy and purchase a second policy based upon any such representation. COUNT XVII On April 15, 1981, Esther Huddleson purchased two Medicare supplement policies issued by National States Insurance Company from agent Michael Frye. On April 16, 1901, she requested a refund on the National States policies. On June 1, 1981, she was visited in her home by Respondent. Count XVII alleges that Respondent falsely advised Mrs. Huddleson that he was an "insurance investigator" and an "investigator for the State." It is also alleged that Respondent was not an "investigator" for National States Insurance Company and that his status with the company had always been that of a sales representative. Further, it is alleged that Respondent ". . . falsely told Mrs. Huddleson her statutory `free look' had expired and so persuaded her to sign a conservation notice." It is clear from the record in this proceeding that Respondent never advised Mrs. Huddleson that he was an "investigator for the State" or in any other manner employed by the State of Florida or the Department of Insurance. A sworn statement signed by Mrs. Huddleson upon which she was closely interrogated by counsel and the Bearing Officer during the course of this proceeding clearly reflects that Respondent identified himself either as "an investigator from National States Insurance Company" or "States Insurance Company." Fur ther, there is no evidence in the record in this cause from which it can be concluded that this representation by Respondent was in any way false. Finally, the only testimony in the record in this cause concerning Mrs. Huddleson's statutory "free look" period occurred on the direct examination of Mrs. Buddleson as follows: Q Did [Respondent] lead you to believe that your 30-day period had passed? A yes. At least, that was in my mind. Mrs. Buddleson's testimony in this regard is, at best, equivocal, and does not persuasively establish that Respondent did, in fact, advise her that her "free look" period had expired as alleged in the Administrative Complaint. There is, accordingly, insufficient evidence of record in this proceeding to establish the allegations against Respondent contained in Count XVII of the Administrative Complaint. The Bearing Officer feels constrained, further, to note with concern the failure of Petitioner's counsel to deal with both Mrs. Huddleson's sworn statement and direct testimony concerning the fact that Respondent never represented himself to her to be an employee of the State of Florida. In fact, to say that Petitioner's counsel failed to deal with those issues is most charitable. It would perhaps be more accurate to say that the proposed findings submitted by Petitioner's counsel on this particular issue have absolutely no factual basis in this record, despite citations to a portion of the transcript purportedly supporting the allegations of the Administrative Complaint. COUNT XXI In December of 1982 Mary Ellen Stapleton purchased a Medicare supplement policy from an agent, other than Respon- dent, representing National States Insurance Company. After reviewing the policy and deciding that she did not want to retain it, Mrs. Stapleton returned the policy on or about February 8, 1983, to National States Insurance Company, and requested a refund of her premium. Through a series of correspondence with National States Insurance Company, Mrs. Stapleton's cancellation request was acknowledged, and she was advised that her premium refund had been returned to the office of the agency selling the policy, with instructions to make immediate delivery to her. On or about March 8, 1983, Respondent telephoned Mrs. Stapleton at her home and advised her that he was an investigator for National States Insurance Company and that he was investigating a Mr. Buffer, who had sold Mrs. Stapleton her National States policy. Count XXI, in pertinent part, alleges: That on or about March 8, 1983, you, JOSEPH MICHAEL PALESKY, telephoned Mrs. Stapleton at her home in Lakeland, Florida, and told her you were "an investigator for National States and [that you were] investi- gating Mr. Buffer" when in fact you were not and are not an investigator for National States Insurance Company but were and are only a salesman. That at no time did you tell Mrs. Stapleton that you represented Diversified Health Services of St. Petersburg, Florida. That you, JOSEPH MICHAEL PALESKY, created the false impression of your employ- ment status in order to induce Mrs. Stapleton to keep the [cancelled] policy. . Respondent did not tell Mrs. Stapleton that he represented Diversified Health Services of St. Petersburg, Florida. It is undisputed that Respondent was, on March 8, 1983, a salesman for National States Insurance Company. Petitioner has not established by any evidence whatsoever that Respondent was not an investigator for National States Insurance Company with authority to investigate Mr. Buffer. Neither has it been shown in this record that Respondent was under any obligation to identify the insurance agency by whom he was employed after having first clearly identified himself as being affiliated with National States Insurance Company. It is, therefore, specifically concluded that there are no facts of record to establish the violations alleged in Count XXI of the Administrative Complaint. COUNT XXII On September 24, 1980, Respondent visited John Capers Smith and Lillian H. Smith in their home in Bradenton, Florida. Respondent went to the Smiths' home in response to the Smiths having sent a card to National States Insurance Company requesting information concerning Medicare supplement policies. Upon his arrival at the Smiths' home, Respondent was advised by Mrs. Smith initially that she did not wish to speak with him further on that day because her husband had recently undergone surgery and was still recuperating. However, uoon Respondent's insistence, he was admitted to the Smiths' home at approximately 1:00 p.m. Respondent remained in the Smiths' home until approximately 8:00 p.m. on September 24, 1980. When he first arrived in the Smiths' home, Respondent told the Smiths that he worked for the State of Florida and that Bill Gunter was his boss. In the course of discussing National States Insurance Company policies, Respondent advised the Smiths that this type of policy was something that Mr. Gunter was attempting to do to assist elderly Floridians. During the course of his conversation with the Smiths, Respondent displayed a photograph of Mr. Gunter to the Smiths as proof of his affiliation with the State of Florida, and offered to call Mr. Gunter on the telephone to verify his credentials. After a long period of discussion, the Smiths purchased an insurance policy from Respondent, and gave him a check for $694. The Smiths' purchase of the policy was due in large part to Respondent's representation that he was an employee of the State of Florida, and that Mr. Gunter approved of the policy. Respondent denies having made any representation to the Smiths concerning his employment by the State of Florida, but, under the circumstances here present, it is specifically concluded that the Smiths' versions of the transaction occurring on September 24, 1980, are more credible.
The Issue Whether Respondent committed the offenses set forth in the Administrative Complaint and, if so, the penalty that should be imposed.
Findings Of Fact At all times material hereto, Respondent was licensed by Petitioner as an insurance agent in the State of Florida licensed to sell health insurance. At all times material hereto, Respondent was not formally affiliated with Cleveland Insurance Agency. However, Cleveland Insurance Agency often referred clients to Respondent for health and Medicare supplement policies because Cleveland Insurance Agency did not handle those type policies. Prior to November 1987, Respondent, working in conjunction with Cleveland Insurance Company, sold to Irene Goldberg a health insurance policy issued through Provider's Fidelity Insurance Company (Provider's Fidelity). On November 29, 1987, Ms. Goldberg paid $1,504.56 as the annual renewal premium for this health insurance policy which extended her coverage through December 4, 1988. In March of 1988, Ms. Goldberg contacted Cleveland Insurance Agency and requested that someone review her health insurance coverage. Cleveland Insurance Agency referred Ms. Goldberg's request to Respondent. Respondent was familiar with the terms and conditions of the health insurance coverage Ms. Goldberg had in place and he knew that she had paid the premium for this policy through December 1988. Upon visiting with Irene Goldberg on or about March 10, 1988, Respondent presented Ms. Goldberg with a business card that intentionally misrepresented his status with Cleveland Insurance Company. Because Ms. Goldberg had placed most of her insurance needs through Cleveland Insurance Agency during the past few years, Respondent intentionally misled Ms. Goldberg into thinking that he was formally affiliated with Cleveland Insurance Agency. During that visit, Respondent recommended to Ms. Goldberg that she purchase a policy of insurance issued by First National Life Insurance Company (First National) to replace her Provider's Fidelity policy. Ms. Goldberg specifically discussed with Respondent a preexisting medical condition which required periodic medical treatment and the need for the treatment required by this condition to be covered by the new policy. Respondent assured Ms. Goldberg that the preexisting condition would be covered by the new policy. Respondent also told Ms. Goldberg that he would cancel the Provider's Fidelity policy and that he would secure on her behalf a pro rated refund of the premium she had paid to Provider's Fidelity. Based on Respondent's representations, Ms. Goldberg agreed to purchase the First National policy. On March 30, 1988, Ms. Goldberg gave to Respondent a check made payable to First National Life Insurance Company in the amount of $1,892.00, the amount Respondent had quoted as the full annual premium. A few days later, Respondent contacted Ms. Goldberg and advised her that there would be an additional premium in the amount of $1,360.00, which Ms. Goldberg paid on April 4, 1988. This additional premium was, according to Respondent, for skilled nursing care coverage which First National had added as a mandatory feature of the policy Ms. Goldberg had purchased. The skilled nursing care coverage was, in fact, a separate policy which was not a mandatory feature of the policy Ms. Goldberg thought she was purchasing from First National. Respondent misled Ms. Goldberg as to the terms of the policies he had sold her and as to the number of policies he had sold her. Respondent represented that the premiums he had collected on behalf of First National were in payment of a single health insurance policy. Respondent had sold Ms. Goldberg four separate policies, and he collected a commission for each of the policies. When Ms. Goldberg received her insurance documents from First National, she learned for the first time that Respondent had sold her four separate policies of insurance, including a cancer policy that she and Respondent had never discussed. In addition to the health and cancer policies, Respondent sold Ms. Goldberg a home convalescent care policy and a separate skilled nursing care policy. Respondent had sold Ms. Goldberg policies of insurance that Ms. Goldberg had not requested and that she did not know she was buying. Upon reading the health policy, Ms. Goldberg discovered that her new First National Life policy excluded her preexisting condition. Ms. Goldberg contacted Respondent who told her that he had not cancelled the Provider's Fidelity policy as he had agreed to do and that he had not tried to get the pro rated refund of the Provider's Fidelity premium. Respondent told her that any claim she might have for the preexisting condition should be filed under the Provider's Fidelity policy. Ms. Goldberg then complained to First National which, after an investigation, refunded to Ms. Goldberg the premiums she had paid for the three policies. Respondent had received a commission on the policies of insurance he had sold to Ms. Goldberg. As of the time of the hearing, Respondent had not reimbursed First National for the commission he had received based on the premiums that were subsequently refunded to Ms. Goldberg. In February 1988, Respondent met with Helen Krafft to discuss her health insurance needs. During the course of the meeting, Respondent presented to Ms. Krafft a business card which intentionally misrepresented his affiliation with Cleveland Insurance Agency. This business card misled Ms. Krafft into believing that Respondent was formally affiliated with Cleveland Insurance Agency. On February 18, 1988, Respondent sold to Ms. Krafft a health insurance policy through First National and a health insurance policy issued through American Sun Life, at which time he collected a premiums in the total amount of $519.80 for six months of coverage from each of the two policies. In July 1988, Respondent visited with Ms. Krafft at her place of work and told her that she should pay her renewal premiums for the health insurance policies on or before August 1, 1988, to avoid a premium increases. Respondent knew, or should have known, that there were no premium increases scheduled for those policies and that there were no discounts for early payment of the premiums The renewal premiums Respondent quoted Ms. Krafft for the two policies totaled $485.40. At Respondent's instructions Ms. Krafft delivered to Respondent her signed check dated July 18, 1988, in the amount of $485.40 with the payee's name left blank. Respondent accepted these trust funds from Ms. Krafft in a fiduciary capacity. Instead of using these funds to pay the premiums as he had agreed to do, Respondent filled his name in on Ms. Krafft's check and cashed it. Ms. Krafft learned that Respondent had not used the funds she had given him to renew her two policies when she started getting late payment notices from the two insurance companies with accompanying threats of cancellation if the premiums were not paid. In late September 1988, Respondent paid to Ms. Krafft the sum of $485.40 in cash. In June of 1988, Steven R. and Marilyn Hill applied, through Respondent, for a health policy with First National. The Hills paid the initial premium of $304.37 by check made payable to First National on June 26, 1988. Because of underwriting considerations, First National informed Respondent that the Hills would have to pay a higher premium to obtain the insurance they wanted. The Hills were not willing to pay the higher premium and requested a refund of the amount they had paid. First National made the refund check payable to Steven Hill and mailed the check to Respondent. There was no competent, substantial evidence as to what happened to the check other than First National Life stopped payment on the check and it never cleared banking channels. A second refund check was later delivered to Steven Hill. First National contended at the hearing that Respondent had accrued a debit balance in the amount of $2,692.45 as a result of his dealings as an agent of the company. Respondent contended that he is entitled to certain offsets against the amount First National claims it is owed based on commissions he contends that he had earned but had not been paid. First National had not, prior to the hearing, submitted to Respondent any type of accounting of sums due, nor had it explicitly demanded any specific sum from Respondent. Instead, First National had made a blanket demand that Respondent return all materials belonging to First National and advised that future commission checks would be held in escrow. From the evidence presented it could not be determined that Respondent was indebted to First National.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a final order which finds that Respondent committed the multiple violations of the Florida Insurance Code as set forth in the Conclusions of Law portion of this Recommended Order and which further revokes all licenses issued by the Department of Insurance and Treasurer to Respondent, John Richard Klee. DONE AND ENTERED this 30th day of November, 1989, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 Filed with the Clerk of the Division Of Administrative Hearings this 30th day of November, 1989. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 89-3269 The following rulings are made on the proposed findings of fact submitted by Petitioner: The proposed findings of fact in paragraph 1 are adopted in material part by paragraph 1 of the Recommended Order. The proposed findings of fact in paragraph 2 are adopted in material part by paragraph 1 of the Recommended Order. The proposed findings of fact in paragraph 3 are adopted in material part by paragraph 12 of the Recommended Order. The proposed findings of fact in paragraph 3 are rejected in part as being a conclusion of law. The proposed findings of fact in paragraph 4 are adopted in material part by paragraph 5 of the Recommended Order. The proposed findings of fact in paragraph 5 are adopted in material part by paragraph 3 of the Recommended Order. The proposed findings of fact in paragraph 6 are adopted in material part by paragraph 4 of the Recommended Order. The proposed findings of fact in paragraph 7 are rejected as being unsubstantiated by the evidence. The proposed findings of fact in paragraph 8 are adopted in material part by paragraph 5 of the Recommended Order. The proposed findings of fact in paragraph 9 are adopted in material part by paragraphs 5 and 6 of the Recommended Order. 10 are adopted in material part 11 are adopted in material part 12 are adopted in material part 13 are adopted in material part 14 are adopted in material part 15 are adopted in material part 16 are adopted in material part 17 are adopted in material part 18 are adopted in material part 19 are adopted in material part 20 are adopted in material part 21 are adopted in material part 22 are adopted in material part 23 are adopted in material part 24 are adopted in material part 25 are rejected as being The proposed findings of fact in paragraph by paragraphs 5 and 6 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 5 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 6 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 6 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 6 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 6 of the Recommended Order. The proposed findings of fact in paragraph by paragraphs 5 and 7 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 10 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 11 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 11 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 12 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 2 and 10 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 13 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 13 of the Recommended Order. The proposed findings of fact in paragraph by paragraph 13 of the Recommended Order. The proposed findings of fact in paragraph unsubstantiated by the evidence. The proposed findings of fact in paragraph 26 are rejected as being unsubstantiated by the evidence. The proposed findings of fact in paragraph 27 are rejected as being unsubstantiated by the evidence. The proposed findings of fact in paragraph 28 are rejected as being unsubstantiated by the evidence. The proposed findings of fact in paragraph 29 are adopted in material part by paragraph 14 of the Recommended Order. The proposed findings of fact in paragraph 30 are adopted in material part by paragraph 14 of the Recommended Order. COPIES FURNISHED: Roy H. Schmidt, Esquire Office of the Treasurer Department of Insurance 412 Larson Building Tallahassee Florida 32399-0300 Greg Ross, Esquire 400 Southeast Eighth Street Fort Lauderdale, Florida 33316 Don Dowdell General Counsel The Capitol Plaza Level Tallahassee, Florida 32399-0300 Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue The issues are whether Petitioner, Daniel O. Cobb, is entitled to payment of claims for surgery performed on Ms. Cobb, Susan Catherine Cobb, his spouse, on November 11, 1985, and whether Respondent, the State, is estopped from denying coverage. A prehearing stipulation was filed limiting the facts, issues, exhibits and witnesses. The stipulated facts were incorporated into the Recommended Order and are in the Final Order as well. Petitioner presented the testimony of himself and his spouse. Petitioner's exhibits 2 through 6 were accepted into evidence. Exhibits 3 and 4 constituted hearsay. The Department presented the testimony of Hazel Rosser and Joseph F. Wellman. Four exhibits by the Department were offered into evidence and were accepted. Neither party ordered a transcript. Only the Department filed a proposed recommended order and findings of fact. The Findings of Fact and the Conclusions of Law in the Recommended Order are hereby adopted, except in Findings of Fact Nos. 16, 17, and 18, Mrs. Scott is changed to Mrs. Cobb and in Findings of Fact No. 18, Mr. Scott is changed to Mr. Cobb.
Findings Of Fact Daniel O. Cobb was an employee of the Florida Department of Transportation during 1985. Mr. Cobb and his spouse, Susan Cobb, had family coverage under the State of Florida Employees Group Health Self Insurance Plan (hereinafter referred to as the "State Plan"), until November 1, 1985. The State Plan is administered by Blue Cross/Blue Shield. Pursuant to the agreement between the State of Florida and Blue Cross/Blue Shield benefits which are payable under the State Plan are governed by a "Benefit Document." Each year, State employees are given an opportunity change the form of health insurance coverage they wish to have. During this "open enrollment period" an employee covered by the State Plan can elect to participate in a Health Maintenance Organization and an employee covered by a Health Maintenance Organization can elect to participate in the State Plan. During 1985, there was an open enrollment period between September 9, 1985, and September 20, 1985. During the 1985 open enrollment period State employees, including Mr. Cobb, were provided a Notice to Employees in which they were advised to carefully review information contained in a Benefit Comparison Brochure, a Rate Comparison Chart and a Health Care Plan Selection Form. These documents were provided to all State employees. The Selection Form instructed employees to "Please read the employee notice about HMO service areas and effective date of coverage before completing this section." State employees were also advised that any change in coverage would be effective November 1, 1985. On September 19, 1985, Mr. Cobb signed a State of Florida Employes Group Health Self Insurance Plan, Change of Information Form. Pursuant to this Change of Information Form, Mr. Cobb elected to terminate his health insurance coverage with the State Plan. On the Change of Information Form it was indicated that Mr. Cobb's election to terminate his coverage under the State Plan was to be effective November 1, 1985. Therefore, Mr. Cobb was informed and should have known that he was no longer eligible for medical cost payment for himself or his family pursuant to the State Plan after October 31, 1985. Mr. Cobb also signed a Member Enrollment (Group) and Physician Selection Form on September 19, 1985. Pursuant to this Form, Mr. Cobb enrolled himself, his Spouse and their children, in Health Options, Inc., a health maintenance organization. Mr. Cobb's participation in Health Options, Inc., began November 1, 1985. On September 19, 1985, Mr. Cobb was provided a list of Health Options, Inc., approved physicians which were available for use by Mr. Cobb and his family. Mr. Cobb designated Gerald A. Giurato, M.D., as his primary care physician on the Physician Enrollment Form which he signed on September 19, 1985. On October 28, 1985, Mr. Cobb was mailed a copy of the Health Options Member Handbook which, among other things, describes the grievance procedure to be followed when medical expenses were not paid by Health Options Inc., and the manner in which physicians were to be used in order to be entitled to payment, of their charges. The Handbook informed Mr. Cobb that all care had to be arranged through a primary care physician and that only services provided or approved by the primary care physician were covered. The Handbook also indicated that treatment by physicians who were not approved by the primary care physician would be the responsibility of the patient. During 1985 Mrs. Cobb was under the care of Alexander Rosin, M.D. Dr. Rosin performed surgery for the removal of a cyst on Mrs. Cobb, on November 11, 1985. Dr. Rosin was not a physician approved by Health Options, Inc., or Mr. Cobb's primary care physician. Nor was the surgery approved. Claims attributable to the November 11, 1985, surgery were submitted to the State Plan. Claims, for the charges of Dr. Rosin, Scott Blonder, M.D., and a Pathologist were submitted. The expenses for the November 11, 1985, surgery were incurred after coverage of Mr. and Mrs. Cobb under the State Plan ended. The type of surgery performed on Mrs. Cobb was also not authorized by the Benefit Document. No claims were submitted to Health Options, Inc., for medical expenses incurred for Mrs. Cobb's operation on November 11, 1985. None of the medical expense attributable to Mrs. Cobb's November 11, 1985, surgery were incurred with physicians or facilities approved by Health Options, Inc. By letter dated August 27, 1986, the Department denied the claims submitted to the State Plan attributable to Mrs. Cobb's November 11, 1985, surgery. Mr. Cobb filed a request for an administrative hearing to contest the Department's proposed denial.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is RECOMMEDED that a final order be issued by the Department denying payment of claimed expenses attributable to Mrs. Cobb's surgery of November 11, 1985. DONE and ENTERED this 15th day of July, 1988, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of July, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 864109 The Department 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. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number, of Acceptance or Reason for Rejection 1 18. The letter denying payment was dated August 27, 1986, and not September 4, 1986. See DOA exhibit 1. 2 7. 3 Hereby accepted. 4 7. 5 3. 6 4 and 5. 7-9 6. 10-12 11. Summary of testimony and irrelevant. Summary of testimony argument. Concerning the weight to be given evidence and cumulative. 15 7. 16 Hearsay. 17-18 Conclusion of law. 19-20 16. 21 Not supported by the weight of the evidence. 22 15. COPIES FURNISHED: O. C. Beakes, Esquire Lindner Smith, Jr., Esquire 836 Riverside Avenue Jacksonville, Florida 32205 Andrea R. Bateman, Esquire Department of Administration Room 438, Carlton Building Tallahassee, Florida 32399-1550 Adis Vila, Secretary 435 Carlton Building Tallahassee, Florida 32399-1550 Augustus D. Aikens, Jr. General Counsel 435 Carlton Building Tallahassee, Florida 32399-1550 =================================================================
The Issue The issue in this case is whether Respondent properly rejected Petitioner's insurance Policy Form No. SL-94.
Findings Of Fact Petitioner submitted Policy Form No. SL-94 (hereinafter referred to as "the Policy") to Respondent for approval as a stop loss policy pursuant to Section 627.410, Florida Statutes, on or about August 15, 1995. The Policy, standing alone, meets all applicable requirements for approval as a stop loss policy under Section 627.410, Florida Statutes. The Policy obligates Petitioner to pay benefits to an employer, or the trust established by or for the employer, which employer is responsible for the payment of benefits to its employees or their dependents under a self-funded employee welfare benefit plan (hereinafter referred to as "the Plan") qualified under the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Policy purports to provide insurance only to the employer. On its face, the Policy does not assume any of the employer's obligations under the Plan to provide insurance directly to the employer's employees. Under the Policy, Petitioner is obligated to reimburse the employer only after the employer pays a limited amount of benefits under the Plan to any person who is covered under the Plan, i.e. employees or their dependents. The amount of Plan benefits that an employer must pay before Petitioner is obligated to begin reimbursement is determined by specific and aggregate attachment points or deductibles as defined in the Policy's Schedule of Insurance. The specific attachment point is the Plan benefit amount which is wholly retained by the employer for all claims incurred by each covered person during each contract year. The Plan benefit amount does not include deductibles, coinsurance amounts or any other expense or claims which are not reimbursable under the terms of the Plan nor does it include expenses which are reimbursable from any other source. The aggregate attachment point or deductible is the Plan benefit amount which is wholly retained by the employer for all covered persons during a contract year. The Policy's Schedule of Insurance does not specify what the specific and aggregate attachment points will be. However, record evidence indicates that Petitioner intends to market the policy with a specific attachment point as low as $500. Therefore, if the Plan has a deductible of $250 and the Policy has a specific attachment point of $500, the employee would pay the first $250 of eligible expenses, the employer would pay the next $500 of eligible expenses, and Petitioner would reimburse the employer for 100 percent of any excess eligible expenses, for each covered person during a contract year. The Policy's eligible expenses are the covered charges or expenses which are incurred by a covered person while covered under the Plan in the course of treatment for an injury or illness and paid under the Plan subject to the terms, conditions and limitations of the Plan document. In other words, the eligible expenses under the Policy will mirror the eligible expenses of the Plan. Record evidence indicates that Petitioner intends to market the Policy to employers with less than fifty (50) employees. The Policy does not contain provisions related to the following protections: guaranteed availability for any small group employer regardless of whether its employees are sick or have preexisting conditions; guaranteed renewability unless the policyholder fails to pay the premium or commits fraud; limitations on exclusions for pre- existing conditions; portability which allows employees to move from one employer to another regard- less of preexisting conditions; community rated premiums; and, periods of open enrollment. ERISA self-funded benefit plans are not regulated by the state regardless of their terms and conditions. They are not required to include the above referenced protections. If the Plan excludes specific health risks or preexisting conditions such as AIDS, emphysema, heart disease, or cancer, neither the employer nor the Petitioner would be obligated to pay benefits for those risks. Additionally, the Plan is subject to whatever deductible limits the small employer wishes to set. Respondent disapproved the Policy by letter dated August 21, 1995. Respondent correctly rejected the Policy as being inappropriate for the small group health insurance market. The Policy is inappropriate because Petitioner intends to market it to self-insured small group employers with attachment points so low ($500) that it becomes a de facto health insurance policy instead of a stop loss policy. Respondent would not approve a stop loss policy for a small group employer's Plan with specific attachment points at $5,000 or less. Respondent would approve a stop loss policy for a small group employer's Plan with specific attachment points as low as $9,000 or $10,000, regardless of the terms and conditions of that Plan. In that instance, the employer assumes significant risk of loss as a self-funded insurer and the stop loss policy operates to limit that loss. However, an ERISA benefit plan combined with a stop loss policy having specific attachment points as low as $500, such as the one at issue here, substantially limits the self-insured employer's risk of loss to a nominal amount and substitutes Petitioner as a small group health insurer with none of the protections required by Section 627.6699, Florida Statutes.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore recommended that Respondent enter a Final Order disapproving Petitioner's Policy Form No. SL-94, for use in Florida's small group health insurance market. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 15th day of March, 1996. SUZANNE F. HOOD, Hearing Officer 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 15th day of March, 1996. APPENDIX The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Petitioner's Proposed Findings of Fact Accepted in Findings of Fact 3. Accepted in substance as restated in Findings of Fact 4. Accepted in substance as restated in Findings of Fact 4. Accepted in substance as restated in Findings of Fact 4. Accepted in Findings of Fact 5-7. Accepted as restated in Findings of Fact 4. Not a finding of fact. More like a conclusion of law. Reject the first sentence as contrary to more persuasive evidence. Second sentence accepted as restated in Conclusions of Law 19-21 and 26-27. Rejected. It is a question of fact whether the Policy is a stop loss policy or a health insurance policy regardless of its denomination. Specifically reject Petitioner's finding that the Policy does not violate public policy as expressed in Section 627.6699, Florida Statutes. See Conclusions of Law 24-27. Accepted in Conclusion of Law 23. Accepted in part as restated in Findings of Fact 15-16. See also Conclusions of Law 22, 24-27. Not a finding of fact. More like a conclusion of law and legal argument which is not persuasive as applied to the facts of this case. Not a finding of fact. More like a conclusion of law. Not a finding of fact. More like a conclusion of law. First sentence rejected as contrary to more persuasive evidence. Next five sentences are not findings of fact. Specifically reject any implication that the Policy is a stop loss policy. See Findings of Fact 15-16 and Conclusions of Law 24-27. First two sentences are not findings of fact. Reject any implication that there is no public policy "relating to the issuance of a stop loss policy in the State of Florida to a Florida employer employing 50 or fewer employees." Accept that the state does not regulate employer self-funded medical benefit programs. See Finding of Fact 12. Accept the last sentence as restated in Finding of Fact 15 and Conclusion of Law 24. Rejected. Petitioner's Exhibit 3 shows the legislature was aware that "the bill could increase the likelihood that an employer would choose to self- insure and due to ERISA would be able to avoid state regulation of the insurance product provided to employees." However, the referenced exhibit is rejected as evidence of legislative intent to exclude "related insurance products" from "the statute's regulatory or public policy purview." Rejected for the reasons set forth in the ruling above. Rejected. See Conclusions of Law 24. Substance accepted as restated in Findings of Facts 12 and Conclusions of Law 24. Substance accepted as restated in Findings of Facts 16. First sentence not a finding of fact. Second sentence rejected as contrary to more persuasive evidence; See Findings of Fact 15-16 and Conclusions of Law 24-27. Accept in part as restated in Findings of Fact 15-16 and Conclusions of Law 24-27. A recitation of the testimony is not a finding of fact; substance accepted as restated in Finding of Fact 16. Accept that the state has no specific statutes or rules regulating attachment points in stop loss insurance policies. See Conclusions of Law 19. However, Section 627.6699(2), Florida Statutes, is applicable here because the Policy is a de facto health insurance policy. See Findings of Fact 15-16 and Conclusions of Law 24-27. First sentence rejected as contrary to more persuasive evidence. See Findings of Fact 15-16 and Conclusions of Law 19. First sentence rejected; More like a conclusion of law or legal argument the substance of which is not persuasive. Second sentence irrelevant. Irrelevant. Accepted but subordinate to Findings of Fact 15-16. NAIC's stop loss model act supports the proposition that the Policy is not a stop loss insurance policy but rather a health insurance policy. Accepted in part as restated in Conclusions of Law 19. Accepted but subordinate to Findings of Fact 15-16. Accepted but subordinate to Findings of Fact 15-16. Irrelevant. Rejected as contrary to more persuasive evidence. Respondent's Proposed Findings of Fact Accepted in Findings of Fact 1. Accepted in Findings of Fact 15. Not a finding of fact. Not a finding of fact. More like a conclusion of law. Accepted in Findings of Fact 1. Accepted as restated in Findings of Fact 2. Accepted as restated in Findings of Fact 11, 15-16. Accepted as restated in Findings of Fact 10, 15-16, and Conclusions of Law 22, 24-27. Accepted as restated in Findings of Fact 4. Accepted as restated in Findings of Fact 4-8 and 10. Accepted in Findings of Fact 10 and Conclusions of Law 22. Accept that the Policy provides for a specific attachment point of not less than $500; See Findings of Fact 8, 15 and 16. There is no evidence that the Policy's specific attachment point can be no more than $1,000. Accepted as restated in Findings of Fact 5-8. Accepted as restated in Findings of Fact 8. Accepted as restated in Conclusions of Law 22. Accepted as restated in Findings of Fact 9, 11-13 and Conclusions of Law 22, 24-27. Accepted as restated in Findings of Fact 9-13. Accepted as restated in Findings of Fact 11. Accepted in part in Findings of Fact 14. Reject that Petitioner could totally avoid the coverage responsibilities otherwise imposed by Section 627.6699, Florida Statutes, merely by setting the Policy's attachment points at the same level as the deductible in the Plan. If the Plan's deductible was $500 and the Policy's specific attachment point was $500, the employee would pay the first $500 of expenses, the employer would be responsible for the next $500 of expenses, and Petitioner would reimburse the employer for 100 percent of any excess eligible expenses for that employee during the contract year. However, Petitioner can totally avoid paying for state mandated protections because the Policy will mirror any prohibited exclusions or provisions in the Plan. Substance accepted in part; See Findings of Fact 15-16. There is no evidence that the Policy's specific attachment point can be as high as $2,000. Accepted as restated in Findings of Fact 16; See Conclusions of Law 24-27. COPIES FURNISHED: Michael H. Davidson, Esquire Department of Insurance Division of Legal Services 200 E. Gaines Street Tallahassee, Florida 32399-0333 Frank J. Santry, Esquire Granger, Santry, et al. Post Office Box 14129 Tallahassee, Florida 32308 Bill Nelson, State Treasurer Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Dan Sumner, Esquire Department of Insurance and Treasurer The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
