The Issue The issue in this case is whether Respondent committed the offenses alleged by the Department of Financial Services in the Administrative Complaint dated May 27, 2009, and, if so, what penalty should be imposed.
Findings Of Fact Petitioner, the Department of Financial Services ("Petitioner" or "the Department") has regulatory responsibility for Chapter 626, Florida Statutes (2009), the insurance licensing procedures law. Respondent, Eileen P. Suarez ("Respondent" or "Suarez"), is a licensed general lines agent transacting in property and casualty insurance, under license number E129078. She operated and was the agent in charge of the Suarez Insurance Agency, Inc. ("Agency"), in Hialeah, Florida. The Agency held a valid state license from 7/21/2006 to 7/27/2009. The Department filed a three-count Administrative Complaint against Respondent alleging that she violated various provisions of Chapter 626, Florida Statutes. COUNT I John Vila is the president of Vila Home Group, Inc., a trucking company that is in the business of hauling sand, soil, and gravel. In April 2005, he purchased a dump truck and, at the suggestion of the dealer, contacted Suarez for insurance. Suarez sold Vila two insurance policies, for the period April 29, 2005 to April 29, 2006, one with AequiCap Insurance Company ("AequiCap") and the other with the Underwriters at Lloyds, London ("Lloyds"). The AequiCap Policy was a commercial liability insurance policy. The Lloyds Policy was a commercial automobile physical damage insurance policy. In March 2006, Vila gave Suarez a check in the amount of $10,876.41, made payable to the Agency to renew the AequiCap and Lloyds policies, for the period April 29, 2006 to April 29, 2007. The AequiCap policy quote was approximately $5,350.00. The Lloyds policy quote was approximately $5,500.00. The check was deposited in the Agency's trust account, but the Lloyds policy was allowed to expire on April 29, 2006, and was not renewed until October 26, 2006, creating a six-month gap in commercial automobile physical damage insurance coverage for Vila. When it was renewed, the Lloyds Policy cost $5,712.03. Vila's AequiCap policy expired on April 29, 2006, and was not renewed because Suarez failed to pay MAI Risk Management, AequiCap's managing general agent. The funds were not returned to Vila. While the March 2006 quotes were pending, the registered driver of the truck, Andres Vila, was involved in an accident and was at fault for hitting a wire. Rather than risk an increase in the pending insurance quotes, Vila paid Bellsouth $2,390.36 in damages. COUNT II On or about October 26, 2006, Suarez provided Vila a Certificate of Liability showing that the truck was insured with AequiCap, under policy number TC012695, and with Lloyds, under policy number R641440/0251, for the period April 29, 2006 to April 29, 2007. Vila was not insured under AequiCap policy number TC012695 from April 29, 2006 to April 29, 2007. The Certificate of Liability was a false document that Suarez created on her computer, printed, and gave to Vila. COUNT III Shelly, Middlebrooks & O'Leary, Inc. ("Shelly Middlebrooks") is a licensed insurance agency, located in Jacksonville, that acts as a general agent for multiple insurance companies. Suarez collected insufficient funds to include the premiums that were intended to be forwarded to Shelley Middlebrooks for policies to insure the following trucking companies: All Nations Logistics, LLC (Policy Number 486865); Jose Veiga, d/b/a JJ Freightways (Policy Number 486885); Gary Castle/Diamond Mine (Policy Number 74APN338354); and Nics Oil, Inc. (Policy Number 74APN401617). For each of the four companies, she requested and received binders for insurance from Shelly Middlebrooks, followed by invoices for the premiums that were to have been paid within ten days of the date the invoices were received. In each instance, Suarez did not pay Shelly Middlebrooks, which cancelled the policies for non-payment of the premium. It also obtained a default judgment in the Circuit Court in and for Duval County, Florida, that requires Suarez to pay it the outstanding balances due for the four policies and a $25 insufficient funds check fee, for a total of $8,335.60, which she has been unable to pay. Instead of paying for insurance, Suarez used most of the funds she collected to pay for various other corporate expenses for the same trucking companies, including state and federal government filings for intrastate or interstate travel that were prerequisites to their becoming insurable. Suarez expected to collect the additional funds needed for insurance later, but the clients, the owners of the trucking companies, did not pay her. Suarez admits that she failed her clients in 2006, after her father's death in February 2006. She realized the Vila errors and tried to correct them in October. The Agency is now closed. Suarez's husband has been unemployed for over a year, and their home is in foreclosure. She is receiving social security disability payments and has insufficient funds to file for bankruptcy.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Department of Financial Services: Finding Respondent guilty of violating Subsections 626.611(7), (8) and (10); Subsection 626.561(1); and Subsections 626.621(2) and (6), Florida Statutes, as charged in Count I of the Administrative Complaint; Finding Respondent guilty of violating Subsections 626.611(7) and (8); Subsection 626.621(6); and Subsection 626.9541 (1)(e)1., Florida Statutes, as charged in Count II of the Administrative Complaint; Finding Respondent guilty of violating Subsections 626.611(7), (8) and (10); Subsection 626.561(1); and Subsections 626.621(2) and (6), Florida Statutes, as charged in Count III of the Amended Complaint; Revoking Respondent's licenses and appointments issued or granted under or pursuant to the Florida Insurance Code; Ordering Respondent to make restitution to John Vila in the amount of $5,164.38; and Ordering Respondent to make restitution to Shelly Middlebrooks & O'Leary in the amount of $8,335.60. DONE AND ENTERED this 16th day of February, 2010, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of February, 2010.
The Issue Whether Petitioner, a health care provider, filed a timely, valid petition with Respondent to challenge Intervenors’ disallowance of payment for certain dates of service to a workers’ compensation claimant.
Findings Of Fact At the times relevant to this proceeding, Intervenors had accepted that the claimant had suffered a compensable injury under the Florida workers’ compensation laws and had paid benefits to and on behalf of claimant. The date of the compensable injury was July 8, 1994. On September 30, 2004, Mr. Spangler, as counsel for the carrier, prepared the Notice that was received by Petitioner on October 4, 2004. The Notice provided, in part, as follows: The purpose of this letter is to inform you of the findings from the Carrier’s utilization review investigation. Based upon the opinions of Carrier Medical Consultants, the Carrier has concluded that there has been overutilization and/or misutilization since the treatment has been excessive and not medically necessary. Additionally, it appears that some bills may not have been timely submitted to the Carrier. . . . Accordingly, the Carrier has decided that specific dates of service will be disallowed and they are as follows: 04/26/04, 06/01/04, 07/12/04 Based upon its utilization review investigation, the Carrier also believes that the treatment rendered on the following dates [sic] was also excessive, and neither reasonable nor medically necessary. Nevertheless, the Carrier has agreed to reimburse for these specific dates [sic] of service which are as follows: 08/17/04 As the health care provider, you have certain rights and responsibilities under Florida Statutes and Florida Administrative Code. This office sent you a very detailed letter that explained the requirements and procedures under the utilization review provisions of Section 440.13(7), Florida Statutes. Please note the under Section 440.13(7)(a), Florida Statutes, “Any health care provider . . . who elects to contest the disallowance . . . of payment by a carrier under 440.13 subsection (6) must, within 30 days after receipt of notice of disallowance petition the agency to resolve the dispute.” The 30 days begin to run from the date this letter is received. Additionally, please find enclosed the Explanation of Benefits regarding these dates of service. Please reference our previous correspondence forwarded to you or contact the undersigned if you have any questions concerning this matter. Enclosed with the carrier’s letter of September 30, 2004, was the Explanation, which consisted of two pages. The carrier’s Notice was a “disallowance of payment” within the meaning of Section 440.13(7), Florida Statutes, and a “reimbursement decision” within the meaning of Florida Administrative Code Rule 59A-31.002. Petitioner mailed a letter to Respondent dated October 25, 2004, that was received by Respondent’s mailroom and delivered to Ms. Reynolds on November 1, 2004. Ms. Reynolds testified that the envelope for the letter reflected that it was mailed on October 29, 2004, in Miami. The two-page letter, which has been redacted to protect the privacy of the claimant, stated the following: I am a Board Certified physician in the field of psychiatry. I have been the treating physician, under the worker’s compensation law, for the above noted patient for many years. I undertook [her/his] treatment on September 19, 2000, at the request of the carrier, following retirement of [her/his] original treating physician. At the that time [she/he] was already adjudicated permanent total disability and it [sic] was already determined to be suffering from severe depression, on various medications and needing continued follow-up care. I was advised by the patient’s attorney that the carrier was trying to close the case including closing the medical. The patient however is in need of continued medical care and has no viable alternative source therefore. I then received various communications from the insurance carrier’s attorney pointing out their rational [sic] for disallowance of medically necessary services. In my field the doctor-patient relationship is of course particularly important and it would be most detrimental to the patient and, at least at this point, I declined to follow a course of curtailing needed services. I then received the enclosed communication disallowing payment for 4 [sic] recent visits per the enclosure. The letter advises to challenge the same it is necessary to “petition” the agency within 30 days of notification. My office was unable to determine to whom I was supposed to respond and in what form. I accordingly incredibly was required to seek the assistance of an attorney to simply try to top [sic] track down whom I was supposed to contact and in what manner. The attorney advises me that after his personal efforts for in excess of two hours, multiple calls including office of employee assistance, AHCA itself several times, Division of Worker’s Compensation and several faxed letters that he was provided the above address. I am further advised that there is no form for this petition, but a responding letter will serve as the petition. Before my addressing the 4 [sic] bills I would suggest it imperative that you need to address a requirement that the carrier in any disallowing communication be required to advise as to whom is to be contacted if objection is made and that a letter will suffice. Given the diagnosis of the patient, Major Depressive Disorder, Recurrent, Severe, With Psychotic Features, it is the accepted guidelines of treatment based on research and practice to combine the use of individual psychotherapy and psychotropic medication for maximum results. This patient’s care has been minimized to 6 visits a year and I don’t see how she can be treated with less frequency and time than that. The minimum time that can be given with this frequency of visits is at least 45-60 minutes to obtain results. An alternative would be twice a month visits of 25 minutes, which will be more costly. If any additional information is needed to expedite my petition please advise. It is undisputed that three forms completed and signed by Petitioner were enclosed with the letter of October 25, 2004. Each form was captioned “Workmen [sic] Compensation Report” (the Report forms) and were, respectively, for the dates of service April 26, 2004; June 1, 2004; and July 12, 2004, that are at issue in this proceeding (the dates of service).3 The three Report forms were the only enclosures with the letter of October 25 received by Ms. Reynolds on November 1, 2004. Ms. Febus typed and mailed the letter of October 25. Ms. Febus testified that in addition to the three Report forms, she also included with the October 25 letter a “Health Insurance Claim Form” for each date of service, the Notice, and the two- page Explanation. The original of each of the Health Insurance Claim Forms was mailed to the carrier and constituted a billing for the services rendered to the claimant by Petitioner on each respective date of service. Petitioner introduced as part of its composite exhibit a copy of his file copy of each Health Insurance Claim Form. Each of the Health Insurance Claim Forms introduced by Petitioner (the three forms Ms. Febus testified she enclosed with the October 25 correspondence) reflects that Petitioner signed the form on December 22, 2004 (block 31 of each form), and that the claimant signed a release of medical information on December 22, 2004 (block 12 on each form). These three Health Insurance Claim Forms were the only billings that Petitioner alleged was enclosed with the October 25 correspondence. Ms. Febus’ testimony was based on her memory. She did not note on the letter the list of enclosures (other than a reference to the Notice) and she did not keep a file copy of her complete submission package. The mailing of the October 25 correspondence was by regular mail, not certified mail. A notation on the bottom of Petitioner’s letter reflects that a copy was mailed to the carrier’s adjuster, to Mr. Spangler, and to Mr. Keyfetz. Each of these mailings was by regular mail. There was no evidence as to what enclosures were included with any of these mailings and there was no indication on the letter whether the copies included the enclosures. On November 1, 2004, after her review of the October 25 correspondence, Ms. Reynolds telephoned Petitioner’s office and talked to Ms. Febus. Ms. Reynolds believed the correspondence constituted an inquiry, not a petition to resolve a disputed disallowance. Ms. Reynolds and Ms. Febus discussed the applicable statute and rule and they discussed the required contents of a petition to resolve a disputed disallowance. Ms. Reynolds and Ms. Febus did not discuss the enclosure that had been received with the October 25 correspondence. On November 1, 2004, Ms. Reynolds followed up her conversation with Ms. Febus by sending her an e-mail. Ms. Reynolds’ e-mail provided, in part, the following: This is a continuation of our telephone conversation of today regarding the 10-25-04 letter from Dr. Merayo. Attached are 2 documents which may assist to orient you to 2 sections of the Florida WC Law which may impact the issues which are spoken to in the letter. Please feel free to call me for further discussion regarding Florida’s WC Law and the medical issues that you may have questions [sic]. The 2 sections of the law that I immediately wish to draw your attention to are: ss. 440.13 and subsection 7(a) and ss. 440.192 F.S. The second section deals with the CLAIMANT’S benefits under Fla. WC Law ... these issues, when impacted, are decided by a Judge of Compensation Claims, following the submission of a proper request by the CLAIMANT. THE FIRST SECTION, ss. 440.13(7), F.S., addresses the way a dispute is submitted to this Agency (using the address below). Should you have further questions, do not hesitate to contact me. Ms. Reynolds attached to her e-mail copies of Sections 440.192 and 440.13(7), Florida Statutes, and Florida Administrative Code Rule 59A-31.002. Section 440.192, Florida Statutes, pertains to disputes between a claimant and a carrier that are resolved by a Judge of Compensation Claims. Those provisions are not relevant to the issues in this proceeding. Section 440.13(7), Florida Statutes, pertains to reimbursement disputes between a provider and a carrier and provides in relevant part, as follows: UTILIZATION AND REIMBURSEMENT DISPUTES.- Any health care provider, carrier, or employer who elects to contest the disallowance or adjustment of payment by a carrier under subsection (6) must, within 30 days after receipt of notice of disallowance or adjustment of payment, petition the agency to resolve the dispute. The petitioner must serve a copy of the petition on the carrier and on all affected parties by certified mail. The petition must be accompanied by all documents and records that support the allegations contained in the petition. Failure of a petitioner to submit such documentation to the agency results in dismissal of the petition. The carrier must submit to the agency within 10 days after receipt of the petition all documentation substantiating the carrier's disallowance or adjustment. Failure of the carrier to timely submit the requested documentation to the agency within 10 days constitutes a waiver of all objections to the petition. Within 60 days after receipt of all documentation, the agency must provide to the petitioner, the carrier, and the affected parties a written determination of whether the carrier properly adjusted or disallowed payment. The agency must be guided by standards and policies set forth in this chapter, including all applicable reimbursement schedules, practice parameters, and protocols of treatment, in rendering its determination. If the agency finds an improper disallowance or improper adjustment of payment by an insurer, the insurer shall reimburse the health care provider, facility, insurer, or employer within 30 days, subject to the penalties provided in this subsection. The agency shall adopt rules to carry out this subsection. The rules may include provisions for consolidating petitions filed by a petitioner and expanding the timetable for rendering a determination upon a consolidated petition. ... Florida Administrative Code Rule 59A-31.002, provides as follows: In those instances when a provider does not agree with a carrier’s reconsidered reimbursement decision, the Agency will, upon request, provide for a settlement of such reimbursement dispute through a review process conducted by the Agency’s Bureau of Managed Care. The provider, the carrier or the employer may request a resolution to a reimbursement dispute from the Agency. A valid Request for Resolution of Disputed Reimbursement must: Be in writing and specify the specific service(s) and policy being disputed. Include copies of the following: All bills submitted or resubmitted that are related to the services in question and their attachments. All applicable Explanations of Medical Benefits. All correspondence between the carrier and provider which is relevant to the disputed reimbursement. Any notation of phone calls regarding authorization. Any pertinent or required health care records or reports or carrier medical opinions. The Agency’s response to a valid disputed reimbursement request will: Be within 60 days of receipt. Establish the proper reimbursement amount, including over and under payments. Identify the basis for the decision. Be sent to the provider, carrier and employer. Be in writing. Provide for reconsiderations through physicians and peer review before an appeal [sic] pursuant to Section 120.57, Florida Statutes. Requests for Resolution of Disputed Reimbursement will be returned as not valid when: The required documentation is not included with the request. The date of the request for a reconsideration exceeds the time requirements as specified in this section. . . . The next communication between Petitioner and Respondent was in the form of a letter dated December 22, 2004, from Mr. Keyfetz on behalf of Petitioner to Respondent. After referencing the reimbursement dispute, the letter provided as follows: I am in receipt of copy of responsive petition by Dr. Merayo dated October 25, 2004, in connection with the above matter. Dr. Merayo advises he has received no response thereto let alone the required response within 10 days receipt by the carrier. It is provided: Failure of the carrier to timely submit the requested documentation to the agency within 10 days constitutes a waiver of all objections to the petition. We await your written determination, which is now due regarding the carrier disallowance of these amounts. The letter from Mr. Keyfetz dated December 22, 2004, prompted a letter from Mr. Spangler on behalf of the carrier dated December 30, 2004. After receiving a copy of Mr. Spangler’s letter, Mr. Keyfetz wrote a second letter to Respondent on January 5, 2005, that attempts to refute Mr. Spangler’s letter and again demands a written determination of the disputed reimbursements. On January 26, 2005, Ms. Reynolds responded to Petitioner with copies to Mr. Keyfetz and Mr. Spangler. This is to acknowledge not only your letter of October 25, 2004, but also the correspondence recently received from [Mr. Keyfetz and Mr. Spangler]. At issue is the acknowledgment of correspondence sent by you to this office dated October 25, 2004, received by this office on November 1, 2004. This correspondence was a two-page letter with reference to a disallowance of payment for treatment rendered to the claimant: [name redacted]. Attachments to this letter were 3 progress reports dated: 08-12-04, 06-01- 04, and 04-26-04, from the Merayo Medical Arts Group and signed with your apparent signature. The progress reports show [claimant’s] Date of Accident (D/A) as 07- 08-1984. On November 1, 2004, in response to this correspondence, I telephoned your office and spoke with Vinette, who identified herself as a representative of your office staff. It was during this telephone conversation, I clarified the definition of a disallowance, denial and a payment made at a different amount from that which was billed. Each of these circumstances has specific procedures, which must be met in order to address a disagreement concerning the carrier’s action. I followed this conversation with an e- mail sent, at Vinette’s direction to ... I have attached a copy of this e-mail and the attachments contained in this e-mail to this letter. I have had no follow-up communication from your office following this action. No file was established in this office. This correspondence was handled as an inquiry. However, subsequent to this action, on December 27 [, 2004] and on January 10, 2005, letters were received from [Mr. Keyfetz] regarding your original October 25, 2004, correspondence. [Mr. Spangler], the carrier’s representative, sent a letter dated December 30, 2004. This is to inform you that this office cannot address the issues brought forward except to clarify to you sections of Chapter 440, which may be of import to your quest for assistance.[4] * * * You failed to comply with these requirements as a contested disallowance or adjustment of payment by the carrier. I have dismissed this correspondence as an invalid submission of a reimbursement dispute.[5]
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order dismissing the October 25 correspondence as an invalid petition. DONE AND ENTERED this 29th day of September, 2005, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 2005.
The Issue Whether Respondent failed to maintain general liability insurance coverage as required by Section 493.6110, Florida Statutes, and, if so, what penalty should be imposed on his Class "A" Private Investigative Agency License and his Class "C" Private Investigator License.
Findings Of Fact Respondent currently holds a Class “A” Private Investigative Agency License, having been issued License No. A96- 00005 pursuant to Chapter 493, Florida Statutes, effective June 15, 1996, and expiring on June 15, 1998. Respondent currently holds a Class “C” Private Investigator License No. C94-00709, issued pursuant to Chapter 493, Florida Statutes, effective January 23, 1997, and expiring on December 7, 1998. As of June 28, 1996, Respondent had general liability insurance coverage relative to his Class “A” license through Scottsdale Insurance Company, West Palm Beach, Florida. This insurance policy expired on June 28, 1997. Respondent currently has insurance coverage relative to his Class “A” license through Costanza Insurance Agency, Inc., Dallas, Texas. The effective period of this insurance coverage is from August 5, 1997, through August 5, 1998. Respondent did not file Form LC2E018, Certificate of Insurance, with the Department as required to evidence that his agency, Jon Bowdoin and Associates, had insurance coverage in force during the period beginning June 29, 1997, through August 4, 1997. Respondent had no insurance coverage relative to his Class “A” license for the period June 29, 1997, through August 4, 1997. Respondent’s Class “A” Private Investigative Agency License was not in an inactive status during the period June 29, 1997, through August 4, 1997.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order (1) finding that Respondent committed the violation alleged in the Administrative Complaint filed herein; (2) imposing an administrative fine of $700.00; and (3) placing Respondent's Class "A" Private Investigative Agency License on one year non- reporting probation. DONE AND ENTERED this 16th day of June, 1998, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 16th day of June, 1998. COPIES FURNISHED: Michelle Guy Assistant General Counsel Department of State, Division of Licensing The Capitol, Mail Station Four Tallahassee, Florida 32399-0250 Jon Bowdoin, Owner Jon Bowin and Associates 3323 U. S. Highway 19 Suite 901 Palm Harbor, Florida 34684 Don Bell, General Counsel Department of State The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0250 Honorable Sandra B. Mortham Secretary of State The Capitol Tallahassee, Florida 32399-0250
The Issue Whether Respondents, by refusing to allow consumers to cancel their individual health insurance policies subsequent to the "free-look" period and thereby failing to refund premiums paid, engaged in conduct violative of Subsection 627.6043, Florida Statutes.
Findings Of Fact The parties stipulated that the Petitioner has jurisdiction over Respondents, National States and Penn Treaty, during times material. On June 24, 1993, Petitioner filed a five count administrative complaint against National States alleging that 20 consumers had purchased various types of health insurance policies and that such policy holders requested cancellation of those policies before the expiration date of their policy. The policy holders prepaid the premiums on such policies. National States refused to honor those requests for cancellation and did not refund the unearned premiums remaining on those policies. National States, by its assistant vice president, William O'Connor, advised those policy holders that they were not entitled to cancellation after the "free-look" period and therefore refused to refund any unearned premiums. Policy holders who were denied premium refunds include the following: Alexandrine Austin, Henry M. and Mary Lou Butler, Madeline Goding, William O. and Rowena Haisten, Sebastian N. and Jane E. Imme, Teresa Karl, John F. Killinger, J. Robert Merriman, Nell I. Mooney, Ralph Motta, Kathryn Patterson, Alene R. Smith, and Bernadine Weiss. On June 17, 1993, Petitioner filed a three count administrative complaint against Penn Treaty alleging that certain consumers had purchased various health insurance policies, that the policy holders requested cancellation of those policies prior to the expiration and Penn Treaty refused to honor those requests for cancellation and to refund any unearned premium remaining. Penn Treaty advised those policy holders, by letter, that they could not cancel their policies after the "free-look" period. The policy holders who were denied cancellation and/or a refund by Penn Treaty were Adelbert Gronvold, George and Marie Hutnyak and George F. and Elizabeth M. MacVicar. Health insurance policies do not contain a provision granting the policy holder the right to cancel. Ms. Kitterman, a former employee of Petitioner who has reviewed health insurance policies for over sixteen (16) years, was familiar with such policy forms. She has not seen a provision in an individual health insurance policy which specifically granted an insured the right to cancel a policy midterm. Dr. Solomon, an expert with extensive knowledge concerning health insurance policy provisions or the absence thereof, opined that health insurance policies do not contain a provision dealing with the ability or the right of the insured to cancel or not to cancel their health insurance policy. Finally, Ms. Andrews, the assistant bureau chief of life and health forms for approximately eight (8) years, has also personally reviewed health insurance policy forms. Ms. Andrews supervised the insurance analysts who reviewed such forms and corroborate the testimony of Kitterman and Solomon that such policy forms do not contain a provision addressing the insured's right to cancel. Petitioner has never required an individual health policy form to contain a provision regarding an insured's right to cancel. Although Petitioner does not require such a provision, it does insist that companies refund unearned premiums once an insured files a request to cancel pursuant to Section 627.6043, Florida Statutes. A discussion of the "free-look" period is contained in Rule 4-154.003, Florida Administrative Code, entitled "Insured's Right to Return Policy; Notice". That rule states: It is the opinion of the insurance commissioner that it will be in the public interest and of benefit to all if the person to whom the policy is issued has the opportunity to return the policy if he is not satisfied with it, provided such return is made within a reasonable length of time after receipt of the policy; therefore, each and every company issuing for delivery a disability policy in this state is requested to have printed or stamped thereon, or attached thereto a notice in a prominent place stating in substance that the person to whom the policy or contract is issued shall be permitted to return the policy or contract within ten (10) days of its delivery to said purchaser and to have the premium paid refunded if, after examination of the policy or contract, the purchaser is not satisfied with it for any reason. The notice may provide that if the insured or purchaser pursuant to such notice returns the policy or contract to the insurer at its home office or branch office or to the agent through whom it was purchased, it shall be void from the beginning and the parties shall be in the same position as if no policy or contract had been issued. This rule shall not apply to either single premium non-renewal policies or contracts or travel accident policies or contracts. Notices in this Rule 4-154.003 and in Rule 4.154.001 may be combined. (emphasis added) Thus, if a policy is returned during the "free look" period, the company is required to return the entire premium paid. The "free-look" period allows the consumer an opportunity to review the contract for the designated period of time. It allows them to make sure that it was the type of contract they intended to purchase and to review the application that was submitted to the company to verify that the information on it is correct. "Guaranteed renewable" is defined in Rule 4-154.004, Florida Administrative Code, titled "Non-cancellable or non-cancellable and guaranteed renewable policy; Use of Terms." That rule states: The terms "non-cancellable" or "non-cancellable and guaranteed renewable" may be used only in a policy which the insured has the right to continue in force by the timely payment of premiums set forth in the policy until at least age 50, or in the case of a policy issued after age 44, for at least five years from its date of issue, during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force. Except as provided above, the term "guaranteed renewable" may be used only in a policy in which the insured has the right to continue in force by the timely payment of premiums until at least age 50, or in the case of a policy issued after age 44, for at least five years from its date of issue, during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force, except that the insurer may make changes in premium rates by classes. The foregoing limitation on use of the term "non-cancellable" shall also apply to any synonymous term such as "not cancellable" and the limitation on use of the term "guaranteed renewable" shall also apply to any synonymous term such as "guaranteed continuable". Nothing herein contained is intended to restrict the development of policies having other guarantees of renewability, or to prevent the accurate description of their terms of renewability or the classification of such policies as guaranteed renewable or non-cancellable for any period during which there may be actually be such, provided the terms used to describe them in policy contracts and advertising are not such as may readily be confused with the above terms. Thus, the term "guaranteed renewable" as defined by Petitioner's rule notably does not contain any prohibitions against an insured's ability to cancel. Both Dr. Solomon and National States expert, E. Paul Barnhart, agreed that the industry meaning of "guaranteed renewable" is that companies guarantee renewability of a health or accident policy but do not guarantee that the rate will remain constant. Guaranteed renewable policies may be cancelled by the company only for nonpayment of premium or for false statements made by the insured in the application. Guaranteed renewable policies can also be cancelled by the company at the terminal point which, for most of National States policy holders, is when the insured dies but, in a few cases, at age 65. Whether a policy is marketed by the company as "guaranteed renewable" is a business decision made by the insurer generally to meet competition. Thus, the insurer, in making the decision to market an insurance policy as guaranteed renewable, waives any right that might otherwise be available to the insurer to cancel or non-renew except those authorized by statute which are, as noted, nonpayment of premium and material misrepresentation. Nowhere in any of the expert's opinions or Petitioner's witnesses is the term guaranteed renewable construed to mean that an insured has also waived the right to cancel a health insurance policy. All health insurance policies are cancellable by the insurer unless the company has chosen to market the policy as non-cancellable or guaranteed renewable which, as noted, may be only cancelled for nonpayment of premium and material misrepresentation. Dr. Solomon's opinion is based on the equitable theory that an insurance company, when it writes a health policy, does not immediately earn all of the premium collected, and the insured is therefore entitled to the unearned premium if he cancels midterm. Mr. Barnhart confirmed that a premium is not totally earned the moment it is collected but that "it's earned over the period of time for which the premium has been paid . . . if someone pays an annual premium, say on July 1, 1993, that annual premium would become earned at a steady rate over the year that follows and become fully earned as of June 30, 1994." When a premium is received for health and accident policies, the company will establish an unearned premium reserve, which is a basic reserve set up as a result of the payment of premiums and represents, at any given point in time, that portion of the premium that remains unearned. Insurance companies are required by law to maintain unearned premium reserves because they have not earned the premium. Unearned premium reserve is typically a section in the balance sheet of a company that is reserved for that purpose of paying back premiums that are not earned, or holding premiums in that account, as a segregated item, until such time as they are earned. Refunds of premiums are made on the basis of either a short-rate or a pro-rata table. Short-rate refunds are for the purpose of returning a portion of the insured's premium in the event that the insured elects to cancel midterm. The insured is penalized for cancelling the policy midterm under the short-term rate table by absorbing some of the company's expenses of underwriting the policy and administrative costs. That is, if the insured cancels an annual policy within one month after which an annual premium has been paid, the insured will receive less than 11/12ths of the advance premium. Pro-rata refunds mean equal distribution which is the refund procedure used when the insurer makes the decision to cancel. Thus, if the insurer cancels an insured's policy that is so cancellable by the insurer in the annual policy example, the insurer would be liable to make a pro-rata refund of premium to the insured which will be 11/12ths of the premium paid. Thus, an insured is not penalized when it is the insurer who exercises its right to cancel any policies which are so cancellable by the insurer. Section 627.6043(2), Florida Statutes, states: In the event of a cancellation, the insurer will return promptly the unearned portion of any premium paid. If the insured cancels, the earned premium shall be computed by the use of the short- rate table last filed with the state official having supervision of insurance with the state where the insured resided when the policy was issued. If the insurer cancels, the earned premium shall be computed pro-rata. Cancellation shall be without prejudice to any claim originating prior to the effective date of cancellation. (emphasis added) Ellen Andrews, the Department's former assistant bureau chief for life and health insurance forms several years prior to 1989, and in 1989 when the statute at issue was initially rewritten by the Legislature and as it is currently written, was familiar with the development of Petitioner's position as the statute went through renumberings in 1990 and 1992. It was part of Ms. Andrews' duties and responsibilities to assist Petitioner in the interpretation of that statute. It was her ultimate responsibility to be in charge of implementation of that statute. Petitioner's initial interpretation has remained unchanged since the statute was initially reworded in 1989 and moved to its various sections of part 6 of Chapter 627, Florida Statutes. The Department's opinion and decision on the meaning of what is currently Section 627.6043(2), Florida Statutes, is that if the insured cancels a policy midterm, the insured would be entitled to a return of premium pursuant to the short-rate table if one was filed with the Department. The Department further interprets the statute to mean that the insurer has a right to cancel, unless the insurer has waived that right by selling a guaranteed renewable or non-cancellable policy and if an insurer exercises that right, the insurer must make a refund to the insured on a pro-rata basis. Petitioner's position is based on the statutory provision that the insured shall receive a return of premium if the insured cancels and that if the insured didn't have a right to cancel, then the insured wouldn't have a right to receive a refund of premium. In 1989, Petitioner took the initiative to obtain statutory authority for its position by submitting a proposed draft to the Legislature revising the statute in order to provide insureds, by statute, the right to receive a return of the unearned premium upon notifying the insurer of their decision to cancel the individual health insurance policies. Mr. Barnhart verified that there would be no claims incurred once a policy ceases to be in force; that National States refund a portion of the premium when a policy is rescinded or terminated and that National States refunds unearned premiums when an insured dies midterm of the policy period whether required by statute or not. Penn Treaty refunds unearned premiums upon death and has a provision in its individual health and accidental insurance policies which provides that the insured shall receive a refund of unearned premiums upon death. From an actuarial perspective, there is no difference between either death or cancellation in midterm of a policy period by an insured. Penn Treaty sells, in Florida, long term care, home health care and medicare supplement insurance policies. National States generally sells guaranteed renewable policies in Florida. National States' position is that health and accident policies are not cancellable by the insured in Florida and that only medicare supplement policies are cancellable by the insured because there is a provision in the policy that allows an insured to cancel and because there is statutory authority for the insured to cancel that policy. Its position is that Section 627.6043, Florida Statutes, does not provide for cancellation by the insured. However, National States allows that the statutes regarding cancellation under the medicare supplement law, Section 627.6741(4), Florida Statutes, mandates refunds to insureds who request cancellation of their medicare supplement policies. National States allow cancellations by insureds and refunds unearned premiums on health insurance policies in those other states which have statutes requiring such refunds. Likewise, Penn Treaty's position is that home health care and long term care policies are not cancellable by the insured because there is no provision in the contract to allow cancellation and because they are guaranteed renewable policies. Its position also is that the insured does not have the right to cancel, either contractually or statutorily. Respondents relied on legal opinions from their counsel (in Florida) and an opinion from Petitioner dated June 12, 1991 to deny refunds. Florida law addressing an insured's right to cancel a medicare supplement policy is at Section 627.6741(4), Florida Statutes. That section provides, in pertinent part, that: If a policy is cancelled, the insurer must return promptly the unearned portion of any premium paid. If the insured cancels the policy, the earned premium shall be computed by the use of the short-rate table last filed with the state official having supervision of insurance in the state where the insured resided when the policy was issued. If the insurer cancels, the earned premium shall be computed pro-rata. Cancellation shall be without prejudice to any claim originating prior to the effective date of the cancellation period. (emphasis added) The above statute is the only Florida law which addresses an insured's right to cancel his medicare supplement policy. Florida law requires that medicare supplement policies be guaranteed renewable. That law is found at Section 627.6741(2)(a), Florida Statutes, which provides: For both individual and group medicare supplement policies: an insurer shall neither cancel nor non-renew a medicare supplement policy or certificate for any reason other than non payment of premium or material misrepresentation. Respondents' position is that in Florida, insureds who purchase their policies are elderly and are easily led. If allowed to cancel, Respondents contend that they would lose out on a number of protections that they would be entitled to if they were required to keep their policies.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Petitioner enter a final order requiring Respondents to make refunds of premiums to all policy holders who request the cancellation of their health insurance policies after October 1, 1989, with 12 percent interest from the date cancellation was requested and further that Respondents' certificates of authority be placed on suspension for a period of twelve (12) months. It is further recommended that the suspension be suspended upon Respondents, payment of the unearned premiums to the above-referenced consumers. 1/ DONE AND ENTERED this 1st day of March, 1995, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 1995.
The Issue The issue to be determined is the amount to be reimbursed to Respondent, Agency for Health Care Administration ("AHCA"), for medical expenses paid on behalf of Yisell Cabrera Rodriquez pursuant to section 409.910, Florida Statutes, from settlement proceeds received by Petitioner from third parties.
Findings Of Fact The Parties Petitioner, Julio Cesar Cabrera, is the duly-appointed Personal Representative of the Estate of Yisell Cabrera Rodriquez, his deceased daughter. Respondent is the state agency charged with administering the Florida Medicaid program, pursuant to chapter 409. The Events Giving Rise to this Proceeding On August 30, 2015, Petitioner's 23-year old daughter, Yisell, was severely injured in an automobile accident. She was a passenger in an automobile that was struck by another automobile that failed to yield the right-of-way at an intersection. The automobile in which Yisell was a passenger previously had been in an accident and had been determined a total loss. It subsequently was rebuilt by Unique Body Works in Miami. A sister company, Unique Automotive, sold the vehicle to the driver of the car in which Yisell was a passenger on August 30, 2015. When Unique Body Works rebuilt the automobile, it did not replace the passenger side airbags. When the automobile was struck in the accident, airbags on the passenger side were not available to deploy. As a result, Yisell was severely injured. She was transported to Jackson Memorial Hospital, where she received medical treatment in intensive care. Tragically, on August 31, 2015, Yisell died from the injuries she sustained in the accident. Petitioner instituted a wrongful death action against the at-fault driver ("Carlos Espinoza") and the owner of the automobile ("Ana Ramirez") that struck the automobile in which Yisell was a passenger, Unique Body Works, and Unique Automotive, to recover damages to Yisell's parents and to her estate. Espinoza/Ramirez were insured by Infinity Auto Insurance Company under a policy having a bodily injury limit of $10,000. Unique Body Works was insured by Grenada Insurance Company under a policy having a liability limit of $100,000. Unique Automotive was insured by Western Heritage Insurance Company under a policy having a liability limit of $30,000. All of the insurers tendered their respective policy limits for a total of $140,000. On July 14, 2017, Petitioner, on behalf of the Estate of Yisell Cabrera Rodriquez, entered into settlement agreements with Espinoza/Ramirez, Unique Body Works, and Unique Automotive, for a total of $140,000, which constitutes the total amount of the third-party benefits received.4/ Yisell's medical care related to her injury was paid by Medicaid.5/ The medical expenses paid by Medicaid totaled $86,491.86. Pursuant to section 409.910(6)(c)1., AHCA has a Medicaid lien for that amount. Petitioner's Challenge to the Repayment Amount Section 409.910(11)(f) establishes a formula for distributing the benefits that are recovered by a recipient or his or her legal representative in a tort action against a third party that results in a judgment, settlement, or award from that third party. Applying this formula to the $140,000 that Petitioner received in third-party benefits results in a lien repayment amount of $51,838.61.6/ In this proceeding, AHCA asserts that it is owed this amount. As noted above, Petitioner disputes that $51,838.61 is the amount of recovered medical expenses payable to Respondent, and instead asserts that $4,039.17 in medical expenses are payable to Respondent. In support of his position, Petitioner presented the testimony of Mrs. Maria Rodriquez, Yisell's mother. She testified, persuasively, that theirs was a very close-knit family who did everything together, and that the loss of Yisell has destroyed their family life. She also testified that as a result of the emotional trauma of losing Yisell, her health has suffered, and she has difficulty sleeping and has gastric reflux for which she is being treated. Petitioner also testified, persuasively, that the loss of Yisell changed his life and the lives of his family members. As he described it, "[her loss] has changed our life. It's all the sadness. It's all the pain, everything. Everything's changed. . . . We were happy. We were so happy. We were so close." Petitioner also presented the expert testimony of Oscar Ruiz7/ regarding the valuation of Petitioner's wrongful death claim. Mr. Ruiz testified that in his opinion, $3 million constituted a very conservative valuation of the damages suffered by Yisell's parents in this case. He based this opinion on having interviewed Yisell's parents regarding the impact of her loss on their family, and on his knowledge of jury verdicts and settlements in recent Florida cases involving awards of damages to parents for the loss of their children in automobile accidents or due to medical malpractice. He emphasized that his valuation was far more conservative than many comparable cases that yielded substantially higher verdicts or settlements. Petitioner asserts that Respondent is only entitled to recover $4,039.17 in medical expenses on the basis of the calculation method used in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006). Specifically, Petitioner proposes to apply the same ratio that the settlement of $140,000 bore to the total monetary value of all damages ($3 million, according to Petitioner's expert) to determine the amount Respondent is owed for medical expenses. Petitioner contends that although Ahlborn did not establish a uniform calculation method applicable in all cases, it nonetheless has been accepted and applied by ALJs in other Medicaid third-party recovery cases to determine the amount of reimbursable medical expenses under section 409.910(17)(b), without challenge from AHCA regarding the accuracy of that method. Respondent did not present any evidence regarding the value of Petitioner's claim or propose a differing valuation of the damages. As more fully discussed below, Respondent contends that the opportunity to rebut the medical expense allocation provided under section 409.910(17)(b) is not available in cases such as this, where the Medicaid recipient dies before third- party benefits are recovered through settlement or other means.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2016), by failing to secure the payment of workers' compensation coverage, as alleged in the Second Amended Order of Penalty Assessment; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of chapter 440 that employers in Florida secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Respondent owns and operates a gas station/convenience store in Miami, Florida. The Investigation. The Department received a public referral that Respondent was operating without workers' compensation coverage. The case was assigned by the Department to Compliance Investigator Julio Cabrera ("Cabrera"). Cabrera first checked the Florida Department of State, Division of Corporations, Sunbiz website to verify Respondent's status as an active corporation. Cabrera then checked the Department's Coverage and Compliance Automated System ("CCAS") to see whether Respondent had a workers' compensation policy or any exemptions. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. CCAS is the Department's internal database that contains workers' compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Cabrera's CCAS search revealed that Respondent had no coverage or exemptions during the relevant period. On February 23, 2016, Cabrera visited Respondent's place of business and observed two women, Margarita Maya ("Maya"), and Nuri Penagos ("Penagos") serving customers. Cabrera asked to speak to the owner. Maya telephoned John Obando ("Obando"). After introducing himself, Cabrera asked how many employees worked for the business. Obando indicated he needed to check with his accountant. Shortly thereafter, Obando called Cabrera back and indicated that his employees included Maya; Carolina Santos ("Santos"); his wife, Marta Ayala ("Ayala"); and himself. Obando confirmed that the business did not currently have workers' compensation insurance coverage nor did any of the members of the LLC have an exemption. The LLC had three managing members: Obando; Maria Rios ("Rios"); and Carlos Franco ("Franco"). Obando explained that Rios lived out of the country and did not provide services to Respondent. According to Obando, Franco also resides outside of the United States, but he travels to Florida and periodically assists with the running of Respondent's business enterprise. Cabrera contacted his supervisor and relayed this information. With his supervisor's approval, Cabrera issued a SWO and served a Business Records Request. Respondent provided the requested business records to the Department. The evidence showed that during the two-year look-back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, including managing members without exemptions. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Penalty Calculation. The Department assigned Penalty Auditor Matt Jackson ("Jackson") to calculate the penalty assessed against Respondent. Jackson used the classification code 8061 listed in the Scopes® Manual, which has been adopted by the Department through Florida Administrative Code Rule 69L-6.021(1). Classification code 8061 applies to employees of gasoline stations with convenience stores. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance to assist in the calculation of workers' compensation insurance premiums. In the penalty assessment, Jackson applied the corresponding approved manual rate for classification code 8061 for the related periods of non-compliance. The corresponding approved manual rate was correctly utilized using the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027 to determine the final penalties. Utilizing the business records provided by Respondent, the Department determined Respondent’s gross payroll pursuant to the procedures required by section 440.107(7)(d) and rule 69L- 6.027. The Department served an Amended OPA on March 29, 2016, imposing a total penalty of $29,084.62. On May 6, 2016, following receipt of additional records, the Department issued a Second Amended OPA, reducing the penalty to $25,670.88. Because Respondent had not previously been issued a SWO, pursuant to section 440.107(7)(d)1., the Department applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $1,718.00. This was subtracted from the calculated penalty of $25,670.88, yielding a total remaining penalty of $23,952.88. No records were provided regarding the compensation of Penagos, who was observed working on the date of the inspection. According to Respondent, Penagos was present and working on that date, not as an employee, but as an unpaid volunteer who was testing out the job to see if it was to her liking. The Department imputed gross payroll for Penagos for February 23, 2016, which resulted in a penalty in the amount of $16.26 and was included in the Second Amended OPA. Respondent's Defenses. At the final hearing, Obando testified that he and the other co-owners of Respondent always attempted to fully comply with every law applicable to Respondent's business and have never had compliance problems. He testified that the business carried workers' compensation coverage until 2013, when its insurance agent advised Respondent it could go without coverage due to the size of the business, if the managing members of the LLC were to apply for, and be granted, an exemption. Obando offered no explanation why Respondent failed to secure the exemptions before letting coverage lapse during the penalty period. Obando also argues that on the date of the investigation, Penagos was not an employee, but rather his sister-in-law, who was trying out the job for a day as a volunteer to determine if she would replace Obando's wife, Ayala, who no longer wanted to work in the store. Obando asserts that only two employees were actually working in the store that day, so Respondent should not have been considered out of compliance. Obando also testified that at most, no more than three employees work at the store on any particular day. Obando testified that Respondent has ample liability coverage and that each worker has health insurance, suggesting that workers' compensation insurance coverage is unnecessary. According to Obando, the $23,952.88 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact. Excluding Penagos as a volunteer, and Rios as a managing member of the LLC with no active service to Respondent, Respondent was a covered employer with four or more employees at all times during the penalty period. The Department demonstrated, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the SWO, by failing to secure workers' compensation coverage for its employees.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent, S & S of Florida, LLC, violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $23,936.62. DONE AND ENTERED this 7th day of December, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of December, 2016. COPIES FURNISHED: Joaquin Alvarez, Esquire Trevor Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) John J. Obando S & S of Florida, LLC 8590 Southwest Eighth Street Miami, Florida 33144 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue The issue in these consolidated cases is whether the Agency for Health Care Administration ("AHCA") properly disallowed Petitioners' expense for liability insurance and accrued contingent liability costs contained in AHCA's audit of Petitioners' Medicaid cost reports.
Findings Of Fact Based upon the oral and documentary evidence presented at the final hearing, and on the entire record of this proceeding, the following findings of fact are made: Petitioners operate licensed nursing homes that participate in the Florida Medicaid program as institutional providers. The 14 Palm Gardens facilities are limited liability companies operating as subsidiaries of New Rochelle Administrators, LLC, which also provides the facilities with management services under a management contract. AHCA is the single state agency responsible for administering the Florida Medicaid program. One of AHCA's duties is to audit Medicaid cost reports submitted by providers participating in the Medicaid program. During the audit period, Petitioners provided services to Medicaid beneficiaries pursuant to Institutional Medicaid Provider Agreements that they entered into with AHCA. The Provider Agreements contained the following relevant provision: (3) Compliance. The provider agrees to comply with local, state, and federal laws, as well as rules, regulations, and statements of policy applicable to the Medicaid program, including Medicaid Provider Handbooks issued by AHCA. Section 409.908, Florida Statutes (2002)1, provided in relevant part: Reimbursement of Medicaid providers.-- Subject to specific appropriations, the agency shall reimburse Medicaid providers, in accordance with state and federal law, according to methodologies set forth in the rules of the agency and in policy manuals and handbooks incorporated by reference therein. These methodologies may include fee schedules, reimbursement methods based on cost reporting, negotiated fees, competitive bidding pursuant to s. 287.057, and other mechanisms the agency considers efficient and effective for purchasing services or goods on behalf of recipients. . . . * * * (2)(a)1. Reimbursement to nursing homes licensed under part II of chapter 400 . . . must be made prospectively. . . . * * * (b) Subject to any limitations or directions provided for in the General Appropriations Act, the agency shall establish and implement a Florida Title XIX Long-Term Care Reimbursement Plan (Medicaid) for nursing home care in order to provide care and services in conformance with the applicable state and federal laws, rules, regulations, and quality and safety standards and to ensure that individuals eligible for medical assistance have reasonable geographic access to such care. . . . AHCA has adopted the Title XIX Long-Term Care Reimbursement Plan (the "Plan") by reference in Florida Administrative Code Rule 59G-6.010. The Plan incorporates the Centers for Medicare and Medicaid Services ("CMS") Publication 15-1, also called the Provider Reimbursement Manual (the "Manual" or "PRM"), which provides "guidelines and policies to implement Medicare regulations which set forth principles for determining the reasonable cost of provider services furnished under the Health Insurance for the Aged Act of l965, as amended." CMS Pub. 15-1, Foreword, p. I. The audit period in these cases spans two versions of the Plan: version XXIII, effective July 1, 2002, and version XXIV, effective January 1, 2003. It is unnecessary to distinguish between the two versions of the Plan because their language is identical as to the provisions relevant to these cases. Section I of the Plan, "Cost Finding and Cost Reporting," provides as follows, in relevant part: The cost report shall be prepared by a Certified Public Accountant in accordance with chapter 409.908, Florida Statutes, on the form prescribed in section I.A. [AHCA form 5100-000, Rev. 7-1-90], and on the accrual basis of accounting in accordance with generally accepted accounting principles as established by the American Institute of Certified Public Accountants (AICPA) as incorporated by reference in Rule 61H1-20.007, F.A.C., the methods of reimbursement in accordance with Medicare (Title XVIII) Principles of Reimbursement, the Provider Reimbursement Manual (CMS-PUB. 15-1)(1993) incorporated herein by reference except as modified by the Florida Title XIX Long Term Care Reimbursement Plan and State of Florida Administrative Rules. . . . Section III of the Plan, "Allowable Costs," provides as follows, in relevant part: Implicit in any definition of allowable costs is that those costs shall not exceed what a prudent and cost-conscious buyer pays for a given service or item. If costs are determined by AHCA, utilizing the Title XVIII Principles of Reimbursement, CMS-PUB. 15-1 (1993) and this plan, to exceed the level that a prudent buyer would incur, then the excess costs shall not be reimbursable under the plan. The Plan is a cost based prospective reimbursement plan. The Plan uses historical data from cost reports to establish provider reimbursement rates. The "prospective" feature is an upward adjustment to historical costs to establish reimbursement rates for subsequent rate semesters.2 The Plan establishes limits on reimbursement of costs, including reimbursement ceilings and targets. AHCA establishes reimbursement ceilings for nursing homes based on the size and location of the facilities. The ceilings are determined prospectively, on a semiannual basis. "Targets" limit the inflationary increase in reimbursement rates from one semester to the next and limit a provider's allowable costs for reimbursement purposes. If a provider's costs exceed the target, then those costs are not factored into the reimbursement rate and must be absorbed by the provider. A nursing home is required to file cost reports. The costs identified in the cost reports are converted into per diem rates in four components: the operating component; the direct care component; the indirect care component; and the property component. GL/PL insurance costs fall under the operating component. Once the per diem rate is established for each component, the nursing home's reimbursement rate is set at the lowest of four limitations: the facility's costs; the facility's target; the statewide cost ceiling based on the size of the facility and its region; or the statewide target, also based on the size and location of the facility. The facility's target is based on the initial cost report submitted by that facility. The initial per diem established pursuant to the initial cost report becomes the "base rate." Once the base rate is established, AHCA sets the target by inflating the base rate forward to subsequent six- month rate semesters according to a pre-established inflation factor. Reimbursement for cost increases experienced in subsequent rate semesters is limited by the target drawn from the base rate. Thus, the facility's reimbursement for costs in future rate semesters is affected by the target limits established in the initial period cost report. Expenses that are disallowed during the establishment of the base rate cannot be reclaimed in later reimbursement periods. Petitioners entered the Medicaid program on June 29, 2002. They filed cost reports for the nine- month period from their entry into the program through February 28, 2003. These reports included all costs claimed by Petitioners under the accrual basis of accounting in rendering services to eligible Medicaid beneficiaries. In preparing their cost reports, Petitioners used the standard Medicaid Cost Report "Chart of Accounts and Description," which contains the account numbers to be used for each ledger entry, and explains the meaning of each account number. Under the general category of "Administration" are set forth several subcategories of account numbers, including "Insurance Expense." Insurance Expense is broken into five account numbers, including number 730810, "General and Professional Liability -- Third Party," which is described as "[c]osts of insurance purchased from a commercial carrier or a non-profit service corporation."3 Petitioners' cost report stated the following expenses under account number 730810: Facility Amount Palm Garden of Clearwater $145,042.00 Palm Garden of Gainesville $145,042.00 Palm Garden of Jacksonville $145,042.00 Palm Garden of Largo $171,188.00 Palm Garden of North Miami $145,042.00 Palm Garden of Ocala $217,712.00 Palm Garden of Orlando $145,042.00 Palm Garden of Pinellas $145,042.00 Palm Garden of Port St. Lucie $145,042.00 Palm Garden of Sun City $145,042.00 Palm Garden of Tampa $145,042.00 Palm Garden of Vero Beach $217,712.00 Palm Garden of West Palm Beach $231,151.00 Palm Garden of Winter Haven $145,042.00 AHCA requires that the cost reports of first-year providers undergo an audit. AHCA's contract auditing firm, Smiley & Smiley, conducted an examination4 of the cost reports of the 14 Palm Gardens nursing homes to determine whether the included costs were allowable. The American Institute of Certified Public Accountants ("AICPA") has promulgated a series of "attestation standards" to provide guidance and establish a framework for the attestation services provided by the accounting profession in various contexts. Attestation Standards 101 and 601 set out the standard an accountant relies upon in examining for governmental compliance. Smiley & Smiley examined the Palm Gardens cost reports pursuant to these standards. During the course of the audit, Smiley & Smiley made numerous requests for documentation and other information pursuant to the Medicaid provider agreement and the Plan. Petitioners provided the auditors with their general ledger, invoices, audited financial statements, bank statements, and other documentation in support of their cost reports. The examinations were finalized during the period between September 28, 2006, and October 4, 2006. The audit report issued by AHCA contained more than 2,000 individual adjustments to Petitioners' costs, which the parties to these consolidated proceedings have negotiated and narrowed to two adjustments per Palm Gardens facility.5 As noted in the Preliminary Statement above, the first adjustment at issue is AHCA's disallowance of Palm Gardens' accrual of expenses for contingent liability under the category of GL/PL insurance, where Palm Gardens could not document that it had purchased GL/PL insurance. The second adjustment at issue is ACHA's disallowance of a portion of the premium paid by Palm Gardens for the Mature Care Policies. The total amount of the adjustment at issue for each facility is set forth in the Preliminary Statement above. Of that total for each facility, $18,849.00 constituted the disallowance for the Mature Care Policies. The remainder constituted the disallowance for the accrual of GL/PL related contingent liabilities. Janette Smiley, senior partner at Smiley & Smiley and expert in Medicaid auditing, testified that Petitioners provided no documentation other than the Mature Care Policies to support the GL/PL entry in the cost reports. Ms. Smiley testified that, during much of the examination process, she understood Petitioners to be self-insured. Ms. Smiley's understanding was based in part on statements contained in Petitioners' audited financial statements. In the audited financial statement covering the period from June 28, 2002, through December 31, 2002, Note six explains Petitioners' operating leases and states as follows, in relevant part: The lease agreement requires that the Company maintain general and professional liability in specified minimum amounts. As an alternative to maintaining these levels of insurance, the lease agreement allows the Company to fund a self-insurance reserve at a per bed minimum amount. The Company chose to self-insure, and has recorded litigation reserves of approximately $1,735,000 that are included in other accrued expenses (see Note 9). As of December 31, 2002, these reserves have not been funded by the Company. . . . The referenced Note nine, titled "Commitments and Contingencies," provides as follows in relevant part: Due to the current legal environment, providers of long-term care services are experiencing significant increases in liability insurance premiums or cancellations of liability insurance coverage. Most, if not all, insurance carriers in Florida have ceased offering liability coverage altogether. The Company's Florida facilities have minimal levels of insurance coverage and are essentially self-insured. The Company has established reserves (see Note 6) that estimate its exposure to uninsured claims. Management is not currently aware of any claims that could exceed these reserves. However, the ultimate outcome of these uninsured claims cannot be determined with certainty, and could therefore have a material adverse impact on the financial position of the Company. The relevant notes in Petitioner's audited financial statement for the year ending December 31, 2003, are identical to those quoted above, except that the recorded litigation reserves were increased to $4 million. The notes provide that, as of December 31, 2003, these reserves had not been funded by Petitioners. Ms. Smiley observed that the quoted notes, while referencing "self-insurance" and the recording of litigation reserves, stated that the litigation reserves had not been funded. By e-mail dated April 21, 2005, Ms. Smiley corresponded with Stanley Swindling, the shareholder in the accounting firm Moore Stephens Lovelace, P.A., who had primary responsibility for preparing Petitioners' cost reports. Ms. Smiley noted that Petitioners' audited financial statements stated that the company "chose to self-insure" and "recorded litigation reserves," then wrote (verbatim): By definition from PRM CMS Pub 15-1 Sections 2162.5 and 2162.7 the Company does in fact have self-insurance as there is no shifting of risk. You will have to support your positioning a letter addressing the regs for self-insurance. As clearly the financial statement auditors believe this is self- insurance and have disclosed such to the financial statement users. If you cannot support the funding as required by the regs, the provider will have to support expense as "pay as you go" in accordance with [2162.6] for PL/GL. * * * Please review 2161 and 2162 and provide support based on the required compliance. If support is not complete within the regulations, amounts for IBNR [incurred but not reported] will be disallowed and we will need to have the claims paid reports from the TPA [third party administrator] (assuming there is a TPA handling the claims processing), in order to allow any expense. Section 2160 of the Manual establishes the basic insurance requirement: A. General.-- A provider participating in the Medicare program is expected to follow sound and prudent management practices, including the maintenance of an adequate insurance program to protect itself against likely losses, particularly losses so great that the provider's financial stability would be threatened. Where a provider chooses not to maintain adequate insurance protection against such losses, through the purchase of insurance, the maintenance of a self-insurance program described in §2161B, or other alternative programs described in §2162, it cannot expect the Medicare program to indemnify it for its failure to do so. . . . . . . If a provider is unable to obtain malpractice coverage, it must select one of the self-insurance alternatives in §2162 to protect itself against such risks. If one of these alternatives is not selected and the provider incurs losses, the cost of such losses and related expenses are not allowable. Section 2161.A of the Manual sets forth the general rule as to the reimbursement of insurance costs. It provides that the reasonable costs of insurance purchased from a commercial carrier or nonprofit service corporation are allowable to the extent they are "consistent with sound management practice." Reimbursement for insurance premiums is limited to the "amount of aggregate coverage offered in the insurance policy." Section 2162 of the Manual provides as follows, in relevant part: PROVIDER COSTS FOR MALPRACTICE AND COMPREHENSIVE GENERAL LIABILITY PROTECTION, UNEMPLOYMENT COMPENSATION, WORKERS' COMPENSATION, AND EMPLOYEE HEALTH CARE INSURANCE General.-- Where provider costs incurred for protection against malpractice and comprehensive general liability . . . do not meet the requirements of §2161.A, costs incurred for that protection under other arrangements will be allowable under the conditions stated below. . . . * * * The following illustrates alternatives to full insurance coverage from commercial sources which providers, acting individually or as part of a group or a pool, can adopt to obtain malpractice, and comprehensive general liability, unemployment compensation, workers' compensation, and employee health care insurance protection: Insurance purchased from a commercial insurance company which provides coverage after a deductible or coinsurance provision has been met; Insurance purchased from a limited purpose insurance company (captive); Total self-insurance; or A combination of purchased insurance and self-insurance. . . . part: Section 2162.3 of the Manual provides: Self-Insurance.-- You may believe that it is more prudent to maintain a total self- insurance program (i.e., the assumption by you of the risk of loss) independently or as part of a group or pool rather than to obtain protection through purchased insurance coverage. If such a program meets the conditions specified in §2162.7, payments into such funds are allowable costs. Section 2162.7 of the Manual provides, in relevant Conditions Applicable to Self-Insurance.-- Definition of Self-Insurance.-- Self- insurance is a means whereby a provider(s), whether proprietary or nonproprietary, undertakes the risk to protect itself against anticipated liabilities by providing funds in an amount equivalent to liquidate those liabilities. . . . * * * Self-Insurance Fund.-- The provider or pool establishes a fund with a recognized independent fiduciary such as a bank, a trust company, or a private benefit administrator. In the case of a State or local governmental provider or pool, the State in which the provider or pool is located may act as a fiduciary. The provider or pool and fiduciary must enter into a written agreement which includes all of the following elements: General Legal Responsibility.-- The fiduciary agreement must include the appropriate legal responsibilities and obligations required by State laws. Control of Fund.-- The fiduciary must have legal title to the fund and be responsible for proper administration and control. The fiduciary cannot be related to the provider either through ownership or control as defined in Chapter 10, except where a State acts as a fiduciary for a State or local governmental provider or pool. Thus, the home office of a chain organization or a religious order of which the provider is an affiliate cannot be the fiduciary. In addition, investments which may be made by the fiduciary from the fund are limited to those approved under State law governing the use of such fund; notwithstanding this, loans by the fiduciary from the fund to the provider or persons related to the provider are not permitted. Where the State acts as fiduciary for itself or local governments, the fund cannot make loans to the State or local governments. . . . The quoted Manual provisions clarify that Ms. Smiley's message to Mr. Swindling was that Petitioners had yet to submit documentation to bring their "self-insurance" expenses within the reimbursable ambit of Sections 2161 and 2162 of the Manual. There was no indication that Petitioners had established a fund in an amount sufficient to liquidate its anticipated liabilities, or that any such funds had been placed under the control of a fiduciary. Petitioners had simply booked the reserved expenses without setting aside any cash to cover the expenses. AHCA provided extensive testimony regarding the correspondence that continued among Ms. Smiley, Mr. Swindling, and AHCA employees regarding this "self-insurance" issue. It is not necessary to set forth detailed findings as to these matters, because Petitioners ultimately conceded to Ms. Smiley that, aside from the Mutual Care policies, they did not purchase commercial insurance as described in Section 2161.A, nor did they avail themselves of the alternatives to commercial insurance described in Section 2162.A. Petitioners did not purchase commercial insurance with a deductible, did not self- insure, did not purchase insurance from a limited purpose or "captive" insurance company, or employ a combination of purchased insurance and self-insurance. Ms. Smiley eventually concluded that Petitioners had no coverage for general and professional liability losses in excess of the $25,000 value of the Mutual Care Policies. Under the cited provisions of the Manual, Petitioners' unfunded self- insurance expense was not considered allowable under the principles of reimbursement. Petitioners were uninsured, which led Ms. Smiley to further conclude that Section 2162.13 of the Manual would apply: Absence of Coverage.-- Where a provider, other than a governmental (Federal, State, or local) provider, has no insurance protection against malpractice or comprehensive general liability in conjunction with malpractice, either in the form of a limited purpose or commercial insurance policy or a self-insurance fund as described in §2162.7, any losses and related expenses incurred are not allowable. In response to this disallowance pursuant to the strict terms of the Manual, Petitioners contend that AHCA should not have limited its examination of the claimed costs to the availability of documentation that would support those costs as allowable under the Manual. Under the unique circumstances presented by their situation, Petitioners assert that AHCA should have examined the state of the nursing home industry in Florida, particularly the market for GL/PL liability insurance during the audit period, and further examined whether Petitioners had the ability to meet the insurance requirements set forth in the Manual. Petitioners assert that, in light of such an examination, AHCA should have concluded that generally accepted accounting principles ("GAAP") may properly be invoked to render the accrued contingent liabilities an allowable expense. Keith Parnell is an expert in insurance for the long- term care industry. He is a licensed insurance broker working for Hamilton Insurance Agency, which provides insurance and risk management services to about 40 percent of the Florida nursing home market. Mr. Parnell testified that during the audit period, it was impossible for nursing homes to obtain insurance in Florida. In his opinion, Petitioners could not have purchased commercial insurance during the audit period. To support this testimony, Petitioners offered a study conducted by the Florida Department of Insurance ("DOI") in 2000 that attempted to determine the status of the Florida long-term care liability insurance market for nursing homes, assisted living facilities, and continuing care retirement communities. Of the 79 companies that responded to DOI's data call, 23 reported that they had provided GL/PL coverage during the previous three years but were no longer writing policies, and only 17 reported that they were currently writing GL/PL policies. Six of the 17 reported writing no policies in 2000, and five of the 17 reported writing only one policy. The responding insurers reported writing a total of 43 policies for the year 2000, though there were approximately 677 skilled nursing facilities in Florida. On March 1, 2004, the Florida Legislature's Joint Select Committee on Nursing Homes issued a report on its study of "issues regarding the continuing liability insurance and lawsuit crisis facing Florida's long-term care facilities and to assess the impact of the reforms contained in CS/CS/CS/SB 1202 (2001)."6 The study employed data compiled from 1999 through 2003. Among the Joint Select Committee's findings was the following: In order to find out about current availability of long-term care liability insurance in Florida, the Committee solicited information from [the Office of Insurance Regulation, or] OIR within the Department of Financial Services, which is responsible for regulating insurance in Florida. At the Committee's request, OIR re-evaluated the liability insurance market and reported that there has been no appreciable change in the availability of private liability insurance over the past year. Twenty-one admitted insurance entities that once offered, or now offer, professional liability coverage for nursing homes were surveyed by OIR. Six of those entities currently offer coverage. Nine surplus lines carriers have provided 54 professional liability policies in the past year. Representatives of insurance carriers that stopped providing coverage in Florida told OIR that they are waiting until there are more reliable indicators of risk nationwide to re-enter the market. Among the Joint Select Committee's conclusions was the following: In the testimony the Committee received, there was general agreement that the quality of care in Florida nursing homes is improving, in large part due to the minimum staffing standards the Legislature adopted in SB 1202 during the 2001 Session. There was not, however, general agreement about whether or not lawsuits are abating due to the tort system changes contained in SB 1202. There was general agreement that the long-term care liability insurance market has not yet improved. After hearing the testimony, there is general agreement among the members of the Joint Select Committee that: * * * General and professional liability insurance, with actual transfer-of-risk, is virtually unavailable in Florida. "Bare- bones" policies designed to provide minimal compliance with the statutory insurance requirement are available; however, the cost often exceeds the face value of the coverage offered in the policy. This situation is a crisis which threatens the continued existence of long-term care facilities in Florida. To further support Mr. Parnell's testimony, Petitioners offered actuarial analyses of general and professional liability in long-term care performed by AON Risk Consultants, Inc. (AON) on behalf of the American Health Care Association. The AON studies analyzed nationwide trends in GL/PL for long-term care, and also examined state-specific issues for eight states identified as leading the trends in claim activity, including Florida. They provided an historical perspective of GL/PL claims in Florida during the audit period. The 2002 AON study for Florida was based on participation by entities representing 52 percent of all Florida nursing home beds. The study provided a "Loss Cost per Occupied Bed" showing GL/PL liability claims losses on a per bed basis. The 2002 study placed the loss cost for nursing homes in Florida at $10,800 per bed for the year 2001. The 2003 AON study, based on participation by entities representing 54 percent of Florida nursing home beds, placed the loss cost for nursing homes in Florida at $11,810 per bed for the year 2002. The studies showed that the cost per bed of GL/PL losses is materially higher in Florida than the rest of the United States. The nationwide loss per bed was $2,360 for the year 2001 and $2,880 for the year 2002. The GL/PL loss costs for Texas were the second-highest in the country, yet were far lower than the per bed loss for Florida ($5,460 for the year 2001 and $6,310 for the year 2002). Finally, Petitioners point to the Mature Care Policies as evidence of the crisis in GL/PL insurance availability. The aforementioned SB 1202 instituted a requirement that nursing homes maintain liability insurance coverage as a condition of licensure. See Section 22, Chapter 2001-45, Laws of Florida, codified at Subsection 400.141(20), Florida Statutes. To satisfy this requirement, Petitioners entered the commercial insurance market and purchased insurance policies for each of the 14 Palm Gardens facilities from a carrier named Mature Care Insurance Company. The policies carried a $25,000 policy limit, with a policy premium of $34,000. These were the kind of "bare bones" policies referenced by the Joint Select Committee's 2004 report. The fact that the policies cost more than they could ever pay out led Mr. Swindling, Petitioners' health care accounting and Medicaid reimbursement expert, to opine that a prudent nursing home operator in Florida at that time would not have purchased insurance, but for the statutory requirement.7 The Mature Care Policies were "bare bones" policies designed to provide minimal compliance with the statutory liability insurance coverage requirement. The policies cost Petitioners more than $37,000 in premium payments, taxes, and fees, in exchange for policy limits of $25,000. In its examination, AHCA disallowed the difference between the cost of the policy and the policy limits, then prorated the allowable costs because the audit period was nine months long and the premium paid for the Mature Care Policies was for 12 months. AHCA based its disallowance on Section 2161.A of the Manual, particularly the language which states: "Insurance premiums reimbursement is limited to the amount of aggregate coverage offered in the insurance policy." Petitioners responded that they did not enter the market and voluntarily pay a premium in excess of the policy limits. They were statutorily required to purchase this minimal amount of insurance; they were required to purchase a 12-month policy; they paid the market price8; and they should not be penalized for complying with the statute. Petitioners contend they should be reimbursed the full amount of the premiums for the Mature Care Policies, as their cost of statutory compliance. Returning to the issue of the contingent liabilities, Petitioners contend that, in light of the state of the market for GL/PL liability insurance during the audit period, AHCA should have gone beyond the strictures of the Manual to conclude that GAAP principles render the accrued contingent liabilities an allowable expense. Under GAAP, a contingent loss is a loss that is probable and can be reasonably estimated. An estimated loss from a loss contingency may be accrued by a charge to income. Statement of Financial Accounting Standards No. 5 ("FAS No. 5"), Accounting for Contingencies, provides several examples of loss contingencies, including "pending or threatened litigation" and "actual or possible claims and assessments." Petitioners assert that the contingent losses reported in their cost reports were actual costs incurred by Petitioners. The AICPA Audit and Accounting Guide for Health Care Organizations, Section 8.05, provides: The ultimate costs of malpractice claims, which include costs associated with litigating or settling claims, are accrued when the incidents that give rise to the claims occur. Estimated losses from asserted and unasserted claims are accrued either individually or on a group basis, based on the best estimates of the ultimate costs of the claims and the relationship of past reported incidents to eventual claims payments. All relevant information, including industry experience, the entity's own historical experience, the entity's existing asserted claims, and reported incidents, is used in estimating the expected amount of claims. The accrual includes an estimate of the losses that will result from unreported incidents, which are probable of having occurred before the end of the reporting period. Section 8.10 of AICPA Guide provides: Accrued unpaid claims and expenses that are expected to be paid during the normal operating cycle (generally within one year of the date of the financial statements) are classified as current liabilities. All other accrued unpaid claims and expenses are classified as non-current liabilities. As noted above, Petitioners' audited financial statements for the fiscal years ending December 31, 2002, and December 31, 2003, showed that the accrual was incurred and recorded by Petitioners during the audit period. Mr. Swindling prepared Petitioners' cost reports, based on information provided by Petitioners, including trial balances reflecting their costs, statistics on patient days, cost data related to square footage, and revenue information. Mr. Swindling advised Petitioners to include the accrued losses. He believed that the loss contingency was probable and could be reasonably estimated. The losses were probable because it was "a given in the state of Florida at that time period that nursing homes are going to get sued." Mr. Swindling testified that the accrual reflected a per bed loss amount of $1,750, which he believed to be a reasonable estimate of the contingent liabilities faced by Petitioners during the audit period. This amount was much less than the per bed loss indicated by the AON studies for Florida. Mr. Swindling used the criteria set forth in Section 8.05 of the AICPA Guide to establish the estimate. He determined that the lesser amount was adequate based on his discussions with Petitioners' management, who indicated that they had a substantial risk management program. Management also disclosed to Mr. Swindling that Petitioners' leases required $1,750 per bed in liability coverage. See Finding of Fact 22, supra. Mr. Swindling believed that the estimated loss per bed was reasonable based on the AON studies and his knowledge and experience of the state of the industry in Florida during the audit period, as further reflected in the DOI and Joint Committee on Nursing Homes materials discussed above. Mr. Swindling's opinion was that the provisions of the Manual relating to GL/PL insurance costs do not apply under these circumstances. The costs at issue in this proceeding are not general and professional liability insurance costs subject to CMS Pub. 15-1; rather, they are loss contingencies related to general and professional liability, including defense costs, litigation costs, and settlement costs. Mr. Swindling placed the loss contingency under number 730810, "General and Professional Liability -- Third Party" because, in the finite chart of accounts provided by Medicaid, that was the most appropriate place to record the cost.9 Despite the initial confusion it caused the agency's auditors, the placement of the loss contingency under number 730810 was not intended to deceive the auditors. Mr. Swindling opined that, under these circumstances, Sections 2160 through 2162 are in conflict with other provisions in the Manual relating to the "prudent buyer" concept, and further conflict with the Plan to the extent that the cited regulations "relate to a retrospective system as opposed to prospective target rate-based system." Mr. Swindling agreed that the application of Sections 2160 through 2162 to the situation presented by Petitioners would result in the disallowance of the loss contingencies. Mr. Swindling observed, however, that Sections 2160 through 2162 are Medicare regulations. Mr. Swindling testified that Medicare reimbursements are made on a retrospective basis.10 Were this situation to occur in Medicare -- in which the provider did not obtain commercial insurance, self-insurance, or establish a captive insurer -- the provider would be deemed to be operating on a pay-as-you-go basis. Though its costs might be disallowed in the current period, the provider would receive reimbursements in subsequent periods when it could prove actual payment for its losses. Mr. Swindling found a conflict in attempting to apply these Medicare rules to the prospective payment system employed by Florida Medicaid, at least under the circumstances presented by Petitioners' case. Under the prospective system, once the contingent loss is disallowed for the base period, there is no way for Petitioners ever to recover that loss in a subsequent period, even when the contingency is liquidated. During his cross-examination, Mr. Swindling explained his position as follows: . . . Medicare allows for that payment in a subsequent period. Medicaid rules would not allow that payment in the subsequent period; therefore you have conflict in the rules. When you have conflict in the rules, you revert to generally accepted accounting principles. Generally accepted accounting principles are what we did. Q. Where did you find that if there's a conflict in the rules, which I disagree with, but if there is a conflict in the rules, that you follow GAAP? Where did you get that from? I mean, we've talked about it and it's clear on the record that if there is no provision that GAAP applies, but where did you get that if there's a conflict? Just point it out, that would be the easiest way to do it. A. The hierarchy, if you will, requires providers to file costs on the accrual basis of accounting in accordance with generally accepted accounting principles. If there's no rules, in absence of rules -- and I forget what the other terms were, we read it into the record before, against public policy, those kind of things -- or in my professional opinion, if there is a conflict within the rules where the provider can't follow two separate rules at the same time, they're in conflict, then [GAAP] rules what should be recorded and what should be reimbursed. * * * Q. [T]he company accrued a liability of $2 million for the cost reporting period of 2002-2003, is that correct? A. Yes. * * * Q. Do you have any documentation supporting claims paid, actually paid, in 2002-2003 beyond the mature care policy for which that $2 million reserve was set up? A. No. Q. So what did Medicaid pay for? A. Medicaid paid the cost of contingent liabilities that were incurred by the providers and were estimated at $1,750 per bed. Generally accepted accounting principles will adjust that going forward every cost reporting period. If that liability in total goes up or down, the differential under [GAAP] goes through the income statement, and expenses either go up or they go down. It's self-correcting, which is similar to what Medicare is doing, only they're doing it on a cash basis. Mr. Swindling explained the "hierarchy" by which allowable costs are determined. The highest governing law is the Federal statutory law, Title XIX of the Social Security Act, 42 U.S.C. Subsection. 1396-1396v. Below the statute come the federal regulations for implementing Title XIX, 42 C.F.R. parts 400-426. Then follow in order Florida statutory law, the relevant Florida Administrative Code provisions, the Plan, the Manual, and, at the bottom of the hierarchy, GAAP. Mr. Swindling testified that in reality, a cost report is not prepared from the top of the hierarchy down; rather, GAAP is the starting point for the preparation of any cost report. The statutes, rules, the Plan and the Manual are then consulted to exclude specific cost items otherwise allowable under GAAP. In the absence of an applicable rule, or in a situation in which there is a conflict between rules in the hierarchy such that the provider is unable to comply with both rules, the provider should fall back on GAAP principles as to recording of costs and reimbursement. John A. Owens, currently a consultant in health care finance specializing in Medicaid, worked for AHCA for several years up to 2002, in positions including administrator of the audit services section and bureau chief of the Office of Medicaid Program Analysis. Mr. Owens is a CPA and expert in health care accounting and Medicare/Medicaid reimbursement. Mr. Owens agreed with Mr. Swindling that AHCA's disallowance of the accrued costs for GL/PL liability was improper. Mr. Owens noted that Section 2160 of the Manual requires providers to purchase commercial insurance. If commercial insurance is unavailable, then the Manual gives the provider two choices: self-insure, or establish a captive program. Mr. Owens testified that insurers were fleeing the state during the period in question, and providers were operating without insurance coverage. Based on the state of the market, Petitioners' only options would have been to self-insure or establish a captive. As to self-insurance, Petitioners' problem was that they had taken over the leases on their facilities from a bankrupt predecessor, Integrated Health Services ("IHS"). Petitioners were not in privity with their predecessor. Petitioners had no access to the facilities' loss histories, without which they could not perform an actuarial study or engage a fiduciary to set up a self-insurance plan.11 Similarly, setting up a captive would require finding an administrator and understanding the risk exposure. Mr. Owens testified that a provider would not be allowed to set up a captive without determining actuarial soundness, which was not possible at the time Petitioners took over the 14 IHS facilities. Thus, Petitioners were simply unable to meet the standards established by the Manual. The options provided by the Manual did not contemplate the unique market situation existing in Florida during the audit period, and certainly did not contemplate that situation compounded by the problems faced by a new provider taking over 14 nursing homes from a bankrupt predecessor. Mr. Owens agreed with Mr. Swindling that, under these circumstances, where the requirements of the Manual could not be met, Petitioners were entitled to seek relief under GAAP, FAS No. 5 in particular. In situations where a loss is probable and can be measured, then an accounting entry may be performed to accrue and report that cost. Mr. Owens concluded that Petitioners' accrual was an allowable cost for Medicaid purposes, and explained his rationale as follows: My opinion is, in essence, that since they could not meet -- technically, they just could not meet those requirements laid out by [the Manual], they had to look somewhere to determine some rational basis for developing a cost to put into the cost report, because if they had chosen to do nothing and just moved forward, those rates would be set and there would be nothing in their base year which then establishes their target moving forward. So by at least looking at a rational methodology to accrue the cost, they were able to build something into their base year and have it worked into their target system as they move forward. Steve Diaczyk, an audit evaluation and review analyst for AHCA, testified for the agency as an expert in accounting, auditing, and Medicaid policy. Mr. Diaczyk was the AHCA auditor who reviewed the work of Smiley & Smiley for compliance with Medicaid rules and regulations, and to verify the accuracy of the independent CPA's determinations. Mr. Diaczyk agreed with Mr. Swindling's description of the "hierarchy" by which allowable costs are determined. Mr. Diaczyk affirmed that Petitioners employed GAAP rather than Medicaid regulations in preparing their cost reports. Mr. Diaczyk testified regarding the Notes to Petitioners' audited financial statements, set forth at Findings of Fact 22-24, supra, which left AHCA's auditors with the understanding that Petitioners were self-insuring. Mr. Diaczyk pointed out that Section 2162.7 of the Manual requires a self- insurer to contract with an independent fiduciary to maintain a self-insurance fund, and that the fund must contain monies sufficient to cover anticipated losses. The fiduciary takes title to the funds, the amount of which is determined actuarially. Mr. Diaczyk explained that, in reimbursing a provider for self-insurance, Medicaid wants to make sure that the provider has actually put money into the fund, and has not just set up a fund on its books and called it "self-insurance" for reimbursement purposes. AHCA's position is that it would be a windfall for a provider to obtain reimbursement for an accrued liability when it has not actually set the money aside and funded the risk. Medicaid wants the risk transferred off of the provider's books and on to the self-insurance fund. Mr. Diaczyk testified as to the differing objectives of Medicaid and GAAP. Medicaid is concerned with reimbursing costs, and is therefore especially sensitive regarding the overstatement of costs. Medicaid wants to reimburse a provider for only those costs that have actually been paid. GAAP, on the other hand, is about report presentation for a business entity and is concerned chiefly with avoiding the understatement of expenses and overstatement of revenue. Under GAAP, an entity may accrue a cost and not pay it for years. In the case of a contingent liability, the entity may book the cost and never actually pay it. Mr. Diaczyk described the self-insurance and liquidation provisions of 42 C.F.R. Section 413.100, "Special treatment of certain accrued costs." The federal rule essentially allows accrued costs to be claimed for reimbursement, but only if they are "liquidated timely." Subsection (c)(2)(viii) of the rule provides that accrued liability related to contributions to a self-insurance program must be liquidated within 75 days after the close of the cost reporting period. To obtain reimbursement, Petitioners would have had to liquidate their accrued liability for GL/PL insurance within 75 days of the end of the audit period. Mr. Diaczyk also noted that, even if the 75-day requirement were not applicable, the general requirement of Section 2305.2 of the Manual would apply. Section 2305.2 requires that all short-term liabilities must be liquidated within one year after the end of the cost reporting period in which the liability is incurred, with some exceptions not applicable in this case. Petitioners' accrued liability for general and professional liability insurance was not funded or liquidated for more than one year after the cost reporting period. It was a contingent liability that might never be paid. Therefore, Mr. Diaczyk stated, reimbursement was not in keeping with Medicaid's goal to reimburse providers for actual paid costs, not for potential costs that may never be paid. Petitioners responded that their accrued liabilities constituted non-current liabilities, items that under normal circumstances will not be liquidated within one year. Mr. Parnell testified that there is great variation in how long it takes for a general and professional liability claim against a nursing home to mature to the point of payment to the claimant. He testified that a "short" timeline would be from two to four years, and that some claims may take from eight to eleven years to mature. From these facts, Petitioners urge that 42 C.F.R. Section 413.100 and Section 2305.2 of the Manual are inapplicable to their situation. As to Section 2305.2 in particular, Petitioners point to Section 2305.A, the general liquidation of liabilities provision to which Section 2305.2 provides the exceptions discussed above. The last sentence of Section 2305.A provides that, where the liability is not liquidated within one year, or does not qualify under the exceptions set forth in Sections 2305.1 and 2305.2, then "the cost incurred for the related goods and services is not allowable in the cost reporting period when the liability is incurred, but is allowable in the cost reporting period when the liquidation of the liability occurs." (Emphasis added.) Petitioners argue that the underscored language supports the Medicare/Medicaid distinction urged by Mr. Swindling. In its usual Medicare retroactive reimbursement context, Section 2305.2 would operate merely to postpone reimbursement until the cost period in which the liability is liquidated. Applied to this Medicaid prospective reimbursement situation, Section 2305.2 would unfairly deny Petitioners any reimbursement at all by excluding the liability from the base rate. Mr. Diaczyk explained that, where the Medicaid rules address a category of costs, the allowable costs in a provider's cost report are limited to those defined as allowable by the applicable rules. He stated that if there is a policy in the Manual that addresses an item of cost, the provider must use the Manual provision; the provider cannot use GAAP to determine that cost item. In this case, Mr. Diaczyk agreed with Ms. Smiley as to the applicable rules and the disallowance of Petitioners' contingent liability costs. According to Mr. Diaczyk, GAAP may be used only if no provisions farther up the chain of the "hierarchy" are applicable. In this case, the Medicaid rules specifically addressed the categories of cost in question, meaning that GAAP did not apply. Under cross-examination, Mr. Diaczyk testified that the accrual made by Petitioners in their cost reports would be considered actual costs under GAAP, "[a]ssuming that they had an actuarial study done to come up with the $1.7 million that they accrued." Mr. Diaczyk acknowledged that AICPA Audit and Accounting Guide for Health Care Organizations, Section 8.05, does not limit the provider to an actuarial study in estimating losses from asserted and unasserted claims. See Finding of Fact 49, supra, for text of Section 8.05. Mr. Diaczyk pointed out that the problem in this case was that Petitioners gave AHCA no documentation to support their estimate of the accrual, despite the auditor's request that Petitioners provide documentation to support their costs. Mr. Diaczyk's testimony raised a parallel issue to Mr. Swindling's concern that Medicaid's prospective targeting system permanently excludes any item of cost not included in the base rate. Mr. Swindling solved the apparent contradiction in employing Medicare rules in the Medicaid scenario by applying GAAP principles. Responding to the criticism that GAAP could provide a windfall to Petitioners by reimbursing them for accrued costs that might never actually result in payment, Mr. Swindling responded that GAAP principles would adjust the cost for contingent liabilities going forward, "truing up" the financial statements in subsequent reporting periods. This truing up process would have the added advantage of obviating the agency's requirement for firm documentation of the initial accrual. Mr. Swindling's "truing up" scenario under GAAP would undoubtedly correct Petitioners' financial statements. However, Mr. Swindling did not explain how the truing up of the financial statements would translate into a correction of Petitioners' reimbursement rate.12 If costs excluded from the base rate cannot be added to future rate adjustments, then costs incorrectly included in the base rate would also presumably remain in the facility's rate going forward.13 Thus, Mr. Swindling's point regarding the self-correcting nature of the GAAP reporting procedures did not really respond to AHCA's concerns about Petitioners' receiving a windfall in their base rate by including the accrual for contingent liabilities. On April 19, 2005, Petitioners entered into a captive insurance program. Petitioners' captive is a claims-made GL/PL policy with limits of $1 million per occurrence and $3 million in the aggregate. Under the terms of the policy, "claims-made" refers to a claim made by Petitioners to the insurance company, not a claim made by a nursing home resident alleging damages. The effective date of the policy is from April 21, 2005, through April 21, 2006, with a retroactive feature that covers any claims for incidents back to June 29, 2002, a date that corresponds to Petitioners' first day of operation and participation in the Medicaid program. The Petitioners' paid $3,376,906 for this policy on April 22, 2005. Mr. Parnell testified that April 2005 was the earliest time that the 14 Palm Gardens facilities could have established this form of insurance program. In summary, the evidence presented at the hearing regarding the contingent liabilities established that Petitioners took over the 14 Palm Gardens facilities after the bankruptcy of the previous owner. Petitioners were faced with the virtual certainty of substantial GL/PL expenses in operating the facilities, and also faced with a Florida nursing home environment market in which commercial professional liability insurance was virtually unavailable. Lacking loss history information from their bankrupt predecessor, Petitioners were unable to self-insure or establish a captive program until 2005. Petitioners understood that if they did not include their GL/PL expenses in their initial cost report, those expenses would be excluded from the base rate and could never be recovered. Petitioners' leases for the facilities required them to fund a self-insurance reserve at a per bed minimum amount of $1,750. Based on the AON studies and the general state of the industry at the time, Petitioners' accountant concluded that, under GAAP principles, $1,750 per bed was a reasonable, conservative estimate of Petitioners' GL/PL loss contingency exposure for the audit period.14 Based on all the evidence, it is found that Petitioners' cost estimate was reasonable and should be accepted by the agency. Petitioners included their GL/PL loss contingency expenses in their initial Medicaid cost report, placing those expenses under a heading indicating the purchase of insurance from a third party. The notes to Petitioners' audited financial statements stated that the facilities were "essentially self- insured." These factors led AHCA to request documentation of Petitioners' self-insurance. Petitioners conceded that they were not self-insured and carried no liability insurance aside from the Mature Care policies. The parties had little dispute as to the facts summarized above. The parties also agreed as to the applicability of the "hierarchy" by which allowable costs are determined. Their disagreement rests solely on the manner in which the principles of the hierarchy should be applied to the unique situation presented by Petitioners in these cases.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that AHCA enter a final order that allows Petitioners' accrual of expenses for contingent liability under the category of general and professional liability ("GL/PL") insurance, and that disallows the Mature Care policy premium amounts in excess of the policy limits, prorated for a nine- month period. DONE AND ENTERED this 24th day of October, 2008, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of October, 2008.
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that the Respondent, the Department of Administration, enter a final order denying coverage for the orthodontia recommended for Sandra Walsh. RECOMMENDED this 18th day of March, 1988, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of March, 1988.
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
