March 1, 2012
Eric A. Cioppa, Superintendent
Maine Bureau of Insurance
34 State House Station
Augusta, ME 04333-0034
Dear Superintendent:
Pursuant to the provisions of 24-A M.R.S.A. §4215 and in conformity with your instructions, a financial examination has been made of
CIGNA HealthCare of Maine, Inc.
with statutory home offices in Falmouth, Maine. The following report is respectfully submitted.
REPORT OF EXAMINATION
CIGNA HealthCare of Maine, Inc.
AS OF
DECEMBER 31, 2010
ACCEPTANCE OF REPORT OF EXAMINATION
WHEREAS a verified Report of Examination of CIGNA HealthCare of Maine, Inc. dated March 1, 2012, was delivered to that insurer on March 23, 2012, and
WHEREAS CIGNA HealthCare of Maine, Inc. and Bureau of Insurance staff have agreed to certain modifications with respect to the Report of Examination, and
WHEREAS I find such modifications proper, and
WHEREAS no hearing with respect to the Report of Examination has been requested by CIGNA HealthCare of Maine, Inc.,
NOW THEREFORE, I accept the Report of Examination as modified and hereby order it placed on file in the Bureau of Insurance as provided for by 24-A M.R.S.A. §226(3).
Dated:
Eric A. Cioppa, Superintendent
Table of Contents
Scope of Examination................................................................................................................................................... 2
Summary of Significant Findings.................................................................................................................................... 2
Prior Examination......................................................................................................................................................... 2
Current Examination..................................................................................................................................................... 2
Subsequent Events....................................................................................................................................................... 2
The Company.............................................................................................................................................................. 3
History......................................................................................................................................................................... 3
Corporate Records...................................................................................................................................................... 3
Corporate Ownership.................................................................................................................................................. 3
Corporate Governance................................................................................................................................................ 3
Code of Conduct and Conflict of Interest..................................................................................................................... 4
Fidelity Bond Insurance............................................................................................................................................... 4
Territory & Plan of Operation...................................................................................................................................... 4
Transactions with Affiliates........................................................................................................................................... 4
Growth of Company.................................................................................................................................................... 5
Reinsurance................................................................................................................................................................. 5
Accounts and Records................................................................................................................................................ 5
Statutory Deposits...................................................................................................................................................... 5
Litigation.................................................................................................................................................................... 5
Financial Statements................................................................................................................................................... 6
Statement of Admitted Assets, Liabilities, and Surplus................................................................................................. 7
Statement of Operations............................................................................................................................................. 8
Statement of Capital and Surplus................................................................................................................................ 9
Conclusion............................................................................................................................................................... 10
The examination of CIGNA HealthCare of Maine, Inc. (hereinafter, “Company”) was performed pursuant to the risk-focused approach promulgated by the National Association of Insurance Commissioners (hereinafter, “NAIC”) and in accordance with the 2011 Financial Condition Examiners Handbook (hereinafter, “FCEH”).
Bureau of Insurance (hereinafter, “Bureau”) planning of this examination considered the voluntary withdrawal of the Company from the Maine market effective December 31, 2010. The Company’s voluntary cessation of business was based on plan of withdrawal approved in advance by the Superintendent. As such, the scope of this examination was impacted due to the steady decline in business and resulting immaterial financial statement account balances reported by the Company at December 31, 2010.
This examination consisted of a review of the Company’s corporate minutes, valuation of assets, determination of loss reserve liabilities, and risk-based requirements in conformity with statutory accounting practices, NAIC guidelines, FCEH, and the laws, rules, and regulations prescribed or permitted by the State of Maine.
The results of this examination present the financial condition of the Company as of December 31, 2010. Comments on various balance sheet items, for purposes of this report, may be limited to matters involving clarification, departures from laws, rules and regulations, and/or significant changes in amounts.
None
None
On October 28, 2011, the Maine Superintendent of Insurance issued a market conduct examination report related to a targeted market conduct examination for the period of January 1, 2005, through December 31, 2008. The purpose of the targeted examination was to assess whether the Company’s mental health and substance abuse benefits were at least equal to those received by a person receiving medical treatment. The market conduct report of examination can be found on the Bureau’s website.
As of the date of this report, the Company was in compliance with the Company’s plan of withdrawal dated April 1, 2009, as approved in the Superintendent’s decision and order dated April 30, 2009.
The Company was incorporated in the State of Maine on March 5, 1986, as Healthsource Maine Inc. pursuant to 13-A M.R.S.A. §403 (repealed) and authorized to transact the business of a health maintenance organization (hereinafter, “HMO”) on January 30, 1987, pursuant to 24-A M.R.S.A. Chapter 56. The Company was purchased by CIGNA Health Corporation in June of 1997. On April 14, 2000, the Company’s articles of incorporation were amended to change the Company’s name to CIGNA HealthCare of Maine, Inc.
The Company’s articles of incorporation, bylaws, and minutes of the board of directors’ meetings held during the period under examination were reviewed.
The Company is a member of a large insurance holding company system. As such, due to the number of entities within the insurance holding company system the abbreviated organizational chart, below, presents only the Company’s immediate, intermediate, and ultimate parents and affiliates at December 31, 2010:
The Company is governed and overseen by its board of directors and the management team of the Company.
As of December 31, 2010, the board of directors of the Company consisted of the following members:
As of December 31, 2010, the officers of the Company consisted of the following individuals:
Title 24-A M.R.S.A. §3413 identifies potential conflict of interest areas. The Company employs a policy of requiring all directors and officers to complete a conflict of interest statement annually to disclose any material interest or affiliation which is likely to be in conflict with his/her official duties and responsibilities with the Company.
A blanket fidelity bond protects the Company. The $5,000,000 fidelity bond maintained by the Company satisfies the NAIC suggested amount of $125,000. The Company also maintains the customary coverage including, but not limited to, property, casualty, and workers compensation.
The Company received its license to provide HMO benefits on January 31, 1987. The Company offered a variety of managed care products and services under commercial plans. The Company was only licensed in the State of Maine.
The Company had the following significant agreements with affiliates at December 31, 2010:
- Management services agreement with CIGNA Health Corporation under which certain administrative services including accounting, underwriting, claims processing, and other support services are provided by the affiliate.
- Investment advisory agreement with CIGNA Investment, Inc. under which the affiliate acts as the Company’s investment advisor.
- Tax sharing agreement with CIGNA Corporation under which the tax provisions are generally computed as if the Company was filing a separate tax return with current credit for net operating losses utilized in the consolidated tax return.
- Line of credit agreement with CIGNA Health Corporation under which the affiliate loans funds to the Company from time to time, to ensure that the operational cash flow needs of the Company are met.
The following table presents certain statistics related to the growth of the Company:
CIGNA Health Corporation subsidiaries, including the Company, are parties to a reinsurance agreement with Connecticut General Life Insurance Company, an affiliate. The reinsurance agreement provides reinsurance coverage for 80% of covered hospital and related services in excess of $150,000 retention per contract year.
Accounts and records were reviewed and tested in order to assess the impact on the Company’s financial condition and conformity to related laws.
Pursuant to 24-A M.R.S.A. §412, the Company maintained the required security deposit(s) with the Treasurer of Maine as follows:
The Company’s legal matters are conducted in-house. The Company does not believe that legal matters currently pending will result in a material judgment against the Company.
The accompanying financial statements fairly present, in all material respects, the Company’s statutory financial position as of December 31, 2010, and statutory results of operations for the period then ended. The financial statements as of December 31, 2009, 2008, 2007, and 2006 are unexamined and are presented for comparative purposes only.
as of December 31, 2010, 2009, 2008, 2007 and 2006
Years Ended December 31, 2010, 2009, 2008, 2007, and 2006
Years Ended December 31, 2010, 2009, 2008, 2007, and 2006
The Company’s financial condition, as reported by management, is reflected in the statements and supporting exhibits contained in this report. The basis of preparation of such statements conforms to laws, rules, and regulations prescribed and/or permitted by the Bureau.
Acknowledgement of cooperation and assistance extended to the examiners by all Company personnel is hereby expressed.
State of Maine
County of Kennebec, SS
Stuart E. Turney, being duly sworn according to law deposes and says that, in accordance with authority vested in him by Eric A. Cioppa, Superintendent of Insurance, pursuant to the Insurance Laws of the State of Maine, he has made an examination of the condition and affairs of the
CIGNA Healthcare of Maine, Inc.
located in Falmouth, Maine as of December 31, 2010, and that the foregoing report of examination subscribed to by him is true to the best of his knowledge and belief. The following examiners from the Bureau of Insurance assisted:
James C. Williams, CPA, CFE, CIE
Debra L. Blaisdell, AFE
________________________
Stuart E. Turney, CPA, AFE
Subscribed and sworn to before me
This _____day of _________, 2012
_______________________
Notary Public
My Commission Expires:
