STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE
| IN RE: APPLICATION OF |
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| ASSOCIATED HOSPITAL SERVICE |
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| OF MAINE, d/b/a BLUE CROSS |
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| AND BLUE SHIELD OF MAINE, TO |
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| CONVERT TO A STOCK INSURER |
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| AND VOLUNTARILY LIQUIDATE |
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| AND Dissolve |
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| IN RE: APPLICATION OF ANTHEM |
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APPLICANTS’ RESPONSE TO |
| HEALTH PLAN OF MAINE, INC., |
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INTERVENORS’ POSITIONS ON |
| TO ACQUIRE TO ACQUIRE THE |
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HMO CERTIFICATE OF AUTHORITY |
| ASSETS OF ASSOCIATED |
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| HOSPITAL SERVICE OF MAINE, |
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| d/b/a BLUE CROSS AND BLUE |
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| SHIELD OF MAINE, AND RELATED |
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| TRANSACTIONS |
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| Docket NO. INS 99-14 |
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| (CONSOLIDATED) |
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Introduction
The issue presented is whether Anthem BCBSME must file for an HMO Certificate of
Authority under 24-A M.R.S.A. §4203-04, separate from and in addition to its pending
applications for (1) a Certificate of Authority as a domestic stock insurer pursuant to
24-A M.R.S.A. §§404 et seq., and (2) approval of its acquisition of the business
and assets of BCBSME pursuant to 24-A M.R.S.A. §§222 and 3476.
None of the four Intervenors addressing this question has taken the position that such
an additional, separate filing is necessary. Applicants agree with these Intervenors, and
explain herein why no such filing is required.
- FACTUAL AND PROCEDURAL BACKGROUND
The Notice of Hearing in this proceeding presents twenty-six issues to be considered by
the Superintendent. The last issue is whether "the proposed acquisition of control of
BCBSME and its HMO Maine line of business by Anthem requires compliance with the filing
and approval requirements of the Maine Insurance Code with respect to a health maintenance
organization (24-A M.R.S.A. §§4203-04.)" (Notice of Hearing, dated Nov. 5, 1999,
Section III, p. 4, ¶26.)
In a letter dated November 15, 1999, the Superintendent directed any party who believed
that "Anthem is required to make the filings required by 24-A M.R.S.A. §4203-4204 to
file a written legal brief supporting its contention." Four Intervenors responded;
none submitted a written legal brief contending that a separate Section 4203-04 proceeding
is required. Instead, they took the following positions:
- The Attorney General ("AG"). The AG indicated that, before he could
take a position on this issue, he "would need to understand fully Anthem
BCBSME’s plans for operating an HMO ‘as a line of business that BCBSME presently
operates’ and the basis of Anthem BCBSME’s position that it does not have to
comply with the filing requirements of" Sections 4203 and 4204. In other words, the
AG seeks further information. (Memorandum of Attorney General on Application of 24-A
M.R.S.A. §§4203-04, dated Nov. 22, 1999.)
- Maine Medical Association ("MMA"). The MMA also took no position on
whether the intact transfer of HMO Maine required a Section 4203-04 filing. In so stating,
it noted the additional, potentially unnecessary, costs of such a filing. It did posit
that the Superintendent and parties should be able to inquire of Anthem’s ability to
meet the requirements of these statutes, and listed specific issues on which it thought
inquiry would be appropriate. In sum, the MMA believes that the Superintendent and parties
should make an inquiry subsuming the Section 4203-04 concerns within this proceeding, and
recommends that the issue presented in Paragraph III(26) be changed to "whether,
after the proposed change of control, Anthem Health Plan could satisfy the requirements
for the issuance of a Certificate of Authority under the Maine HMO Act (24-A M.R.S.A.
§§4203-04.)" (Maine Medical Association’s Motion to Amend the HMO Certificate
of Authority Standard of Review in Paragraph III(26) of the Notice of Hearing, dated Nov.
23, 1999.)
- Consumers for Affordable Health Care Coalition ("CAHC"). CAHC supports
the MMA’s proposed amendment of the Paragraph III(26) issue. It also suggested that:
(a) all the information required under Sections 4203-04 be provided to the Superintendent
and parties in some filing; (b) Applicants index this information; and (c) the
Superintendents and the parties have the opportunity to review this information.
(CAHC’s Response to Superintendent’s Letter Regarding 24-A MRSA §§4203-4204
Filing Requirements Dated November 15, 1999.)
- Maine Ambulatory Care Coalition ("MACC"). MACC agreed with the other
Intervenors that the additional costs of a Section 4203-04 filing could outweigh its
value, and took no position on whether such a filing was required. It agreed with CAHC and
MMA that this proceeding should include the ability to inquire as to Anthem’s ability
to meet these statutory requirements, and concurred with the MMA’s proposal as to
amending Paragraph III(26). (Maine Ambulatory Care Coalition’s Response to
Superintendent’s Letter Regarding 24-A MRSA §§4203-4204 Filing Requirements Dated
November 15, 1999.)
Applicants respond to these positions below. Briefly, Applicants agree: (1) no good
purpose would be served by a separate Section 4203-04 proceeding; (2) such a separate
review would only add unnecessary costs and delay – for the Bureau, Applicants and
Intervenors - - and distract them from the core issues presented by the acquisition; and
(3) the Superintendent is authorized, separate from Sections 4203-04 and pursuant to 24-A
M.R.S.A. §§222, 414 and 3476, to investigate all pertinent HMO issues.
The only topic that appears to need further discussion is how the Superintendent should
address any HMO issues in this proceeding. Additionally, in respect to the AG’s
comments, Applicants set forth herein the legal base why no separate HMO licensing
proceeding is required. As discussed below, the HMO Certificate of Authority issues to be
addressed in this proceeding pursuant to Sections 222, 404 et seq. and 3476 do not
involve a de novo review. Rather, the Superintendent’s inquiry should focus on
the impact, if any, the acquisition will have on the HMO line of business.
- DISCUSSION
- THE RELEVANT HMO CERTIFICATE OF AUTHORITY INQUIRIES ARE SUBSUMED IN THE EXISTING
PROCEEDING.
Anthem’s acquisition involves three HMOs: (1) Maine Partners Health Plan,
Inc.; (2) Central Maine Partners Health Plan, Inc; and (3) BCBSME’s HMO line of
business ("HMO Maine"). Maine Partners and Central Maine Partners are separate,
50%-owned subsidiaries of BCBSME.
Maine Partners and Central Maine Partners are both free-standing HMOs, with their own
HMO Certificates of Authority issued under Chapter 56 of the Insurance Code. (See
Appendices 1 and 2, respectively, attached hereto.) BCBSME has a Certificate of Authority
issued pursuant to Title 24, Chapter 19. (Appendix 3 hereto.) BCBSME acquired its own HMO
line of business when it merged with HMO Maine in 1994. HMO Maine originally had its own
HMO Certificate of Authority; BCBSME succeeded to HMO Maine’s authority pursuant P.L.
1993, c. 702, Section A-30, which mirrors current 24-A M.R.S.A. §4205-A.
Under the Asset Purchase Agreement effecting the Anthem acquisition, Anthem is
purchasing 50% of the stock of Maine Partners and Central Maine Partners. While purchasing
BCBSME’s assets, not its stock, Anthem proposes no material change as to how the HMO
line of business is operated. As to this last point, with respect to Anthem BCBSME’s post-closing operation
of BCBSME’s HMO line of business, Anthem BCBSME represents that it will maintain
those HMO operations without change, adhering to all pertinent rules and regulations,
unless: (1) specific approval for a change is sought from the Bureau of Insurance which
would currently require an approval were BCBSME making it; or (2) a change in structure or
operation is specifically identified in Anthem’s submissions to the Bureau in
connection with this proceeding. This representation includes the promise to maintain
BCBSME’s Quality Assurance Program and Standards, Access Plan and provider networks,
provider credentialing standards, utilization review standards, grievance and appeals
procedures and benefits plans. Anthem has also agreed to exercise commercially reasonable
efforts to maintain NCQA accreditation for Anthem BCBSME for at least two years following
the acquisition.
Under the Title 24-A provisions already triggered by Anthem’s acquisition, Anthem
BCBSME, the new subsidiary to be formed to own these assets and subsidiaries, will have to
obtain its own Certificate of Authority to be a domestic stock insurer under 24-A M.R.S.A.
§§413 et seq., with authority to do health insurance and operate the HMO Maine
line of business.
To obtain this Section 413 insurer Certificate of Authority, Anthem BCBSME will
have to meet broad regulatory requirements, including, inter alia, compliance with
Title 24-A as a whole (24-A M.R.S.A. §406) and standards of competence, honesty and
trustworthiness (24-A M.R.S.A. §407). Anthem BCBSME must also produce evidence
satisfactory to the Superintendent that "its methods of operation are not such as
would render its proposed operation hazardous to the public or its policyholders."
(24-A M.R.S.A. §414(1).) Under Section 414(1), the Superintendent may properly inquire,
in determining whether to issue a Certificate of Authority to Anthem BCBSME as a domestic
stock insurer, into the impact, if any, of the Anthem acquisition on BCBSME’s HMO
line of business.
Thus, for example, under the Section 413 licensing process, the Superintendent could
require Anthem BCBSME’s insurer Certificate of Authority to include a condition
requiring no change to the BCBSME HMO line of business, except as described in the Anthem
BCBSME representation set forth above. In other words, the Superintendent has ample
authority under the Section 413 licensing provisions to address the kinds of concerns
underlying Section 4203-04.
In addition, also under the Title 24-A provisions already triggered in this proceeding,
the Superintendent will not approve the acquisition if he finds, inter alia,, under
24-A M.R.S.A. §§222(7)(A)(1) and (4), that:
(1) After the change of control [from BCBSME to Anthem], the domestic insurer [BCBSME,
Maine Partners and Central Maine Partners] could not satisfy the requirements for the
issuance of a Certificate of Authority according to requirements in force at the time of
the issuance, or last renewal or continuation of its Certificate of Authority to do the
insurance business which it intends to transact in this State.
…
(4) The plans or proposals which the acquiring person has … to make any other
major change in its business or corporate structure or management, are unfair or
prejudicial to policyholders.
In sum, under the statutory review standards already triggered in this proceeding, the
Superintendent has broad, flexible regulatory powers that expressly include the ability to
investigate the impact of the acquisition on the two HMOs and BCBSME’s HMO line of
business. The issues which might otherwise be addressed in an independent proceeding under
Sections 4203-04 are subsumed in what Anthem BCBSME must already show in this proceeding.
The Superintendent will specifically determine whether the acquisition of control could
somehow undermine BCBSME, Maine Partners or Central Maine Partners’ ability to meet
the standards they met to obtain their own Certificates of Authority.
Thus, as the Intervenors appear to recognize, there would be no logical, practical or
rational basis for instigating yet another proceeding.
- THE LAW DOES NOT REQUIRE A SEPARATE 4203-04 PROCEEDING HERE.
The next question is how does the law recognize the logical conclusion set forth above
and recognized by all.
There are four independent interpretations of the Insurance Code, each of which
precludes any requirement to undertake a separate Section 4203-04 proceeding:
- Section 4214 provides that insurers may operate HMOs under a Section 414 insurer
Certificate of Authority;
- The Superintendent may approve the transfer of an existing HMO Certificate of Authority
under Sections 4203-04;
- Sections 4203-04 apply only to de novo HMO operations, while Section 222(7)(A)(7)
governs changes in control over existing HMO operations; and/or
- The instant change in control is a de facto merger governed by Section
4205-A.
Each of these interpretations is discussed below.
- Statutory Rules of Construction Militate in Favor of an Interpretation Requiring No
Separate Section 4203-04 Filing.
As a threshold matter, the Superintendent starts from the premise that statutes must be
read rationally. "Reasoning and judgment, not the mere bald literalness of statutory
phrasing, must guide and control research for a judicial legislative design." Town
of Embden v. Madison Water Dist., 713 A.2d 328, 330 (Me. 1998), quoting Inhabitants
of Whiting v. Inhabitants of Lubec, 115 A. 896, 899 (Me. 1922). The Superintendent
begins, therefore, with the premise that he should, if possible, read Title 24-A not to
require a duplicative, superfluous filing. Schwanda v. Bonney, 418 A.2d 163, 166
(Me. 1978) ("In interpreting a statute, courts must presume that the Legislature did
not intend unreasonable or absurd consequences, nor results inimical to the public
interest").
Hence, if, for example, Title 24-A were ambiguous on the issue whether a duplicative
HMO proceeding were required, the statutory language would be construed not to require
such a filing. Clark v. State Emp. Appeals Board, 363 A.2d 735, 738 (Me. 1976)
("when one construction of a statute leads to public mischief or to results inimical
to the public interest which another construction will avoid, the latter is to be favored
unless the terms of the statute absolutely forbid").
With this starting point, it is clear that, here, the operative statutory language can
be read to avoid such unnecessary and costly administrative superfluities.
- Because Maine Partners and Central Maine Partners Involve a Stock Transaction, No
New Certificate of Authority is Required.
Also as a threshold matter, addressing the acquisition of Maine Partners and Central
Maine Partners first, these entities have existing HMO Certificates of Authority, and will
continue to have them after Anthem BCBSME acquires 50% of the stock of each from BCBSME.
The question is whether Anthem BCBSME also needs to obtain an HMO Certificate of Authority
(in addition to its Section 413 insurer Certificate of Authority) in order to become a 50%
stock owner in these entities.
As discussed infra, Section 3, if an entity obtains an insurer Certificate of
Authority under Sections 413 et seq., it does not have to obtain a duplicative HMO
Certificate of Authority. Hence, even if these were not stock acquisitions, and Maine
Partners and Central Maine Partners did not already have their own HMO Certificates of
Authority, Anthem BCBSME would not have to obtain a separate HMO certificate.
In addition, however, the fact that these are stock transactions provides another,
independent basis why Anthem does not need separate and additional HMO Certificates of
Authority as to these two entities.
Section 4203(1), entitled "Establishment of health maintenance
organizations," provides that "A person may not establish, maintain, own, merge
with, organize or operate a health maintenance organization in this State either directly
as a division or a line of business or indirectly through a subsidiary or affiliate …
without obtaining a Certificate of Authority under this chapter." Both Maine Partners
and Central Maine Partners already have Certificates of Authority issued under this
chapter. These entities’ Certificates will be unaffected by the sale of 50% of their
stock from BCBSME to Anthem BCBSME. No language in Section 4203 provides that yet another
HMO Certificate is required for the buyer when it buys stock of entities that
already have such Certificates. Logic confirms that no such requirement should be
read into the statute’s language. Since Certificates of Authority have already been
"obtained," yet another one is not required.
Confirming this statutory construction, no such requirement has been read into Section
4203 in the past. For example, in 1998, Aetna Inc. ("Aetna")
acquired control of NYLCare Health Plans of Maine, Inc. ("NYLCare"). See
Decision and Order, In re Form A Application of Aetna Inc. to Acquire Control of
NYLCare Health Plans of Maine, Inc., a subsidiary of New York Life Insurance Company,
Docket No. INS-98-5 ("Aetna Decision and Order") (attached hereto as Appendix
4.) Aetna acquired the stock of NYLCare, which had its own HMO Certificate of Authority,
without having to apply itself for another, superfluous HMO Certificate. Instead, the
Superintendent properly focused on Section 222 in determining whether to approve the
acquisition.
Similarly, when CIGNA Health Corporation ("CIGNA") gained control of
Healthsource Maine, Inc., ("Healthsource Maine"), a Maine licensed HMO, by
purchasing the stock of Healthsource Maine’s parent company, CIGNA did not obtain its
own HMO Certificate of Authority. See Amended Decision and Order, In re Form A
Filing of Cigna Health Corporation, acting through CHC Acquisition Corp., to Acquire
Control of Healthsource Maine, Inc., a subsidiary of Healthsource Inc., Docket No.
INS-97-4 ("CIGNA Decision and Order"), attached hereto as Appendix 5. Again, the
Superintendent’s inquiry focused on Section 222.
In sum, nothing in Title 24-A requires the issuance of yet another HMO Certificate of
Authority to the buyer when a stock acquisition is involved, and there is no reason to
read such a requirement into Section 4203.
- Four Independent Statutory Interpretations All Reject the Need for a New,
Separate HMO Licensing Proceedings Here.
- Interpretation #1: Under Section 4214, an entity with an insurer Certificate of
Authority need not obtain a duplicative HMO Certificate.
Unlike Maine Partners and Central Maine Partners, the BCBSME HMO line of business (HMO
Maine) is not now, and will not after the acquisition become, a stand-alone business.
Anthem BCBSME is buying BCSME’s HMO line of business intact, as a unitary group of
operating assets and liabilities; it is not purchasing stock. While Anthem will not be
changing how the BCBSME HMO line of business operates, see supra, that line of
business will become a part of the new Anthem BCBSME.
The question presented is whether this difference – purchase of unitary assets
versus stock -- alters the circumstances, so that Anthem BCBSME must obtain its own HMO
Certificate of Authority, in a separate proceeding under Sections 4203-04, as well as an
insurer Certificate of Authority under Sections 413 et seq.
Looking at the language of Section 4214, harmonized with Section 4203 and Title 24-A as
a whole, the answer to this question is no. See Town of North Yarmouth v.
Moulton, 710 A.2d 252, 254 (Me. 1998) ("in interpreting a statute, [the
court] must consider the entire statutory scheme in order to achieve a harmonious
result"), citing Daniels v. Tew Mac Aero Servs., Inc., 675 A.2d 984, 987 (Me.
1996).
Section 4214 provides in relevant part:
§ 4214. Powers of insurers and nonprofit hospital or medical service corporations.
1. Subject to the provisions of sections 222, 3479 to 3482 and chapters 13 and 13-A
[24-A M.R.S.A. §§1101 and 1151 et seq.], an insurance company licensed in this
State or a nonprofit hospital, medical or health care service organization may
establish, maintain, own, merge with, organize and operate a health maintenance
organization under this chapter, either directly as a division or line of business,
or indirectly through a subsidiary or affiliate…. The business of an insurer
or hospital or medical service corporation that establishes, maintains, owns,
merges with, organizes or operates a health maintenance organization is considered to
include the providing of health care by a health maintenance organization.
(emphasis supplied).
This language can reasonably be read to mean that if an insurance company obtains a
Section 413 insurance license in Maine, it may own and operate an HMO as a line of
business. There is no need to acquire yet another license for the HMO portion of its
business.
In theory, this language might be read not to excuse the licensed insurer from
obtaining another, specific HMO license. The language could be deemed ambiguous. But any
such ambiguity, as noted above, must be resolved to give the language a rational
interpretation, and to avoid unreasonable results. As discussed above, it would be
unreasonable to read this language and Title 24-A in general to require a superfluous HMO
certificate and licensing proceeding. The inquiry can end at this point.
This statutory interpretation, however, is confirmed by that fact that other
statutory language throughout the Insurance Code would be rendered superfluous if Section
4214 is not read to bring insurers outside the ambit of Sections 4203-04. A fundamental
rule of statutory construction is that a statute must be read harmoniously not only with
other statutes, but internally. See Bolduc v. Androscoggin County Commissioners,
485 A.2d 655, 658 (Me. 1984) ("sections of a statute must be read together as a
single piece of legislation to reach a harmonious interpretation"). For example, Section 4214(1-A) provides:
A domestic insurer that establishes, maintains, merges with or organizes and
operates a health maintenance organization as a division or line of business is
governed in its investment of funds allocated to that line of business by
the provisions of section 4204, subsection 3-A.
(emphasis supplied).
If an insurer had to obtain a separate HMO Certificate of Authority for its HMO line of
business, there would simply be no need for this provision. Section 4204 would already
apply to the HMO line of business. See Handy Man Equipment Rental Co. Inc. v.
City of Portland, 1999 ME 20, ¶9, 724 A.2d 605, 607 ("It is an axiom of
statutory interpretation that words must be given meaning and are not to be treated as
meaningless and superfluous").
Similarly, 24-A M.R.S.A. §410(1)(F) provides, "A health maintenance organization
as a division or line of business is subject to this paragraph." The paragraph goes
on to describe the surplus required for insurers operating an HMO as a division or line of
business (Section 410(1)(F)(1)). If the framework of Title 24-A required an insurer to
obtain two distinct certificates of authority, with two separate lines of statutory
requirements applying to each, as if the insurer were two different entities, an insurer
and an HMO, this type of statutory provision, treating the insurer as one entity with an
HMO line within it, and explaining what specific, additional rules applied to that HMO
business, would be superfluous. See also 24-A M.R.S.A. §423-B (provision requiring
financial reporting that would be rendered superfluous if separate Section 4203-04 filing
were required). See generally Struck v. Hackett, 668 A.2d 411, 412
(Me. 1995) (construing language in one statute in a way not to render language in another
meaningless).
Finally, 24-A M.R.S.A. §11 provides: "Provisions of this Title as to a
particular kind of insurance, type of insurer or matter shall prevail over provisions
relating to insurance, insurers or matters in general." Examining the relationship
between Sections 4214 and 4203, one section (4203) treats the ownership of HMOs by any
legal entity ("person" is defined to include "any legal entity").
The other section (4214) specifically addresses to the operation/ownership of HMOs by licensed
insurers. Under Section 11, the more specific Section 4214 prevails over Section 4203.
Section 4214 governs the involvement of already licensed insurers with respect to their
involvement in the HMO market.
In addition to this statutory language, the legislative history of the 1994 amendments
to the Insurance Code provides still further confirmation of this interpretation. As
discussed in more detail in Appendix 6, this history shows a clear legislative intent to
ensure that the specific statutory provisions listed in Section 4214(1) (viz.,
sections 222, 3479 to 3482 and chapters 13 and 13-A) apply to insurers’ HMO
businesses operate pursuant to the insurers’ general certificates of authority. Such
an intent is directly contrary to requiring an insurer to obtain a separate HMO
certificate.
Applicants underscore that the fact that insurers need not obtain duplicative HMO
certificates of authority for their HMO lines of business does not mean that an
insurer with a Section 413 certificate can, ipso facto, operate an HMO without
further Bureau inquiry. The Section 413 certificate would also have to encompass HMO
operations as a type of authorized insurance business for that insurer, and, under
Sections 413 et seq.,the Superintendent properly inquires into the same kinds
of issues identified in Chapter 56, by analogy (just as he applies the pertinent portions
of Chapter 230 of his Rules by analogy to certificates of authority for domestic insurers
in the first place). Properly construed, consistent with its express language, other
sections of the Code, legislative history, tools of statutory construction, and sheer
logic, Section 4214 simply recognizes that licensed insurers are already subject to
comprehensive, heightened regulatory control and oversight by the Bureau.
- Interpretation #2: Anthem BCBSME May Obtain BCBSME’s Certificate by
Transfer.
Again, we start from the premise that any ambiguous provisions in the Insurance Code
must be construed reasonably, to effect a legislative intent to avoid unnecessary costs
and filings.
Under the Asset Purchase Agreement ("APA") triggering this proceeding, Anthem
is purchasing all of BCBSME’s operating assets and assuming all of its operating
liabilities pertinent to Anthem BCBSME’s ongoing operation of the businesses
currently operated by BCBSME. (APA, §§2.01(a), 2.02(a).) Included in this purchase are: all municipal, state and federal franchises, licenses, permits, agreements, waivers and
authorizations held or used by [BCBSME] in connection with, or required for, the Business,
to the extent transferable.
(Id., §2.01(a)(xiv).)
This APA language presents the question whether the Certificate allowing BCBSME to
operate its HMO line of business is transferable to Anthem. If so, these transfers would
obviate the need for Anthem BCBSME to apply for yet another HMO Certificate of Authority
under Sections 4203 and 4204.
As noted above, Section 4214 removes this transaction from the application of Section
4203 entirely. Additionally and alternatively, however, if somehow Section 4203 still
applied, Section 4203(1) requires a "person" (which would include Anthem BCBSME,
see Section 4202(A)(15)) to "obtain[] a Certificate of Authority under this
chapter" (emphasis supplied).
As noted above, the Superintendent previously approved the Aetna and Cigna stock
acquisitions without the acquirer having to apply for a new HMO Certificate. The existing
Certificates remained effective. Hence, to the extent the acquirers had to
"obtain" a Certificate of Authority under Chapter 56, they did so by virtue of
acquiring the HMO Certificates of NYLCare and Healthsource Maine. The stock transactions
achieved any necessary transfer of the existing Certificates.
No logical reason exists why such a transfer cannot similarly be achieved through a
unitary asset purchase. Focusing on the language of the statute, Section 4203(1) provides
that a person must "obtain" a Chapter 56 Certificate of Authority. It does not
state that this acquisition must come through a de novo Chapter 56 proceeding. The
Section does not prohibit acquisition by transfer.
Thus, once again, the statutory language is, at most, ambiguous, and the question
presented is whether this ambiguity can and should reasonably be resolved by permitting
the transfer in the existing proceeding. For the reasons set forth above, logic dictates
that the answer is yes. Section 222 provides the protections Sections 4203 and 4204 were
designed to obtain, and applies to asset transfers.
This conclusion is confirmed by looking to analogous situations addressed by other
Maine agencies. License transfers are permitted without any explicit statutory permission;
the transfer power is, as it should be here, found to be implicit in the governing
agencies’ authority.
For example, the statute governing the Land Use Regulation Commission
("LURC"), 12 M.R.S.A. §685-B, requires a developer to have a development permit
issued by LURC. When a property under development is transferred to a new developer, that
party must then have a development permit. The statute is silent regarding LURC's
authority to permit the transfer of a development permit to the successor developer. Yet
LURC regularly authorizes transfers of these permits, acting under its implied authority
to do so.
Similarly, the Department of Environmental Protection (DEP) issues permits to parties
engaged in a host of activities. The DEP statutes, 38 M.R.S.A.§§341-A et seq.,
expressly authorize transfers of wastewater discharge and landfill permits (38 M.R.S.A.
§§413(3), 1310-Q), but are silent regarding the DEP's authority generally to
permit other transfers. Nevertheless, acting on its implied authority, the DEP has
formalized its general permit transfer practices in a formal rule. (DEP Reg. 2.17.) If the
DEP lacked the implied statutory power to allow permit transfers, the rule would be
invalid -- which it is not.
Thus, the statutory powers of the Superintendent can reasonably be read to include a
similar transfer authority. Sections 4203 and 4204 give the Superintendent the power to
issue HMO certificates of authority in the first place. 24-A M.R.S.A. §4216 bestows upon
the Superintendent the power to suspend or revoke such certificates. If the Superintendent
can issue the certificates, and can revoke or suspend them, implicit in this power –
as with LURC and the DEP – is the power to permit their transfer.
- Interpretation #3: Section 4203 Does Not Apply to Unitary Asset
Transfers of HMO Businesses When There Are No Material Changes in The Business.
As noted above, Anthem is purchasing all of BCBSME’s assets en masse. Anthem
BCBSME is acquiring all BCBSME assets pertinent to its ongoing insurance
operations, including its HMO business, and is assuming all BCBSME liabilities,
including contracts, pertinent to its ongoing insurance and HMO operations. Except for
requisite infusions of capital from Anthem, at the closing Anthem BCBSME will have no
other business, assets or liabilities. In short, the transaction is the functional
equivalent of the stock acquisitions described above involving NYLCare and Healthsource
Maine, requiring no new issuance of HMO certificates.
Nothing in the Insurance Code requires the Superintendent to put form over substance
and require a new certificate for a unitary asset transfer when one is not required for a
stock acquisition. Such disparate treatment would be arbitrary and capricious.
Rather, Chapter 56, read as a whole, covers de novo establishments of HMOs, or
other transactions where there are material entity changes, e.g., mergers
and consolidations, with entities that have other business operations. See, e.g.,
24-A M.R.S.A. §§4202-4205-A. The chapter is silent as to unitary asset transfers of
existing HMOs to newly-formed insurers. This silence again renders the statute ambiguous.
The next question is thus whether it is reasonable for the Superintendent to construe
Section 4203 not to apply to such unitary transfers. Again, given the coverage of Sections
222 and 413 et seq., such a construction would be reasonable and should be adopted.
Such a construction is also specifically supported by Section 4205-A. This section
provides: When a health maintenance organization authorized pursuant to this chapter merges or
consolidates with an insurer or a nonprofit hospital, medical or health care service
organization and operations of the surviving entity include those of a health maintenance
organization, the surviving entity succeeds on a continuing basis to the authority
possessed by the merging entities if:
- Plan approved. The superintendent has approved the plan of merger or consolidation,
pursuant to section 4203, subsection 1;
- Entity financially qualified. The entity is financially qualified pursuant to the
provisions of sections 410 and 4204-A; and
- Entity otherwise qualified. The entity is otherwise qualified pursuant to this
chapter.
Thus, Section 4205-A provides for an abbreviated proceeding, less burdensome than an
ordinary Section 4204 proceeding, when a merger or consolidation is involved. This
framework reflects an intent that the full-blown Section 4204 process not apply when the
transaction involves an existing licensed HMO.
Here, existing licensed HMOs are involved. Following the purpose of Section 4205-A,
there is no reason to subject this transaction to a full Section 4203-04 proceeding
treatment. Here, moreover, the existing HMO operations will be unchanged. See supra,
p. 6. Logically, such a transaction should be subject to less, not more, scrutiny than
that for mergers and consolidations under Section 4205-A.
It follows that the Superintendent can reasonably construe Sections 222 and 4203 to
4205-A together, harmoniously, so that unitary asset transfers involving no material
change in HMO operations do not trigger any review under Chapter 56. Rather, the more
specific language of Section 222 applies.
Put differently, Section 4203-04 applies to new HMO businesses, or instances when there
are material changes in the HMO business. Section 222(7)(A)(7) applies to changes in
control, including changes affecting existing HMO businesses. Reading Section 222
harmoniously with Sections 4203-04, the more particular Section 222(7)(A)(7) applies to
changes in control of existing HMOs, while Sections 4203-04 apply when a new (or altered)
HMO business is involved. See 24-A M.R.S.A.§11, discussed supra, pursuant
to which the more particular term prevails over the more general in the Insurance Code.
- Interpretation #4: At Most, This is a De Facto Merger Governed by Section
4205-A.
Section 4205-A does not define what "merges or
consolidates" means for the purposes of that section. Given, as noted above, the
intent reflected in Section 4205-A that an abbreviated review apply when an existing,
licensed HMO merges or consolidates, it follows that, at a minimum, the review given to an
unitary asset transfer should not be more extensive than that for a conventional merger or
consolidation. The Superintendent, therefore, should construe the term "merges"
under Section 4205-A to include de facto mergers, such as the instant unitary asset
transfer.
Such an interpretation is not only reasonable for all the reasons noted above, but
comports with general legal understanding. See Black’s Law Dictionary, definition
of "merger," at 1003, sub-heading "de facto merger" ("A
transaction that has the economic effect of a statutory merger but that is cast in the
form of an acquisition or sale of assets or voting stock. Although such a transaction does
not meet the statutory requirements for a merger, a court will generally treat it as a
statutory merger for purposes of the appraisal remedy") (7th ed. 1999).
Under this interpretation, Anthem BCBSME would have to meet the following three
criteria of Section 4205-A -- all of which are already being addressed in the instant
proceeding:
- Plan approval. The Superintendent would have to approve BCBSME’s Plan of
Conversion and associated transactions (including the Plan of Liquidation and
Anthem’s applications for its Certificate of Authority and change of control).
- Financial qualification. This Section 4205-A criterion is expressly
already subsumed in Section 410(1)(F)(1), which, like Section 4205-A, cross-references
Section 4204-A.
- Otherwise qualified. This Section 4205-A criterion – that Anthem BCBSME be
"otherwise qualified" is met because (a) Anthem BCBSME meets the definition of a
"person" under Section 4202-A(15); and (b) Anthem BCBSME will have to obtain an
insurer’s Certificate of Authority under Sections 413 et seq.
In short, the criteria of Section 4205-A are already subsumed in the instant
proceeding.
This fact, logically, not only allows any "separate" Section 4205-A
proceeding easily to be added to the instant proceeding, but underscores the conclusion,
discussed in Section II.B.3, that an insurer need not undertake both a Section 222 and a
Section 4205-A proceeding in the first place. If the same factors are examined in a
Section 4205-A proceeding as are examined in a Section 222 proceeding, why would the
Legislature require two duplicative proceedings?
- Summary
Whichever interpretation(s) the Superintendent finds appropriate, the ultimate result
seems beyond peradvanture: no duplicative Section 4203-04 proceeding is required. Applying
the language of the Code, rules of statutory construction, legislative history and logic,
the Superintendent should either construe the Insurance Code as not requiring any separate
filing, or, at most, should interpret unitary asset transfers as de facto mergers
requiring a Section 4205-A filing, and deem that filing as consolidated in the instant
proceedings.
- THE IMPACT OF THE CONCLUSION THAT A SEPARATE SECTION 4203-04 PROCEEDING IS NOT REQUIRED.
Accepting that a sufficient legal basis exists not to require a separate Section
4203-04 filing, the final question is how the Superintendent should address any Section
4203-04-type concern that Intervenors may have as to this transaction. In other words,
with the understanding that the statutes already triggered by this acquisition proceeding
already provide a framework to address the same type of concerns that are addressed in
Section 4203-04 proceedings, how should any such concerns be addressed here?
CAHC has proposed a process by which explicit mapping of Section 4203-04 issues is
undertaken. Other Intervenors more generally indicate a desire to raise specific concerns
that reflect issues addressed in a Section 4203-04 proceeding.
Applicants believe that CAHC’s approach would not only be unnecessarily burdensome
as a practical matter, but is inconsistent with the legal premise that the Insurance Code
contemplates two different lines of proceeding: one for an insurance certificate and
acquisition; another for establishment of only an HMO business. Under the CAHC’s
approach, this proceeding would functionally become two proceedings, which is not the
Code’s intent.
The relevant statutory language is 24-A M.R.S.A. §222(7)(A)(1). The acquisition should
be approved unless, inter alia: After the change of control [from BCBSME to Anthem], the domestic insurer [BCBSME,
Maine Partners and Central Maine Partners] could not satisfy the requirements for the
issuance of a Certificate of Authority according to requirements in force at the time of
the issuance, or last renewal or continuation of its Certificate of Authority to do the
insurance business which it intends to transact in this State.
As noted above, Maine Partners and Central Maine Partners have existing HMO
Certificates, and BCBSME has a general insurance license and inherited HMO Maine’s
authority under P.L. 1993, c. 702, Section A-30, mirroring Section 4205-A. Under Section
222(7)(A)(1), the relevant inquiry is whether the change of control from BCBSME to Anthem
would impact the validity of these existing Certificates and authorizations.
A few Intervenors have recommended formally changing the language of the Notice of
Hearing to alter the issue set forth in Section III(26). This approach is misdirected, and
would be a costly and unnecessary exercise for multiple reasons.
First, to the extent Intervenors are calling for issuance of an amended Notice, the
expense of issuing such an amended Notice is already known to all. Second, the issue as
presented in the existing Notice properly presented the question whether the HMO
certificate filing is required, and should now be answered – no. Third, all the
concerns Intervenors may have as to Maine Partners, Central Maine Partners, and Anthem
BCBSME’s HMO line of business are not only already subsumed in the statutory reviews
already triggered in this preceding, but in the specific questions set forth among the
Notice’s other 25 issues. See Notice of Hearing, Section III, ¶¶(1),
(3)-(10), (13), (19-21).
The inquiry, as presented in these 25 issues, will properly focus on the impact of the
change of control on any aspect of the existing entities’ Certificates of Authority
and the concomitant HMO businesses associated with those Certificates.
CONCLUSION
For the reasons set forth above, the Superintendent should conclude that Applicants
need not make a separate filing under 24-A M.R.S.A. §4203 and 4204.
DATED: November 30, 1999
____________________________________
James B. Zimpritch, Esq.
Catherine R. Connors, Esq.
Attorney for Anthem Insurance Companies, Inc. PIERCE ATWOOD
One Monument Square
Portland, ME 04101
(207) 791-1100
Robert S. Frank, Esq.
Attorney for Blue Cross and Blue Shield of Maine HARVEY & FRANK
Two City center, Fourth Floor
Portland, Maine 04101
(207) 775-1300
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on November 24, 1999, a copy of the
Applicants’ Response to Public Intervenors’ Proposal for Coordination was served
by United States mail, first class postage prepaid, on each of the persons listed below.
Robert S. Frank, Esq.
Harvey & Frank
Two City center
P.O. Box 126
Portland, Maine 04112
(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
(Counsel to the Superintendent)
William H. Laubenstein, Esq.
State of Maine
Department of the Attorney General
6 State House Station
Augusta, Maine 04333-0006
(Office of the Attorney General)
Gregory A. Brodek, Esq.
Duane, Morris & Heckscher, LLP
15 Columbia Street, 4th Floor
Bangor, Maine 04401-6355
(Maine Health Alliance)
Andrew B. MacLean, Esq.
Maine Medical Association
Frank O. Stred Building
P.O. Box 190
Manchester, Maine 04351
(Thomas D. Hayward, M.D.,
Maroulla S. Gleaton, M.D.,
and the Maine Medical Association)
Joseph P. Ditre, Esq.
Consumer Health Law Program
One Weston Court, Level One
P.O. Box 2490
Augusta, Maine 04338-2490(Consumers for Affordable Health Care Foundation/Coalition)
Michele M. Garvin, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(Central Maine Healthcare Corporation)
Robert I. Goldman
Maine Council of Senior Citizens
27 Bowery Beach Road
Cape Elizabeth, Maine 04107
(Maine Council of Senior Citizens)
Bonnie Post
Executive Director of the Maine Ambulatory Care Coalition
P.O. Box 390
Manchester, Maine 04351
(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
(Maine People’s Alliance)
DATED: November 30, 1999 _____________________________
James B. Zimpritch, Esq.
Catherine R. Connors, Esq.
PIERCE ATWOOD
One Monument Square
Portland, Maine 04101
(207) 791-1100
Attorneys for Anthem Insurance Companies, Inc.
APPENDIX 6
THE LEGISLATIVE HISTORY SHOWING THAT SECTION 4214 BRINGS INSURERS
OUTSIDE THE SECTION 4203-04 LICENSING PROCESS
In 1994, the Maine Legislature enacted "Act to Promote Flexibility in Health Care
Delivery Systems," or L.D. 1651. L.D. 1651 changed various sections of Titles 24 and
24-A. These changes, as confirmed by their legislative history, show that Title 24-A does
not require an insurer to obtain both a general Certificate of Authority and a separate
HMO Certificate.
In 1993, BCBSME realized that, in order to respond to changes in the health care market
and to continue to offer low-cost effective health care/insurance, it needed to be able to
operate through an HMO. To accomplish this, BCBSME introduced draft legislation to the
Committee on Banking and Insurance, which contained various amendments to Title 24 and
Title 24-A, which covered non-profit hospitals or medical care organizations’ and
insurers’ participation in the HMO market.
In testimony before the Committee on Banking and Insurance, then-Superintendent of
Insurance Brian Atchinson commented that the changes in the market presented policymakers
with the "challenge of responsibly granting regulated entities the operational
flexibility they need to respond to these changing times while maintaining high standards
of public protection." (Testimony of Brian Atchinson, Superintendent of Insurance,
before Committee on Banking and Insurance, dated Feb. 24, 1994; emphasis supplied). He
went on to recognize that the Insurance Code sets forth a rigorous set of standards that
apply to "health insurance entities and all insurance companies," and stated
that the concern as BCBSME changed was maintaining standards of financial stability and
market responsibility. He expressed concern that insurers owning or operating HMOs comply
with investment requirements and financial reporting mechanisms. Id. at 14.
In a letter to the Committee, William Sterling, Associate Counsel of John Alden
Insurance Company, expressed his company’s support for the idea behind L.D. 1651
– "that adequately regulated risk assuming entities should be allowed to offer
the same kinds of managed care products and services as any other similarly regulated
company, such as a licensed HMO." (Letter from W. Sterling, Associate Counsel, John
Alden Insurance Co. to Sen. Dale McCormick and Rep. Edward L. Pineau, co-chairs of the
Banking and Insurance Committee, dated Feb. 23, 1994). His company’s argument was
that all insurers, not just BCBSME, should be able to effectively participate in the
medical care market. He suggested that all insurers be able to participate in managed care
services, but be regulated by criteria drawn from HMO laws. See id.
Thus, the purpose of these statutory changes was to allow already highly regulated
companies (insurers) to participate in the managed care market, while maintaining adequate
regulatory standards. L.D. 1651 provided the flexibility insurers needed to involve
themselves in the HMO business, while maintaining regulatory safeguards. The intent
demonstrated in the legislative history, and by these statutory amendments, was expressly
to apply certain HMO requirements to insurers. The intent was not to require an
additional, separate and duplicative licensing scheme for an insurer’s HMO line of
business.
Consistent with this intent, the amendments to Title 24-A contained in L.D. 1651
expressly provide that certain HMO rules apply to insurers’ HMO lines of business.
Some of these provisions have already been noted, supra, e.g., Section 410.
(See Summary of Changes, describing Section 410 as "[c]larif[ying] capital and
surplus requirements for insurers or Title 24 corporations with HMO operations").
Focusing on Section 4214, as originally enacted in 1975, this section provided, in
relevant part, that "[a]n insurance company licensed in this State or nonprofit
hospital or medical service organization may, either directly or through a subsidiary or
affiliate, organize and operate a health maintenance organization under this
chapter." BCBSME’s proposed amendment to Section 4214 in 1994 added the
following underlined language: "Notwithstanding any other law that may be
inconsistent herewith, an insurance company licensed in this state . . . may
establish; maintain; own …". (Proposed Amendment, Blue Cross and Blue Shield of
Maine, Committee on Banking and Insurance, dated Feb. 24, 1994, contained in Committee
file.)
In the end, based on Bureau of Insurance input, the operative language was amended as
follows: "Subject to the provisions of Sections 222, 3479 to 3482 and Chapters 13
and 13-A of this Title . . . an insurance company licensed in this State . . . may
establish….". (See Bureau Markup of Blue Cross’s March 4 Draft, dated March
9, 1994, contained in Committee file).
Thus, BCBSME suggested a change to Section 4214 that underscored insurers’ ability
to operate HMO lines of businesses without the need for a second, separate HMO Certificate
of Authority. The Legislature ultimately adopted the Bureau’s refinement of this
proposed change, which expressly identifies sections of the Insurance Code with which
insurers must comply to operate these lines of businesses. These clarifications,
specifically identifying the statutes applicable to an insurer’s HMO line of
business, are consistent with a statutory framework that envisions an HMO line of business
within a licensed insurer.
Notably, the amendments to Section 4214, listing which HMO Code provisions apply to
insurers, do not enumerate Section 4202-03, or Chapter 56 generally. Applying the
"handy tool" of statutory construction, "expressio unius est exclusio
alterius," we do not read into Section 4214 any statutory provisions not
expressly referenced therein. Westcott v. Allstate Ins., 397 A.2d 156, 168 (Me.
1979) (noting that this tool may be used to ascertain the intention of the lawmaking
body).
Another change in the Insurance Code enacted through Section L.D. 1651 similarly
demonstrates no intent to require insurers to obtain separate, superfluous HMO
certificates. The 1994 amendments added Section 704-A to Title 24-A. This section states,
"For the purposes of this Title, ‘health maintenance organization’ is
defined in section 4202-A, subsection 10." This section appears in Chapter 9,
subchapter I, of Title 24-A, which is entitled "Kinds of Insurance." The
legislative history to Section 704-A explains that its purpose is to denote "HMO as a
kind of insurance," which "is necessary to make license authority provisions
work." (See Summary of Changes).
In other words, HMO business is identified as a type of insurance, so that insurers can
carry out that business under their general licenses. (See Response supra, p.15,
n.5)
Last Updated:
October 1, 2008
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