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> Document 538 : INS 99-14 : Hearing Decision
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION BUREAU OF INSURANCE
In his Order on Applicants’ Request to Compel Responses to Discovery Requests ("Order"), the Superintendent denied Applicants’ Motion to Compel, but "in recognition of the need for information prior to the hearing as to the issues to be addressed", also ordered all intervenors to designate issues on or before March 3, 2000. "The designations [were to] provide a detailed summary of the specific issues which each intervenor will address [and] [t]he issues identified must fall within the general standards set forth in the Notice of Hearing." Several intervenors filed designations, including Maine Medical Association ("MMA"), MHA, Inc. ("MHA"), Maine Ambulatory Care Coalition ("MACC") and, jointly, the Consumers for Affordable Healthcare Coalition ("CAHC") and Maine Counsel of Senior Citizens ("MCSC"). For the reasons set forth below, several of the "issues" identified by the intervenors are not within relevant statutory criteria or otherwise do not comply with the Superintendent’s Order. Anthem requests that the Superintendent strike, or otherwise preclude the intervenors from offering evidence concerning, such "issues."
I. Issues Raised That Are Irrelevant To The Applicable Statutory Criteria A. MMA In its designation, the MMA identified several "issues" that are not within the scope of the relevant statutory criteria. MMA Issue
Objection This statement assumes that the Applicants have the burden of proving that BCBSME cannot survive unless this transaction is approved; or that there is no alternative for BCBSME, except the proposed acquisition by Anthem. No such statutory requirement exists. The Boards of Directors of BCBSME and Anthem have determined that is in the companies’ respective best interests to enter into the Asset Purchase Agreement. None of the applicable statutory criteria for approval of this transaction, including 24-A M.R.S.A. §§222, 2301, 3476, 3483, 3484, are dependent on a showing of any inability of BCBSME to "financially recover" or "operate successfully." Had the Legislature intended such a requirement, it presumably would have expressly included it in relevant statutory provisions.
MMA Issue
MMA Issue
Objection The proposed transaction contemplates acquisition of substantially all of the assets and business of BCBSME by a Maine stock company, Anthem Health Plans of Maine, Inc. d/b/a Anthem BCBS, the bulk reinsurance of BCBSME’s policies, and the continued operation of the purchased business in Maine. Anthem BCBS will, of course, be subject to continued oversight by the Bureau as provided by the Insurance Code. While Anthem is developing a regional structure to enhance and support its New England operations, it is not required to operate a regional system, and has no statutory "burden" to "integrate" BCBSME into a regional system. Similarly, there is no statutory requirement that Anthem demonstrate that "integration of Blue Cross plans in Connecticut, New Hampshire and Maine would lead to administrative efficiencies or superior operations."
MMA Issue
Objection In its Response to the Provider Intervenors’ First Discovery Request, Anthem stated:
(Id., response to question no.2 (emphasis added); See also Anthem’s responses to question nos. 7, 17, 19, 22, 30 & 34.) In light of Anthem’s stated intent to step into BCBSME’s shoes with respect to existing provider contracts, there is no relevance in this proceeding to the provisions of provider contract terms in other markets. The future negotiation of provider contracts is not within the relevant statutory inquiries. BCBSME, as well as other insurers in this State, are currently free and would be expected to, subject to any relevant provisions of the Insurance Code, negotiate terms with providers at the time of contract renewal. There is nothing in the Insurance Code which justifies different treatment for Anthem. Anthem respectfully suggests that the Superintendent has enough to consider in this proceeding with the relevant statutory inquiries, without entertaining the distraction of determining the propriety of as yet undefined and unidentified terms of potential future contracts with providers. MMA Issue
Objection For many of the same reasons articulated above concerning the MMA’s "Provider Agreements" issue, this issue does not belong in this proceeding. MMA first suggests there is a statutory burden on the Anthem where none exists. Moreover, since Anthem proposes to acquire substantially all of BCBSME’s assets, it will be in a position to utilize any advantages provided by existing information or data management systems currently available to BCBSME and its providers. Finally, even if there were evidence to support the MMA’s inference (which there is not), the connection between Anthem’s "information systems or data management systems," the purported inadequacy of which would jeopardize medical practices, which in turn would put physicians at risk of losing their practices, which in turn could jeopardize the health of plan enrollees, is attenuated at best. The MMA’s conclusory statement of this "issue" also sheds no real light on what "inadequate data to manage downstream risk" is supposed to mean or include. This does not comply with the Superintendent’s Order, which at page 1 provides that the intervenors must provide "a detailed summary of the specific issues which each intervenor will address") (emphasis supplied). MMA Issue
Objection Anthem does not understand this issue as stated, and is thus incapable of adequately responding to it even if it fell within any of the relevant statutory criteria. If it is intended to relate to the issue of whether the transaction "would tend to affect adversely the contractual obligations of BCBSME or its two HMO subsidiaries, Maine Partners and Central Maine Partners", it has previously been noted that BCBSME has existing contracts with providers and Anthem intends to honor them. MMA apparently seeks to inject into this proceeding the public policy issue of whether there should be a State law or regulation requiring insurers to provide "security" for payment of services. The consideration of such issues is for the Legislature or rulemaking proceedings. The Insurance Code does not contemplate the Superintendent’s creation of ad hoc regulations of this sort, which would affect only one insurer in the market, in an adjudicatory proceeding. MMA Issue
Objection These two issues together suggest that the Superintendent (1) should require capital to be infused from Anthem (presumably from subsidiaries in other states), while at the same time (2) prohibiting any transfer of capital from Anthem Health Plans of Maine, Inc. to its parent company (and hence to its other subsidiaries). This proposition, if applied in all states, would essentially freeze the movement of capital and ultimately dictate "stand-alone" insurers in individual states. One of the main benefits of a large, multi-regional company is the ability to withstand local or regional economic, industry or competitive pressures that a single location healthcare company could not, and the ability to move capital among the companies is essential to realize those benefits. Transfers between affiliates are specifically addressed in 24-A M.R.S.A. §222(9)(C) of the Insurance Code, which provides that a registered insurer’s surplus to policyholders following any dividends or distributions to stockholder affiliates must be reasonable in relation to the insurer’s liabilities and adequate to its financial needs. Section 222(10) identifies the adequacy factors to be considered in determining whether the insurer’s surplus is reasonable. Other provisions place restrictions on the payment of extraordinary dividends and other distributions. See Sections 222(11-A) and 222(11-B). The Legislature, having dealt extensively with distributions in the Code, has not imposed the capital restrictions sought by the MMA, and Anthem respectfully suggests that there is no statutory authority for the Superintendent to do so in this proceeding. The MMA’s suggestion that the Superintendent create special capital transfer limitations in this proceeding, applicable only to Anthem, should be rejected. Moreover, the Insurance Code already affords the Superintendent on-going oversight to examine the financial affairs of any insurer:
24-A M.R.S.A. § 222(1). This oversight authority extends to the payment of extraordinary dividends as well as ensuring adequate surplus in the event a dividend is paid. B. MHA, Inc.
MHA Issue Require Anthem Parent to Guarantee Satisfactory Performance of All insurance and provider contracts and other obligations of Anthem Blue Cross Blue Shield. Objection Please see Applicants’ objection to MMA’s issue regarding provider agreements. MHA Issue Prohibit or Limit Anthem Ability to Upstream or Transfer Maine Resources to other States. Objection Please see Applicants’ objection to MMA’s issue regarding capital transfers. MHA Issue Require Anthem to Continue Distinct Contracts with Distinct Providers. Objection This issue is not within any of the relevant statutory inquiries. Rather, similar to many of the issues raised by the MMA, the MHA seeks to gain concessions in this proceeding concerning future provider contracts. Please see Applicants foregoing objections to MMA’s issue regarding provider agreements. The providers do not currently have a guarantee concerning future contract terms with BCBSME (in the absence of this transaction), and they are not entitled to such a guarantee under the statutory criteria relevant to this proceeding. MHA Issue Require Anthem to Continue Certain Other Provider Contracting Practices of BCBSME. Objection This "issue" is not related to any of the relevant statutory inquiries. The MHA further suggests that the Superintendent condition his approval on Anthem’s agreeing in essence to extend the pre-existing termination dates for the provider contracts for three years from the date of the transaction. The MHA members, of course, have no such guarantee even from BCBSME. For the reasons set forth above, it is wholly inappropriate to attempt to tie approval of this transaction to future contract concessions for the members of the MHA. MHA Issue
Objection In the Asset Purchase Agreement, Anthem has committed to maintaining charitable contributions at $500,000 for two years. (See APA §5.15.) Local management of Anthem BCBS will determine how that money is spent. BCBSME is not currently required by the Bureau to maintain specified levels of charitable contributions or other initiatives. The MHA is essentially requesting that the Superintendent order a change in the Asset Purchase Agreement and require Anthem to spending an additional $4 million in charitable contributions. Although Anthem historically has made significant charitable contributions and expects to continue significant contributions to charitable organizations and initiatives in Maine, the Superintendent should not use this proceeding to legislate requirements that are not legally imposed on BCBSME or other insurers in this State. Additionally, in 5 M.R.S.A.§194-A and 24-A §2301, the Legislature has already determined the manner in which BCBSME’s charitable obligations are to be discharged in connection with the conversion of BCBSME. Following compliance with the statute, BCBSME can be viewed as having been bifurcated between its "charitable" mission to be carried on by the Foundation and its health insurance business to be carried on by Anthem. The statutory scheme does not contemplate or permit the additional restrictions sought by the MHA. MHA Issue
Objection Anthem has stated that it has no current plans to eliminate products that BCBSME now offers. Anthem offers a full range of products in the eight other states where it provides Blue Cross Blue Shield coverage. Future product offerings, however, necessarily must be based on market conditions, policyholder needs, medical costs and other factors which change over time. These same factors would exist for BCBSME, in the absence if this transaction, as for Anthem BCBS if the transaction is concluded. The MHA’s concerns about the availability and marketing of individual and other coverage presents an issue affecting all insurers. This proceeding is not the proper forum to impose special restrictions on only one insurer in the State, particularly when they have not previously been imposed on BCBSME. There is no statutory requirement applicable to this proceeding that authorizes the imposition of such restrictions. MHA Issue
Objection This issue again does not deal with any of the relevant statutory inquiries. BCBSME’s contractual obligations to providers will be unaffected by the transaction, because Anthem has agreed to honor BCBSME’s current provider contracts. With regard to the negotiation of future provider contracts, Anthem notes that "most favored nation" or "prudent buyer" clauses are not generally unlawful, and their competitive effect can only be assessed in light of relevant circumstances at the time, if any, at which they are sought. See, e.g, Ocean State Physicians Health Plan, Inc. v Blue Cross & Blue Shield of Rhode Island, 883 F. 2d 1101,1110 (1st Cir. 1989) (use of prudent buyer clause determined to be competitive as its purpose was to promote lower prices; "[C]ourts . . . should be . . . reluctant to condemn too speedily . . . an arrangement that, on its face, appears to bring low price benefits to the consumer"). (Citations omitted). In any event, the Superintendent has adequate means to address any concerns in the future for all insurers equally involving such clauses under the Unfair Trade Practices Act, 24-A M.R.S.A. §2152. MHA Issue Assure More Public Scrutiny of Financial Analyses and Further Public Input. Objection The MHA apparently contemplates that, after the April hearings, the Superintendent should hold additional public hearings to take additional public testimony and comments about this transaction. Protracting this proceeding beyond the April hearings is unwarranted, unnecessary, and inconsistent with the statutory construct. Since the Applicant’s filing in September of 1999, the Applicants have responded to over 300 discovery requests, many of which contained multiple parts, and have produced thousands of pages of documents relevant to the inquiries before the Superintendent and the intervenors. Intervention status has been granted to 11 intervenors purporting to represent virtually every aspect of public, policyholder, patient and provider interests. The Maine Attorney General, who generally represents the interests of the public, is among them. In addition to being a party to this proceeding, the Attorney General also gathered public comment and input during the charitable trust proceeding in the Superior Court. The Superintendent has placed an unprecedented amount of information about this proceeding and the proposed transaction on the Internet, and has made filings and documents available both at the Bureau of Insurance, and in several locations around the State. The Superintendent has also presided over well-publicized public hearings throughout the State for an entire week. The evidentiary hearing itself will be open to the public. In light of these facts, the MHA’s suggestion that the Superintendent should hold additional public comments sessions after the evidentiary hearings should be rejected. In addition to being unnecessary, the additional delay would be prejudicial to the Applicants and to the public as well. Delay could result in the loss substantial investment income to the charitable trust; delay of the benefits of the transaction, including the enhanced financial stability, support and efficiencies of the affiliation with Anthem; employee loss; and, given BCBSME’s recent financial results, further erosion of the value of the business. Delay is also inconsistent with the governing statutes. Title 24-A directs that a hearing be held within 30 days of the filing a completed application, and that a decision be rendered with 30 days of the hearing. The Legislature thus contemplated an expedition resolution of these proceedings. MHA Issue Urge Full Consideration by BOI of Alternative Valuation Methodologies. Objection The Applicants have complied with the statutory requirement for an independent appraisal by submitting the appraisal of Houlihan Lokey. BCBSME has also provided the Salomon Smith Barney fairness opinion to the Superintendent. The Superintendent himself has retained Arthur Anderson as a valuation consultant, and the Attorney General has retained KPMG, which has issued a report addressing valuation. While full examination of the opinions of Houlihan Lokey is appropriate for the hearing, the request for yet another valuation process is neither warranted nor required by the relevant statutes. If the MHA had suggestions about the methodology for valuing BCBSME, it should have raised them long ago.
The "issues" cited in the CAHC and MCSC’s joint designation ("Joint Designation") are so broad that it is difficult to determine what issue(s) these intervenors do not anticipate addressing at the hearing. The entire Joint Designation simply is not within the letter, or spirit, of the Superintendent’s Order. The point of that order was to fairly apprise the Applicants and Superintendent of the specific issues which the intervenors intend to address at the hearing with a meaningful level of detail. The Superintendent ordered this disclosure as an alternative to the intervenors’ providing all documents, facts and other information relevant to any statutory criterion they intended to address at the hearing, as requested in the Applicants’ Information Requests to Intervenors and their Motion to Compel responses thereto. The Joint Designation is wholly inadequate an should be rejected in its entirety.
Conclusion For the reasons set forth above, the "issues" identified by the intervenors, and addressed herein, should be stricken.
DATED: March 10, 2000
_____________________________ James B. Zimpritch, Esq. Jeffrey M. White, Esq. Catherine R. Connors, Esq. PIERCE ATWOOD Portland, Maine 04101 (207) 791-1100 Attorneys for Anthem Insurance Companies, Inc.
CERTIFICATE OF SERVICE The undersigned hereby certifies that on March 10, 2000 a copy of Anthem Insurance Companies, Inc.’s Objections to Intervenors’ Designations of Issues was served by United States mail, first class postage prepaid, email, or, where indicated, by hand delivery, on each of the persons listed below. Robert S. Frank, Esq. Harvey & Frank Two City Center P.O. Box 126 Portland, Maine 04112 e-mail: frank@harveyfrank.com
(Blue Cross/Blue Shield of Maine) Judith Chamberlain, Esq. State of Maine Department of the Attorney General 6 State House Station Augusta, Maine 04333-0006 e-mail: judy.chamberlain@state.me.us
(Bureau of Insurance) William H. Laubenstein, Esq. State of Maine Department of the Attorney General 6 State House Station Augusta, Maine 04333-0006 e-mail: bill.laubenstein@state.me.us
(Office of the Attorney General) Gregory A. Brodek, Esq. Duane, Morris & Heckscher, LLP 15 Columbia Street, 4th Floor Bangor, Maine 04401-6355 e-mail: gabrodek@duanemorris.com
(Maine Health Alliance) Joseph P. Ditre, Esq. Consumer Health Law Program One Weston Court, Level One P.O. Box 2490 Augusta, Maine 04338-2490 e-mail: jditre@mainecahc.org
(Consumers for Affordable Health Care Foundation/Coalition) Michele M. Garvin, Esq. Ropes & Gray One International Place Boston, Massachusetts 02110-2624 e-mail: Mgarvin@Ropesgray.com
(Central Maine Healthcare Corporation; Central Maine Partners Health Plan) Robert I. Goldman Maine Council of Senior Citizens 27 Bowery Beach Road Cape Elizabeth, Maine 04107 e-mail: Rgoldma1@maine.rr.com
(Maine Council of Senior Citizens) Bonnie Post Executive Director of the Maine Ambulatory Care Coalition P.O. Box 390 Manchester, Maine 04351 e-mail: bdpmacc@mint.net
(Sacopee Valley Health Center, Regional Medical Center at Lubec, Eastport Health Care, Inc., and the Maine Ambulatory Care Coalition) John Dieffenbacher-Krall Executive Director Maine People’s Alliance 192 State Street Portland, Maine 04101 e-mail: MPA@gwi.net
(Maine People’s Alliance) Gordon H. Smith, Esq. Maine Medical Association 30 Association Drive P.O. Box 190 Manchester, Maine 04351 e-mail: gsmith@ctel.net
(Thomas D. Hayward, M.D., Maroulla S. Gleaton, M.D., And the Maine Medical Association)
Donald E. Quigley, Esq. General Counsel 465 Congress Street, Suite 600 Portland, Maine 04101-3537 e-mail: quigld@mail.mmc.org
(Maine Medical Center) Sandra L. Parker, Esq. John Doyle, Jr., Esq. Attorneys for MHA, Inc. 150 Capitol Street Augusta, Maine 04330 e-mail: sparker@themha.org
jdoyle@preti.com (MHA, Inc.) Kellie P. Miller, M.S. Executive Director Maine Osteopathic Association 693 Western Avenue Manchester, Maine 04351 e-mail: meosteo@mint.net
(Maine Osteopathic Association)
DATED: March 10, 2000 _____________________________ James B. Zimpritch, Esq. Jeffrey M. White, Esq. Catherine R. Connors, Esq. PIERCE ATWOOD Portland, Maine 04101 (207) 791-1100 Attorneys for Anthem Insurance Companies, Inc Last Updated: July 16, 2008 |
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