IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

ENTERPRISE LIFE INSURANCE COMPANY, et al.,

Plaintiffs/Appellants,

v.

STATE OF ARIZONA DEPARTMENT OF INSURANCE,

Defendant/Appellee.

No. 1 CA-CV 19-0359 

Appeal from the Superior Court in Maricopa County

No. LC2018-000254-001

The Honorable Patricia A. Starr, Judge

VACATED

COUNSEL

Kutak Rock, LLP, Scottsdale

By S. David Childers, Tasha N. Cycholl, Jennifer L. Kraham, 

Paul S. Gerding, Jr.

Counsel for Plaintiffs/Appellants

Arizona Attorney General's Office, Phoenix

By Lynette J. Evans

Counsel for Defendant/Appellee

FILED 3-26-2020
ENTERPRISE LIFE, et al. v. ADOI

Opinion of the Court

2

OPINION

Judge James B. Morse Jr. delivered the opinion of the Court, in which 

Presiding Judge David D. Weinzweig and Judge Jennifer M. Perkins joined.

M O R S E, Judge:

¶1 The Arizona Department of Insurance ("ADOI") found that 

Enterprise Life Insurance Company ("Enterprise") and National 

Foundation Life Insurance Company ("National") (collectively, "the 

companies") exited the Arizona individual health insurance market and 

were therefore prohibited from transacting business in the Arizona market 

for five years. The companies unsuccessfully challenged the ADOI's 

decision in the superior court and now appeal. Because A.R.S. § 20-1380 

does not provide the ADOI with the authority to force the companies to exit 

the market, we vacate the ADOI's order.

FACTS AND PROCEDURAL BACKGROUND

¶2 Currently, the companies provide in-force health insurance 

policies that are labeled as "grandfathered" and "transitional" by the Patient 

Protection and Affordable Care Act ("ACA"). 42 U.S.C. § 18011; 45 CFR § 

147.140(a)(1)(i). "Grandfathered" policies are those that were sold prior to 

the signing of the ACA in March of 2010. "Transitional" policies are those 

that were sold after the ACA was passed, but before its provisions went 

into effect on January 1, 2014. Both types of policies are somewhat unusual 

because they are exempt from the substantive and procedural requirements 

of the ACA. 45 CFR § 147.140(c)(1); 29 CFR § 2590.715-1251(c). So long as 

these policies continue to be offered for renewal by the insurer, existing 

customers can renew and continue this coverage. Important for our 

purposes, this renewal process takes place outside of the regulatory 

framework and ACA individual market ("ACA market"). 

¶3 While "grandfathered" policies may continue to be offered for 

renewal in perpetuity without ACA compliance, "transitional" policies 

must eventually comply with the ACA. The ACA first mandated that all 

"transitional" policies must be replaced with ACA-compliant essential 

health benefit policies ("EHB policies") by January 1, 2014. The Centers for 

Medicare and Medicaid Services ("CMS") have extended that deadline 

multiple times, most recently to January 1, 2020. 
ENTERPRISE LIFE, et al. v. ADOI

Opinion of the Court

3

¶4 The ever-changing deadline led the companies to believe the 

ACA required them to make new EHB policies available to their

"grandfathered" and "transitional" customers. Accordingly, the companies 

filed rates with the ADOI to offer new EHB policies from 2015 to 2017, but 

no one purchased the EHB policies. The companies continued to renew the 

"grandfathered" and "transitional" policies for existing customers, relying 

on the extensions granted by the CMS. 

¶5 After the CMS extended the deadline to January 2019, the 

companies chose to discontinue offering new EHB policies, and instead 

only renewed their existing "grandfathered" and "transitional" policies. 

Accordingly, the companies did not file EHB policy rates with the ADOI by 

the June 1, 2017, deadline. 

¶6 In October of 2017 the ADOI sent the companies a letter 

explaining that by "failing to file plan year 2018 rates," the companies had 

provided the ADOI "with constructive notice of their intent to exit the 

individual market." The letter then directed the companies to terminate all 

in-force "grandfathered" and "transitional" policies by December 31, 2017,

and take further steps to properly exit the market. 

¶7 The companies appealed to the Office of Administrative 

Hearings. At the evidentiary hearing, an ADOI assistant director, testified

that when an insurer files EHB rates with the ADOI, it is then required by 

federal regulations to offer ACA compliant policies in the ACA market for 

that year. Thus, according to the ADOI, when the companies filed EHB 

rates between 2015 and 2017, they effectively entered "the ACA individual 

health insurance marketplace" and became subject to what the agency 

describes as the market exit provision of A.R.S. § 20-1380(D). That statute 

provides as follows:

D. If a health care insurer elects to discontinue offering all 

health insurance coverage in the individual market in this 

state, the health care insurer may discontinue that coverage 

only if all of the following occur:

1. The health care insurer gives notice to the director at least 

five business days before the health care insurer gives notice 

to each individual of the intention to discontinue offering 

health insurance coverage in the individual market in this 

state.
ENTERPRISE LIFE, et al. v. ADOI

Opinion of the Court

4

2. The health care insurer provides notice to each individual 

of that discontinuation at least one hundred eighty days 

before the date of the expiration of that coverage.

3. The health care insurer discontinues all individual 

insurance or coverage that was issued or delivered for 

issuance in this state and does not renew any coverage that 

was offered or sold in this state.

¶8 According to the ADOI, when the companies failed to file 

EHB rates they, "elect[ed] to discontinue offering all health care insurance 

in the individual market," and A.R.S. § 20-1380(D) allows the ADOI to force

them from Arizona's individual insurance market entirely. The companies 

challenged the ADOI's interpretation of the statute, and argued that 

because the companies were still offering to renew their "grandfathered"

and "transitional" policies to existing customers, they had not

"discontinue[d] offering all health insurance coverage in the individual 

market." A.R.S. § 20-1380(D) (emphasis added).

¶9 The ADOI responded that renewed policies are distinguished 

from new policies and "grandfathered" and "transitional" policies are 

"closed blocks of business," not offered or available for purchase in the 

individual marketplace. The Administrative Law Judge ("ALJ") disagreed 

and reasoned that the term "offering all" includes both "the offering of the 

sale of new policies and the offer to renew existing policies." As such, the

ALJ found the ADOI failed to establish: (1) that the companies exited the 

market pursuant to the statute and (2) that grounds existed to suspend or 

revoke their certificate to transact business in the state. 

¶10 The ADOI rejected the ALJ's reasoning and decision. The 

ADOI found that the ALJ's decision "overemphasizes the importance of the 

word 'all' in the statute" and should have instead focused on the word 

"offering," which "constitutes an act by the insurer calculated to procure 

new business, not to merely retain existing enrollees." Therefore, under the 

ADOI's interpretation, the companies "elected to discontinue offering all 

health insurance" because they stopped offering new policies in the 

individual market. 

¶11 As a penalty, the ADOI first ordered the companies to 

comply with the remaining market exit provisions enumerated in A.R.S. §

20-1380(D)(1-3). Second, the ADOI barred the companies from the Arizona 

individual health insurance market for a period of five years "as made clear 

by A.R.S. § 20-1380(E)."
ENTERPRISE LIFE, et al. v. ADOI

Opinion of the Court

5

¶12 The companies appealed to the superior court and challenged

the ADOI's interpretation of the statute and corresponding penalties. The 

superior court affirmed, concluding that the word "all" in the statute "most 

logically refers"to offering new "guaranteed available insurance plans," and 

does not include the renewal of existing coverage. Therefore, the superior 

court found that the companies triggered the market exit provisions of the 

statute and must comply with the ADOI's order. The companies timely 

appealed. We have jurisdiction pursuant to A.R.S. § 12-913. 

DISCUSSION

¶13 On appeal, the companies challenge the ADOI's 

interpretation of A.R.S. § 20-1380 and the resulting order. When an 

administrative order is "based on an interpretation of law," this Court 

reviews the agency and superior court's interpretation de novo, Saldate v. 

Montgomery, 228 Ariz. 495, 498, ¶ 10 (App. 2012), and therefore is "not 

bound by the superior court's or the agency's legal conclusions," JHass 

Group L.L.C. v. Ariz. Dep't of Fin. Insts., 238 Ariz. 377, 383, ¶ 20 (App. 2015). 

Further, in interpreting a statute, the primary goal is to determine and give 

effect to the legislature's intent. DeVries v. State, 221 Ariz. 201, 204, ¶ 6 (App. 

2009). And "[t]he best indication of legislative intent is the plain language 

of the statute." Bither v. Country Mut. Ins. Co., 226 Ariz. 198, 200, ¶ 8 (App. 

2010). 

¶14 Moreover, "the degree to which [an agency] can exercise any 

power depends upon the legislature's grant of authority to the agency." 

Facilitec, Inc. v. Hibbs, 206 Ariz. 486, 488, ¶ 10 (2003). Nothing in A.R.S. § 

20-1380 authorizes the ADOI to compel an insurer to exit the market. 

Instead, the ADOI relies on A.R.S. § 20-142(B), which provides that the 

ADOI director "shall have the powers and authority . . . reasonably implied 

from the provisions of this title." The issue is therefore whether A.R.S. § 20-

1380 "reasonably implie[s]" that the ADOI can force the companies to cancel 

their "grandfathered" and "transitional" policies and completely exit 

Arizona's individual insurance market. 

¶15 As reflected in its title, the purpose of A.R.S. § 20-1380 is to 

provide "guaranteed renewability for all individuals[']" health insurance 

coverage. Arizona Senate Fact Sheet, 2000 Reg. Sess. S.B. 1032 (44th Leg., 2nd

Reg. Sess., April 26, 2000). Subsection A enforces this purpose by requiring

insurers to "renew or continue" existing coverage at the individual's 

request. A.R.S. § 20-1380(A). An "insurer may nonrenew or discontinue 

the health insurance coverage of an individual" only for the specific reasons

enumerated in A.R.S. § 20-1380(B). Relevant here, (B)(3) provides an 
ENTERPRISE LIFE, et al. v. ADOI

Opinion of the Court

6

exception when the insurer "has ceased to offer new coverage and has 

discontinued all in-force coverage in the market pursuant to subsection D 

of this section." A.R.S. § 20-1380(B)(3) (emphasis added). This provision 

clarifies that an insurer does not exit the market when it merely "cease[s] to 

offer new coverage" and has not "discontinued all in-force coverage." 

¶16 Subsection D then provides that for an insurer to avail itself 

of the exception to mandatory renewability based on exiting the individual 

health insurance market, it must: (1) provide formal notice to the director; 

(2) provide timely notice to their existing customers; and (3) discontinue all 

individual insurance and not renew any coverage that was offered or sold 

in the state. A.R.S. § 20-1380(D). 

¶17 The ADOI argues that when an insurer ceases to offer new 

coverage in the market, A.R.S. § 20-1380 gives the agency the authority to 

force an insurer to discontinue all in-force coverage pursuant to subsections

B and D outlined above, and then revoke the insurers ability to do business 

in the state for a period of five years pursuant to subsection E.1 But A.R.S. 

§ 20-1380 does not authorize such action. The statute provides a checklist 

of what must be done when the insurer decides to discontinue both new 

and existing coverage. The legislature deployed permissive words ("elect" 

and "may") to authorize the insurer, not the ADOI, to make that decision. 

Beyond that, the statute protects renewability of coverage and does not 

expressly authorize the ADOI to force an insurer to discontinue in-force 

coverage. Therefore, subsections B and D establish a limited mechanism by 

which the insurer may choose to avoid guaranteed renewability under 

subsection A. They do not support the ADOI's proposition that an insurer's 

decision not to offer new coverage triggers the mandatory discontinuation 

of existing coverage. 

¶18 The ADOI also argues that its authority to force an insurer to

discontinue in-force coverage and completely exit the market is "reasonably 

implied" in the statute because otherwise an insurer will never act to 

comply with subsection D. This ignores both the text and purpose of the 

statute. If an insurer does not perform all the prerequisites of subsection D, 

then despite the insurer's preference to cancel existing coverages, an 

individual insured can enforce his or her right to renew an existing policy

1 The ADOI only sought to force non-renewal of the existing 

coverages. The ADOI has not asserted that A.R.S. § 20-1380 provides

express or implied authority to require the companies to continue to offer 

the previously offered new policies in order to renew the existing coverage

policies. 
ENTERPRISE LIFE, et al. v. ADOI

Opinion of the Court

7

pursuant to A.R.S. § 20-1380(A). Thus, the statute provides its own 

incentive for an insurer to comply with subsection D without the ADOI's 

intervention. 

¶19 Rather than protecting existing insureds by providing 

guaranteed renewability of their health insurance coverage, the ADOI's 

order subverts the plain language of A.R.S. § 20-1380 and accomplishes 

precisely the opposite result—forcing the termination of an individual's 

insurance coverage against the wishes of both the insurer and the insured. 

In the end, the ADOI’s claim of statutory authority fails because ADOI is 

seeking to accomplish what an insurer is forbidden from doing under 

subsection A. A.R.S. § 20-1380 provides for guaranteed renewability of 

existing coverage and does not "reasonably imply" that the ADOI can force 

an insurer to terminate or non-renew existing coverage simply because the 

insurer ceases to offer new coverage. 

¶20 The ADOI further contends that if we do not adopt its 

interpretation of A.R.S. § 20-1380, insurers will be able to remain in the 

market without offering new policies. As a result, the ADOI argues that

other insurers would stop offering new insurance policies, causing severe 

harm to the Arizona market. At bottom, the ADOI once again misinterprets 

A.R.S. § 20-1380 as a sword for the agency to wield, when its purpose is to 

shield the individual insured against loss of insurance coverage. 

¶21 Finally, the ADOI contends this interpretation of the statute 

leaves the agency unable to enforce the five-year market ban provision of 

A.R.S. § 20-1380(E). Not so. The statute only provides that the ADOI wait 

until the prerequisites of subsection D have been met before enforcing 

subsection E as a deterrent to an insurer electing to non-renew existing 

coverages by exiting the market. 

¶22 More broadly, the ADOI's arguments ignore the separation of 

powers. The "scope of an agency's power is measured by statute and may 

not be expanded by agency fiat." Cochise County v. Ariz. Health Care Cost 

Containment Sys., 170 Ariz. 443, 445 (App. 1991). "[A]ny excursion" beyond 

what is granted by the legislature "is treated as an usurpation of 

constitutional powers vested only in the major branch of government." 

Hibbs, 206 Ariz. at 488, ¶ 10 (quoting Cochise Cty. v. Kirschner, 171 Ariz. 258, 

261-62 (App. 1992)). If the ADOI is concerned that insurers will not offer 

new policies in Arizona unless the ADOI is empowered to force insurers to 

cancel existing "grandfathered" and "transitional" policies, then it should 

ask the legislature to grant it such power. The ADOI's order, and the well-
ENTERPRISE LIFE, et al. v. ADOI

Opinion of the Court

8

established principle that an agency's power is dependent on a grant of 

statutory authority, cannot coexist. 

¶23 Because the companies have not performed the actions set 

forth in A.R.S. § 20-1380(D), the companies' insureds retain the protections 

of A.R.S. § 20-1380(A) against termination of their insurance. Further, 

neither the plain language of the statute, nor the implied authority derived 

therefrom, provide the ADOI with authority to force the companies to 

terminate existing coverages and take further steps to exit the market. 

Therefore, the ADOI's order requiring the companies to do so is contrary to 

law and must be vacated. 

CONCLUSION

¶24 We vacate the ADOI's order against the companies.