##### 



BLUE SHIELD
CONTROLLED AFFILIATE LICENSE AGREEMENT
(Includes revisions adopted by Member Plans through their March 15, 2007 meeting)
     1.
    
    GRANT OF LICENSE
   2.
    
    QUALITY CONTROL
  Amended as of November 16, 2000




---



##### 



(i)
    
    change its legal and/or trade names;(ii)
    
    change the geographic area in which it operates;(iii)
    
    change any of the type(s) of businesses in which it engages;
 2




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##### 



(iv)
    
    create, or become liable for by way of guarantee, any indebtedness, other
than indebtedness arising in the ordinary course of business;(v)
    
    sell any assets, except for sales in the ordinary course of business or sales
of equipment no longer useful or being replaced;(vi)
    
    make any loans or advances except in the ordinary course of business;(vii)
    
    enter into any arrangement or agreement with any party directly or indirectly
affiliated with any of the owners or persons or entities with the authority to
select or appoint members or board members of the Controlled Affiliate, other than
the Plan or Plans (excluding owners of stock holdings of under 5% in a publicly
traded Controlled Affiliate);(viii)
    
    conduct any business other than under the Licensed Marks and Name;(ix)
    
    take any action that any Controlling Plan or BCBSA reasonably believes will
adversely affect the Licensed Marks and Name.
    (a)
    
    prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es)
not concur;(b)
    
    exercise control over the policy and operations of the Controlled
Affiliate.
  3




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##### 



3.
    
    SERVICE MARK USE
      4




---



##### 



4.
    
    SUBLICENSING AND ASSIGNMENT
  5.
    
    INFRINGEMENT
  6.
    
    LIABILITY INDEMNIFICATION
  7.
    
    LICENSE TERM
   Amended as of September 14, 2004
 5




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##### 



6




---



##### 



Amended as of March 18, 2004
 7




---



##### 



Amended as of June 16, 2005
 8




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##### 



Amended as June 16, 2005
 9




---



##### 



Amended as of June 16, 2005
 10




---



##### 



8.
    
    DISPUTE RESOLUTION
  9.
    
    LICENSE FEE
  10.
    
    JOINT VENTURE
  Amended as of June 16, 2005
 11




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##### 



11.
    
    NOTICES AND CORRESPONDENCE
  12.
    
    COMPLETE AGREEMENT
  13.
    
    SEVERABILITY
  14.
    
    NONWAIVER
  14A.
    
    VOTING
  Amended as of June 16, 2005
 12




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##### 



13




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##### 



15.
    
    GOVERNING LAW
  16.
    
    HEADINGS
   Controlled Affiliate:By:Date:Plan:By:Date:BLUE CROSS AND BLUE SHIELD ASSOCIATIONBy:Date: 14




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##### 



EXHIBIT A
 CONTROLLED AFFILIATE LICENSE STANDARDS   PREAMBLE
   
    
    Percent of Controlled Affiliate controlled by parent: Greater than 50 percent or 50
percent?
    
    Risk assumption: yes or no?
    
    Medical care delivery: yes or no?
    
    Size of the Controlled Affiliate: If the Controlled Affiliate has health or workers
compensation administration business, does such business constitute 15 percent or more of the
parents and other licensed health subsidiaries member enrollment?
 Amended September 19, 2002
 15




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##### 



EXHIBIT A (continued)
  
    
    A smaller Controlled Affiliate: (1) comprises less than fifteen percent (15%) of
Plans and its licensed Controlled Affiliates total member enrollment (as reported on the
BCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating an
entity seeking licensure as licensed);* or (2) underwrites the indemnity portion of workers
compensation insurance and has total premium revenue less than 15 percent of the sponsoring
Plans net subscription revenue.
 
    
    A larger Controlled Affiliate comprises fifteen percent (15%) or more of Plans and
its licensed Controlled Affiliates total member enrollment (as reported on the BCBSA
Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating an
entity seeking licensure as licensed.)*
  any
  Amended September 19, 2002
 16




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##### 



EXHIBIT A (continued)
 1.
    
    Within thirty (30) days, notify BCBSA of this fact in writing, including evidence that the
Controlled Affiliate meets the minimum liquidity and capital (BCBSA Health Risk-Based
Capital (HRBC) as defined by the NAIC and state-established minimum reserve) requirements of
the larger Controlled Affiliate Financial Responsibility standard; and
 2.
    
    Within six (6) months after reaching or surpassing the fifteen percent (15%) threshold,
demonstrate compliance with all license requirements for a larger Controlled Affiliate.
  
 *
    
    For purposes of this calculation,     Amended September 19, 2002
 17




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##### 



EXHIBIT A (continued)
 STANDARDS FOR LICENSED CONTROLLED AFFILIATES
   More than 50%
    
    
    50%
    
    100% and Primary Business isGovernment Non-Riskò
    
    
    ò
    
    òStandard 1A, 4
    
    
    Standard 1B, 4
    
    Standard 4*,10A
 *
    
    Applicable only if
using the names and
marks. IN ADDITION,
   Yes
    
    
    
    
    
    No÷
    
    ò
    
    ø
    
    ÷
    
    ò
    
    øControlled Affiliate
    
    Controlled Affiliate
    
    Controlled Affiliate
    
    Controlled Affiliate
    
    Controlled Affiliate
    
    Controlledunderwrites any
    
    comprises < 15%
    
    comprises 3 15%
    
    comprises < 15%
    
    comprises 3 15%
    
    Affiliates Primaryindemnity portion
    
    of total member
    
    of total member
    
    of total member
    
    of total member
    
    Business isof workers
    
    enrollment of Plan
    
    enrollment of Plan
    
    enrollment of Plan
    
    enrollment of Plan
    
    Government Non-compensation
    
    and its licensed
    
    and its licensed
    
    and its licensed
    
    and its licensed
    
    Riskinsurance
    
    affiliates, and does
    
    affiliates, and does
    
    affiliates
    
    affiliatesò
    
    not underwrite the
    
    not underwrite theStandards 7A-7E,
    
    indemnity portion of
    
    indemnity portion of
    
    ò
    
    ò
    
    ò12
    
    workers
    
    workerscompensation
    
    compensation
    
    
    
    Standard 6H
    
    Standard 10Binsurance
    
    insuranceò
    
    òStandard 2
    
    Standard 6H
    
    Standard 2(Guidelines 1.1,1.2)
    
    
    
    (Guidelines 1.1,1.3)and Standard 11
    
    
    
    and Standard 11
 IN ADDITION,
  Yes
    
    
    Noò
    
    
    òStandard 3A
    
    
    Standard 3B
 IN ADDITION,
   Yes
    
    
    
    
    
    Noò
    
    ÷
    
    ÷
    
    ò
    
    øStandards 6A-6J
    
    Controlled Affiliate
    
    Controlled Affiliate is
    
    Controlled Affiliate is not a
    
    Controlled Affiliatesis not a former
    
    a former primary
    
    former primary licensee
    
    Primary Business isprimary licensee
    
    licensee
    
    and does not elect to
    
    Government Non-Riskand elects to
    
    
    
    participate in BCBSAparticipate in
    
    ò
    
    national programs
    
    òBCBSA national
    
    
    
    òprogramsòStandards 5,8,9B,12
    
    Standards
5,8,9A,11,12
    
    Standards 5,8,12
    
    Standards 8, 10(C),12
 18




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##### 



EXHIBIT A (continued)
 Standard 1  Organization and Governance
 1A.)
    
    The Standard for more than 50% Plan control is:
  1B.)
    
    The Standard for 50% Plan control is:
  1)
    
    to select members of the Controlled Affiliates governing body having not less than 50% voting
control thereof; and2)
    
    to prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not
concur; and3)
    
    to exercise control over the policy and operations of the Controlled Affiliate at least equal to
that exercised by persons or entities (jointly or individually) other than the Controlling Plan(s).
 19




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##### 



EXHIBIT A (continued)
  
    
    change the geographic area in which it operates
    
    change its legal and/or trade names
    
    change any of the types of businesses in which it engages
    
    create, or become liable for by way of guarantee, any indebtedness, other than
indebtedness arising in the ordinary course of business
    
    sell any assets, except for sales in the ordinary course of business or sales of equipment
no longer useful or being replaced
    
    make any loans or advances except in the ordinary course of business
    
    enter into any arrangement or agreement with any party directly or indirectly affiliated
with any of the owners or persons or entities with the authority to select or appoint members or
board members of the Controlled Affiliate, other than the Plan or Plans (excluding owners of stock
holdings of under 5% in a publicly traded Controlled Affiliate)
    
    conduct any business other than under the Licensed Marks and Name
    
    take any action that any Controlling Plan or BCBSA reasonably believes will adversely
affect the Licensed Marks and Name.
  20




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##### 



EXHIBIT A (continued)
 Standard 2  Financial Responsibility
  Standard 3  State Licensure/Certification
 3A.)
    
    The Standard for a Controlled Affiliate that employs, owns or contracts on a substantially
exclusive basis for medical services is:
  3B.)
    
    The Standard for a Controlled Affiliate that does not employ, own or contract on a
substantially exclusive basis for medical services is:
  Standard 4  Certain Disclosures
  Standard 5  Reports and Records for Certain Smaller Controlled Affiliates
  Amended as of June 16, 2005
 21




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##### 



EXHIBIT A (continued)
  Standard 6  Other Standards for Larger Controlled Affiliates
         1.
    
    Transfer Program;2.
    
    BlueCard Program;
 22




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##### 



EXHIBIT A (continued)
 3.
    
    Inter-Plan Teleprocessing System (ITS);4.
    
    Electronic Claims Routing Process;5.
    
    National Account Programs, effective January 1, 2002;6.
    
    Business Associate Agreement for Blue Cross and Blue Shield Licensees, effective April
14, 2003; and7.
    
    Inter-Plan Medicare Advantage Program.
  
         Amended as of November 17, 2005
 23




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##### 



EXHIBIT A (continued)
   A)
    
    BCBSA Controlled Affiliate Licensure Information Request; andB)
    
    Biennial trade name and service mark usage material, including disclosure material; andC)
    
    Changes in the ownership and governance of the Controlled Affiliate, including changes in its
charter, articles of incorporation, or bylaws, changes in a Controlled Affiliates Board
composition, or changes in the identity of the Controlled Affiliates Principal Officers, and
changes in risk acceptance, contract growth, or direct delivery of medical care; andD)
    
    Quarterly Financial Report, Semi-annual Health Risk-Based Capital (HRBC) Report as defined
by the NAIC, Annual Financial Forecast, Annual Certified Audit Report, Insurance Department
Examination Report, Annual Statement filed with State Insurance Department (with all
attachments), andE)
    
    Quarterly Enrollment Report.
 Amended March 14, 2002
 24




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##### 



EXHIBIT A (continued)
   Standard 7  Other Standards for Risk-Assuming Workers Compensation Controlled Affiliates
      A.
    
    BCBSA Controlled Affiliate Licensure Information Request; andB.
    
    Biennial trade name and service mark usage materials, including disclosure
materials; andC.
    
    Annual Certified Audit Report, Annual Statement as filed with the
State Insurance Department (with all attachments), Annual NAICs Risk-Based
Capital Worksheets for Property and Casualty Insurers, Annual Financial Forecast;
andD.
    
    Quarterly Financial Report, Quarterly Estimated Risk-Based Capital for Property and
Casualty Insurers, Insurance Department Examination Report, Quarterly Enrollment
Report; and
 Amended September 19, 2002
 25




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##### 



EXHIBIT A (continued)
 E.
    
    Notification of all changes and proposed changes to independent ratings within 30 days
of receipt and submission of a copy of all rating reports; andF.
    
    Changes in the ownership and governance of the Controlled Affiliate including changes
in its charter, articles of incorporation, or bylaws, changes in a Controlled Affiliates
Board composition, Plan control, state license status, operating area, the Controlled
Affiliates Principal Officers or direct delivery of medical care.
       Amended November 16, 2000
 26




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##### 



EXHIBIT A (continued)
 Standard 8  Cooperation with Controlled Affiliate License Performance Response Process Protocol
  Standard 9(A)  Participation in National Programs by Smaller Controlled Affiliates that were former Primary Licensees
  A.
    
    National program requirements include:
 
    
    BlueCard Program;
    
    Inter-Plan Teleprocessing System (ITS);
    
    Transfer Program;
    
    Electronic Claims Routing Process, effective until October 16, 2003; and
    
    National Account Programs, effective January 1, 2002
 B.
    
    Financial
Requirements include:
 
    
    Standard 6(D): Financial Performance Requirements and Standard 6(H): Financial
Responsibility; or
    
    A financial guarantee covering the Controlled Affiliates BlueCard Program
obligations in a form, and from a guarantor, acceptable to BCBSA.
 27




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##### 



EXHIBIT A (continued)
 Standard 9(A)  Participation in National Programs by Smaller Controlled Affiliates that were former Primary Licensees
 C.
    
    Reporting requirements include:
 
    
    The Semi-annual Health Risk-Based Capital (HRBC) Report.
 Amended June 13, 2002
 28




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##### 



Exhibit A (continued)
 Standard 9(B)  Participation in National Programs by Smaller Controlled Affiliates
  A.
    
    National program requirements include:
 
    
    BlueCard Program;
    
    Inter-Plan Teleprocessing System (ITS);
    
    Electronic Claims Routing Process, effective until October 16,
2003; and
    
    National Account Programs, effective January 1, 2002.
 B.
    
    Financial Requirements include:
 
    
    Standard 6(D): Financial Performance Requirements and Standard
6(H): Financial Responsibility; or
    
    A financial guarantee covering the Controlled Affiliates
BlueCard Program obligations in a form, and from a guarantor, acceptable to
BCBSA.
 Amended June 13, 2002
 29




---



##### 



EXHIBIT A (continued)
 Standard 10  Other Standards for Controlled Affiliates Whose Primary Business is Government Non-Risk
    30




---



##### 



EXHIBIT A (continued)
     A.
    
    BCBSA Affiliate Licensure Information Request; andB.
    
    Biennial trade name and service mark usage materials, including disclosure material;
andC.
    
    Annual Certified Audit Report, Annual Statement (if required) as filed with the State
Insurance Department (with all attachments), Annual NAIC Risk-Based Capital Worksheets
(if required) as filed with the State Insurance Department (with all attachments), and
Insurance Department Examination Report (if applicable)*; andD.
    
    Changes in the ownership and governance of the Controlled
Affiliate, including changes in its charter, articles of incorporation, or
bylaws, changes in the Controlled Affiliates Board composition, Plan control,
state license status, operating area, the Controlled Affiliates Principal
Officers or direct delivery of medical care.
 31




---



##### 



EXHIBIT A (continued)
 Standard 11- Participation in Electronic Claims Routing Process
   A.
    
    Electronic Claims Routing Process effective upon October 16, 2003;B.
    
    Inter-Plan Medicare Advantage Program.
 Amended November 17, 2005
 32




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##### 



EXIHIBIT A (continued)
 Standard 12: Participation in Master Business Associate Agreement by Smaller Controlled
Affiliate Licensees
  Amended September 19, 2002
 33




---



##### 



EXHIBIT B
 
  FOR RISK AND GOVERNMENT NON-RISK PRODUCTS:
       34




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##### 



EXHIBIT B (continued)
 FOR NONRISK PRODUCTS:
  1)
    
    An annual fee of $5,000 per license for a Controlled Affiliate subject to Standard 6 D.2)
    
    An annual fee of $2,000 per license for all other Controlled Affiliates.
 ® ®
 35




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##### 



1




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##### 



GUIDELINES TO ADMINISTER  MEMBERSHIP STANDARDS APPLICABLE TO REGULAR MEMBERS
 
 Description
    
    
    
    
    
    PageIntroduction
    
    
    
    
    
    
    3Preamble
    
    
    
    
    
    
    5Standard 1
    
    
    
    Board of Directors
    
    
    6Standard 2
    
    
    
    Reports and Records
    
    
    18Standard 3
    
    
    
    Financial Responsibility
    
    
    20Standard 4
    
    
    
    Responsiveness to Customers
    
    
    22Standard 5
    
    
    
    Participation in National Programs
    
    
    25Standard 6
    
    
    
    Financial Performance Requirements
    
    
    28Standard 7
    
    
    
    Certain Disclosures
    
    
    31Standard 8
    
    
    
    Cooperation with the Plan Performance Response Process Protocol
    
    
    32Standard 9
    
    
    
    Independent Financial Rating
    
    
    33Standard 10
    
    
    
    Local and National Best Efforts
    
    
    34Standard 11
    
    
    
    Transaction Which May Impair the Value of the Marks and Name
    
    
    43Standard 12
    
    
    
    Blue Branded Provider Network Rental
    
    
    46Attachment I
    
    
    
    Required Plan Performance Reports and Certifications Schedule
    
    
    49Attachment II
    
    
    
    Sanction Protocols  Reports and Records
    
    
    51Attachment III
    
    
    
    Guaranty Association Alternatives & Evaluation Criteria
    
    
    52Attachment IV
    
    
    
    Service Performance and MTM Index
    
    
    55Attachment V
    
    
    
    Clarification of Requirements for
Licensees Annual Actuarial Certification
    
    
    59Attachment VI
    
    
    
    Definition of Local Net
Revenue & Combined Local Net Revenue
    
    
    61Attachment VII
    
    
    
    Business Associate Agreement
    
    
    65
 2




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##### 



GUIDELINES TO ADMINISTER MEMBERSHIP STANDARDS  APPLICABLE TO REGULAR MEMBERS  As of March 2007
    
    
    Immediate Termination Track  Upon determination by the PPFSC that a licensee is noncompliant
under the minimum capital and liquidity requirements of the Financial Responsibility Standard,
the Member Plans will meet, as called for in BCBSAs Bylaws and the Primary License Agreements,
to vote to terminate the Plans licenses and membership. Upon determination by the PPFSC that a
licensee is noncompliant under all other Standards subject to this track, the Member Plans may
meet as called for in the Primary License Agreements to vote to terminate the Plans licenses
and membership.
    
    Mediation & Arbitration Track  Upon determination by the PPFSC that a licensee is
noncompliant, the PPFSC, with BCBSA Board approval, will initiate the established
mediation/arbitration dispute resolution process. The goal of mediation is to resolve the issue
by achieving Plan performance with stated requirements. License and membership termination
could occur if the licensee fails to abide by the arbitration decision.
    
    Sanctions Track  While the goal is to encourage licensees to comply with all requirements,
there are several requirements for which the PPFSC will implement specific preapproved
sanctions in the event a Plan chooses not to comply (after initial licensure). Failure to
comply with a sanction will result in initiation of the established mediation/arbitration
dispute resolution process. License and membership termination could occur if the licensee
fails to abide by the arbitration decision.
  3




---



##### 



GUIDELINES TO ADMINISTER MEMBERSHIP STANDARDS APPLICABLE TO REGULAR MEMBERS
continued  As of March 2007
     4




---



##### 



5




---



##### 



A Plan shall maintain a governing Board, which shall control the Plan and ensure that the Plan
follows appropriate practices of corporate governance. A Plans Board shall not be controlled by
any special interest group, shall make an annual determination that a majority of its directors are
independent and shall act in the best interest of its Corporation and its customers. The Board
shall be composed of a majority of persons other than providers of health care services, who shall
be known as public members. A public member shall not be an employee of or have a financial
interest in a health care provider, nor be a member of a profession which provides health care
services.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    If the Plan has members with the power to nominate, elect, or remove any Board member
or amend or recommend revisions to articles of incorporation, Bylaws, or other governing
documents, the Plan shall be considered noncompliant if at least one-half of such members
are commonly employed by or have a common direct or indirect financial interest in:
 1.1a
    
    The licensee itself or entities controlled by the licensee;1.1b
    
    An entity (other than another licensee or other licensees of BCBSA or entities
controlled by other licensees);1.1c
    
    Affiliates and Associates (as defined in paragraph 9.d(v)(a) of the License
Agreement) of the entity described in 1.1b; or1.1d
    
    Any other entity which provides goods or services to the entity described in
1.1b.
  1.2
    
    The Plan shall be considered noncompliant if its Board is composed of members at least
one-half of whom are commonly employed by or have a common direct or indirect financial
interest in:
 1.2a
    
    The licensee itself or entities controlled by the licensee;1.2b
    
    An entity (other than another licensee or other licensees of BCBSA or entities
controlled by other licensees);
 6




---



##### 



1.2c
    
    Affiliates and Associates (as defined in paragraph 9.d(v)(a) of the
License Agreement) of the entity described in 1.2b; or1.2d
    
    Any other entity which provides goods or services to the entity described in
1.2b.
  2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    The Plans Board shall be composed of a majority of members (greater than 50% of the
total) who are:
 2.1a
    
    public members*;2.1b
    
    not, in any combination, a controlling faction of the Plans Board with a
common interest in the licensee itself or entities controlled by the licensee, any
business, governmental, lobbying, or other organized group or entity, excluding
directors, officers and employees of other licensees or entities controlled by
other licensees of BCBSA; and
 
 *
    
    A public member excludes any person who: 
    
    is engaged or has engaged at any time in the practice of a health care
profession (other than an employee of the Plan);
    
    is a director, officer, partner or employee of an organization that primarily sells
health care services (other than the Plan or an organization controlled by the Plan); or
    
    is a director, officer, partner or employee of an organization of health care
providers; or
    
    has a direct or indirect beneficial interest of more than five percent of the equity
of an organization that sells or delivers health care services.
 7




---



##### 



2.1c
    
    independent, as defined by the Plan. The Plans Board may consider the
following factors, among others, in deciding whether a member is independent: (i)
all relationships between the member, the Plan, and senior management of the Plan,
including but not limited to, present or former employment with the Plan, and a
substantial connection of a personal or financial nature (other than payments for
services rendered as a Plan Board or Committee member) that could in fact or in
appearance compromise the members independence; (ii) the members affiliation with
any organization that provides goods or services to the Plan and the nature, value
and extent of those services; (iii) the members affiliation with any organization
that receives goods, services, or charitable donations from the Plan and the
nature, value and extent of those services; (iv) the members employment as an
executive officer of another company where any of the Plans present executive
officers at the same time serves or served on the other companys compensation
committee; and (v) the Plans unique legal and regulatory environment, including
but not limited to whether law requires Board participation by otherwise
non-independent Board members. For purposes of this Guideline 2.1c, all references to member include the members immediate
family and all references to Plan include the Plans controlled
affiliates. Beginning in 2008, a Plan shall certify annually to BCBSA that
it has made a determination that a majority of its Board members are
independent as stated in this Guideline 2.1c.
 2.2
    
    The Committee that performs the nominating function shall be comprised entirely of
independent members as defined by the Plan. The Plans CEO may be permitted to
participate on this Committee in an ex officio capacity. Such Committee shall also have a written charter describing its purpose and
responsibilities.2.3
    
    The Committee or Committees that perform the compensation and evaluation functions
shall be comprised entirely of independent members as defined by the Plan. Such
Committee(s) shall also have a written charter describing its purpose and responsibilities,
which shall include:
 2.3a
    
    Having the authority to retain its own independent compensation consultant,
who shall report directly to the Committee;2.3b
    
    Performing a review at least triennially of all senior executive1compensation and benefit programs, which review shall include an analysis of
the competitiveness of the programs and the extent to which the compensation
packages are designed to motivate and reward performance;
 
 1
    
    Senior executive means the CEO and his or her executive level direct reports. 8




---



##### 



2.3c
    
    Reviewing and approving or recommending to the Board or other appropriate
committee: (i) corporate goals and objectives relevant to CEO compensation, (ii) an
evaluation of the CEOs performance in light of those goals and objectives, and
(iii) the CEOs compensation level based on the evaluation.
 2.4
    
    The Plan shall bar individuals deemed unfit by a court under the Securities Exchange
Act from serving on its Board.2.5
    
    The Plans Board of Directors shall require the performance of regular self-evaluations
for itself and its standing committees. Plans have the option of evaluating the Board or
Committee as a whole or evaluating individual members.2.6
    
    The Plans Board shall adopt corporate governance guidelines that address appropriate
governance topics. Such topics may include Board procedures, director responsibilities,
tenure, selection criteria, committee appointments, executive session procedures, etc.2.7
    
    Each director joining a Plan Board of Directors in 2007 or thereafter shall complete:
 2.7a
    
    A training program on the fiduciary duties and other responsibilities of Plan
directors, including but not limited to the duties of loyalty and care and any
Plan-specific requirements such as attendance at meetings, review of meeting
materials, committee service, etc. This program must be completed within the first
year of service on the Board; and2.7b
    
    A training program that addresses the role and governance structure of the
Association, including the responsibilities of Plan CEOs on the Associations
Board of Directors. The program shall cover Plans mutual interests in protecting
and preserving the Brands and the potential impact that Plan Board decisions may
have on other Plans and on the Brands. The training program will be approved by the
BCBSA Board of Directors and the Member Plans and may be delivered at the Plan site
or through a web-based program or other means acceptable to BCBSA.
The program must be completed within one year of such approval by the
Board and Member Plans.
 2.8
    
    Except as otherwise specifically provided in these Guidelines, the Plan shall certify
tri-annually beginning in 2008 to BCBSA that it has complied with the requirements of
Guidelines 2.2 through 2.7 above.2.9
    
    Notwithstanding anything in this Paragraph 2, a Plan in violation of Paragraph 1 of
these Guidelines shall be subject to immediate termination.
 9




---



##### 



2.10
    
    BCBSA shall send a triennial membership compliance letter to each Plans CEO. The
letter shall include the Plans licensure and membership status, a copy of the Membership
Standards and Guidelines, a report of the Plans licensure and membership status by
Standard, and PPFSC comments or concerns, if any, about the Plans compliance with the
License Agreements and Membership Standards. The Plan CEO or Corporate Secretary must
certify to the PPFSC that the triennial membership compliance letter has been distributed
to all Plan Board Members. Such certification may be in the form of the minutes of the Plan
Board meeting or other documentation demonstrating timely compliance with the distribution
requirement.
  2.11
    
    Every Plan shall:
 2.11a
    
    Adopt a set of policies setting forth standards for the conduct of directors
and review and reaffirm such policies on a periodic basis (but no less than every
three years)1 The adopted set of policies must include, at a minimum,
policies setting forth the role and responsibilities of directors in:
 2.11a(ii)
    
    ensuring that the Plan adopts an effective compliance and ethics
program designed to detect and prevent violations of law and promote an
organizational culture that encourages ethical conduct and a commitment to
compliance with the law. Directors must be knowledgeable about the content
and operation of the program and exercise reasonable oversight with
respect to its implementation and effectiveness;2.11a(iii)
    
    regularly approving the overall business objectives and
strategy of the Plan and monitoring performance;2.11a(iiii)
    
    selecting and directing management;2.11a(ivi)
    
    setting management compensation at competitive levels;2.11a(vi)
    
    establishing a Board committee structure in which the audit,
nominating and compensation functions shall be performed exclusively by
outside directors, and ensuring that all directors are aware of their
fiduciary obligations;
 
 1
    
    The provisions appearing under guideline 2.11a apply only to directors; the policies
applicable to Plan employees as well as directors appear in guideline 2.11b and 2.11c. 10




---



##### 



2.11a(vi)
    
    A Plan operating as a Shell Holding
Company, as defined in the Preamble hereto, may allow its
audit or compensation functions to be assumed by a
Controlled Affiliate Licensee (Assuming Controlled
Affiliate) if the following conditions are satisfied:
 (1)
    
    The Plan and the Assuming Controlled
Affiliate have identical Boards;(2)
    
    The Assuming Controlled Affiliate is a direct
Controlled Affiliate of the Plan;(3)
    
    The Plan has no direct subsidiaries or
affiliates other than the Assuming Controlled
Affiliate;(4)
    
    The Plan and the Assuming Controlled
Affiliate are Not-For-Profit;(5)
    
    The Plan has no assets, liabilities or net
worth other than those assets and liabilities
attributed to the Plan by virtue of consolidation
of financial statements of subsidiaries pursuant
to GAAP accounting guidelines;(6)
    
    The Plan has no employees;(7)
    
    The Plan has not entered into any contractual
arrangements other than in connection with the
appointment and compensation of it directors,
expenses associated with the holding of its board
of directors meeting and contracts that are
incidental and solely related to its activity as
an insurance holding company; provided, however:
(1) all such compensation, expenses and amounts
due under contracts shall be paid by the
Controlled Affiliate on behalf of the Plan and
(2) the Plan discloses to BCBSA starting 12/31/05
and annually thereafter a list of such incidental
contracts related to its activity as an insurance
holding company including the amount and nature
of each contract; and(8)
    
    The Plan does not become liable by way of any
guarantee or indebtedness (other than the
sponsoring financial guarantee issued to its
Controlled Affiliate Licensees as required under
these Membership Standards).
 11




---



##### 



2.11a(vii)
    
    establishing policies against self-dealing and other
improper conduct; and2.11a(viii)
    
    establishing policies addressing conflicts of interest.2.11a(ix)
    
    requiring the Plans sponsored Larger Controlled Affiliate, and
Smaller Controlled Affiliates that were former Primary Licensees, to: 1)
implement similar such policies and programs incorporating the same
principles enumerated under 2.11a(i)-(viii) above, or 2) participate in
such programs of the Plan.2.11a(x)
    
    requiring Smaller Controlled Affiliates, other than those
enumerated in 2.11a(viii), to demonstrate the same degree of commitment to
ethical conduct and compliance as the Plan. As appropriate, the Plan may
allow the Smaller Controlled Affiliate to: 1) meet such commitment using
less formality and fewer resources than are required by
the Plan above; or 2) participate in such programs of the
Plan.
  12




---



##### 



2.11b
    
    Adopt an effective compliance and ethics program governing the conduct
of all Plan directors, employees and officers designed to prevent, detect and
resolve instances of conduct that do not conform to Federal and state law and
government health care program requirements or the Plans ethical and business
standards and otherwise promotes an organizational culture that encourages ethical
conduct and a commitment to compliance with law (hereinafter compliance
program).2The adopted compliance program must at a minimum include the
following elements:
 2.11b(i)
    
    The development and distribution of written standards of conduct
as well as written policies and procedures that promote the Plans
commitment to prevent and detect violations of law including adherence to
compliance as an element in evaluating managers and employees) and that
address specific risk areas (such as the submission of data to the
government);2.11b(ii)
    
    The designation of a chief compliance officer and/or other
appropriate high-level personnel charged with the responsibility of
operating and monitoring the compliance program and ensuring its
effectiveness (e.g., a corporate compliance committee that reports
directly to the CEO and the Plans governing authority (e.g., the board).
Specific individual(s) shall be delegated day-to-day operational
responsibility for the program and shall report periodically to high-level
personnel and, as appropriate, to the Board or appropriate committee
thereof on the effectiveness of the program. If the authority is
delegated, the Board must receive reports from such individual(s) at least
annually. In addition, such individual(s) must be given adequate
resources, appropriate authority, and direct access to the Board or
appropriate committee thereof.
 
 2
    
    The provisions appearing under guideline 2.11b reflect the proposed amendments to the
United States Sentencing Guidelines for Organizations which will take effect November 1, 2004
unless disapproved by Congress, and include the comments and suggestions of the Plans Compliance
personnel along with the comments of the Department of Health and Human Services Office of
Inspector General concerning the minimum requirements of an effective compliance program. See
Amendments to Sentencing Guidelines, § 8 B2.1.; Compliance Program Guidance for Clinical
Laboratories, 63 Fed. Reg. 45076, 45078-79; (Aug. 24, 1998); Compliance Program Guidance for Hospitals, 63 Fed. Reg. 8987, 8989 (Feb.
23, 1998); Compliance Program Guidance For Medicare+Choice Organizations Offering Coordinated Care
Plans, 64 Fed. Reg. 61893, 61896 (Nov. 15, 1999). 13




---



##### 



2.11b(iii)
    
    The use of reasonable efforts not to include within
substantial authority personnel any individual whom the Plan knew, or
should have known through the exercise of due diligence, has engaged in
illegal activities or conduct inconsistent with the compliance program;2.11b(iv)
    
    The development and implementation of periodic, effective
education and training programs for directors, high-level personnel,
substantial authority personnel, Plan employees, and, as appropriate, the
organizations agents, and dissemination of information appropriate to
such individuals role and responsibilities;2.11b(v)
    
    The maintenance and publication of a mechanism (e.g., a hotline)
for Plan employees and agents to report or seek guidance regarding
potential or actual criminal conduct that is designed to protect the
anonymity of those reporting and to protect those reporting from
retaliation;2.11b(vi)
    
    The development of a system to respond to allegations of
improper/illegal activities and the enforcement of appropriate
disciplinary action against employees who have violated internal
compliance policies, applicable statutes, regulations or federal health
care program requirements and to provide incentives to perform in
accordance with the compliance program;2.11b(vii)
    
    The use of audits, monitoring and other evaluation techniques
to assist in the reduction of identified problem areas, and detect
criminal conduct as well as implementation of additional steps to evaluate
periodically the compliance program;2.11b(viii)
    
    The investigation and remediation of identified criminal
conduct and reasonable steps to prevent similar conduct, including any
necessary modification to the compliance program;2.11b(ix)
    
    The development of policies addressing the non-employment or
retention of individuals sanctioned for misconduct in connection with any
health care program;
 14




---



##### 



2.11b(x)
    
    Periodic risk assessments to ensure that the Plans efforts
to prevent and detect violations of law matches the companys current
business activities and appropriate steps to design, implement, or modify
each of the elements set forth above to reduce the risk of criminal
conduct identified though this process.
  2.11c
    
    The standards of conduct applicable to employees, officers and directors shall
contain provisions addressing the following additional elements:
 2.11c(i)
    
    A prohibition on employees, officers and directors from (a)
taking for themselves personally or for their immediate family members
opportunities that are discovered through the use of corporate property,
information or position; (b) using corporate property, information, or
position for personal gain or that of an immediate family member; and
(c) competing with the Plan. Employees, officers and directors owe a
duty to the Plan to advance its legitimate interests when the
opportunity to do so arises;2.11c(ii)
    
    The responsibility to maintain the confidentiality of
information entrusted to the employee, officer or director by the Plan
or its customers, except when disclosure is authorized or legally
mandated. Confidential information includes all non-public information
that might be of use to competitors, or harmful to the Plan or its
customers, if disclosed;2.11c(iii)
    
    The responsibility of each employee, officer and director to
deal fairly with the Plans customers, suppliers, competitors and
employees. None shall take unfair advantage of anyone through
manipulation, concealment, abuse of privileged information,
misrepresentation of material factors or any other unfair-dealing
practice;
 15




---



##### 



2.11c(iv)
    
    The responsibility to protect the Plans assets and ensure
their efficient use. Theft, carelessness and waste have a direct impact on
the Plans profitability. All Plan assets shall be used for legitimate
business purposes;2.11c(v)
    
    A prohibition on the Plan directly or indirectly, including
through any subsidiary or Controlled Affiliate, extending or maintaining
credit, arranging for the extension of credit, or renewing an extension of
credit in the form of a personal loan to or for any director or executive
officer (or equivalent thereof) of the Plan, except travel advances. An
extension of credit maintained by the Plan at the time this policy is
adopted shall not be subject to the provisions of this subsection,
provided that there is no material modification to any term of any such
extension of credit or any renewal of any such extension of credit on or
after such date;2.11c(vi)
    
    A prohibition on taking any action to fraudulently influence,
coerce, manipulate, or mislead any independent public or certified
accountant engaged in the performance of an audit of the financial
statements of the Plan or Controlled Affiliate for the purpose of
rendering such financial statements materially misleading;2.11c(vii)
    
    The responsibility of Plan attorneys to report evidence of a
material violation of law or breach of fiduciary duty or similar violation
by the Plan or any Controlled Affiliate, or any agent thereof, to the
chief legal counsel or the chief executive officer of the Plan (or the
equivalent thereof). If the counsel or officer does not appropriately
respond to the evidence (adopting, as necessary, appropriate remedial
measures or sanctions with respect to the violation), the Plan attorney
shall report the evidence to the Audit Committee of the Board of Directors
of the Plan or to another committee of the Board of Directors comprised
solely of directors not employed directly or indirectly by the Plan, or to
the Board of Directors.
  16




---



##### 



2.11d
    
    Require the Plans sponsored Larger Controlled Affiliates, and Smaller
Controlled Affiliates that were former Primary Licensees, to: 1) adopt effective
compliance and ethics programs which incorporate the same principles enumerated
under 2.11b and 2.11c above; or 2) participate in the compliance and ethics
programs of the Plan.2.11e
    
    Require Smaller Controlled Affiliates, other than those enumerated in 2.11d,
to: 1) adopt compliance and ethics programs as appropriate; or 2) participate in
the compliance and ethics programs of the Plan.2.11f
    
    To the extent that any of the provisions set forth in these Guidelines are
inconsistent with the terms of any Corporate Integrity Agreement (CIA) entered
into by the Plan, the terms of the CIA shall prevail, and compliance therewith
shall be deemed sufficient.
 2.12
    
    In the case of Plans operated on a for-profit basis, the Plans Articles of
Incorporation and other Charter documents shall include, at the time the Plan converts to a
for-profit basis and continuously thereafter, enforceable provisions to:
 2.12a
    
    prohibit any entity not licensed by BCBSA from acquiring more of the Plans
voting power or ownership than is allowed under Paragraph 9(d)(iii) of the License
Agreements (in effect at the time the Plan converted or, if the Plan elects, as
subsequently amended) without consent of the Plans continuing directors
(Continuing directors being defined as stated in Paragraph 9(d)(iii) of the
License Agreement);2.12b
    
    require that the Plan Board be composed of three classes of directors with
each class containing as close to one third of the total number of directors as
possible and each class of directors serving a three year term beginning in a year
in which no other class term begins;2.12c
    
    prohibit cumulative voting of stock; and2.12d
    
    permit amendments to these provisions only upon a vote of at least
three-fourths of all shareholders.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 17




---



##### 



A Plan shall furnish to the Association on a timely and accurate basis reports and records
relating to compliance with these Standards and the License Agreements between the Association and
the Plans. Such reports and records are the following:
 A.
    
    BCBSA Membership Information Request;B.
    
    Biennial trade name and service mark usage material, including disclosure material under
Standard 7;C.
    
    Changes in the governance of the Plan, including changes in a Plans Charter***,
Articles of Incorporation***, or Bylaws***, changes in a Plans Board composition, or
changes in the identity of the Plans Principal Officers*;D.
    
    Quarterly Financial Report, Semi-annual Health Risk-Based Capital (HRBC)
Report as defined by the NAIC, Annual Financial Forecast, Annual Certified Audit Report,
Insurance Department Examination Report**, Annual Statement filed with State Insurance
Department (with all attachments), Plan, Subsidiary and Affiliate Report; and
 
    
    Plans that are a Shell Holding Company as defined in the Preamble hereto are
required to furnish only a calendar year-end Health Risk-Based Capital (HRBC)
Report as defined by the NAIC.
 E.
    
    Quarterly Enrollment Report and, Member Touchpoint Measures Index (MTM).
 
    
    Plans that are a Shell Holding Company as defined in the Preamble hereto are not
required to furnish a Quarterly Enrollment Report.
    
    For purposes of MTM reporting only, a Plan shall file a separate MTM report for
each Georgraphic Market and on an enterprise basis, except that the enterprise
report shall not include the Geographic Market as defined in section (c) of
footnote 2 to the guidelines to administer Regular Member Standard 4.
 
 *
    
    Submit within 30 days of change to address indicated below**
    
    Forward within 30 days of receipt by the Plan of the final report accompanied by a formal
comment thereon from the Plans CEO, if appropriate, to:Managing Director, Brand Protection & Financial Services 
     Blue Cross and Blue Shield Association
     225 North Michigan Avenue
     Chicago, IL 60601***
    
    Include a redline version that clearly identifies the changes 18




---



##### 



1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    For Reports listed in Item C above: A Plan shall submit the listed reports by the due
dates indicated in Attachment I.
 2.1a
    
    Not Reporting  A report will be considered not reported if data are not
received by the Association within 30 days after the published deadline or after an
agreed-upon extension. A report will also be considered not submitted if accuracy
concerns or missing data, leading to the misrepresentation of performance and
inability to publish data, are not resolved within 30 days after the published
deadline or an agreed-upon extension (See Attachment I for reporting due dates).2.1b
    
    Late Reporting  A report will be considered late if it is received by the
Association after the published deadline or after an agreed upon extension (See
Attachment I for reporting due dates).2.1c
    
    Inaccurate Reporting  A report will be considered inaccurate if the data
submitted do not conform to published instructions.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    For Reports listed in items D and E above: A Plan shall submit the listed reports by
the due dates shown in Attachment I. Refer to Attachment II for specific sanctions in the
event a Plan is not in compliance with the following guidelines.
 3.1.a
    
    Not Reporting  A report will be considered not reported if data are not
received by the Association within 30 days after the published deadline or after an
agreed-upon extension. A report will also be considered not submitted if accuracy
concerns or missing data, leading to the misrepresentation of performance and
inability to publish data, are not resolved within 30 days after the published
deadline or an agreed-upon extension (See Attachment I for reporting due dates).3.1.b
    
    Late Reporting  A report will be considered late if it is received by the
Association after the published deadline or after an agreed upon extension (see
Attachment I for reporting due dates).3.1.c
    
    Inaccurate Reporting  A report will be considered inaccurate if the data
submitted does not conform to published instructions.
 19




---



##### 



A Plan shall be operated in a manner that provides reasonable financial assurance that it can
fulfill its contractual obligations to its customers.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    A Plan shall be considered noncompliant if its liquidity (standard BCBSA definition) is
less than 1.0 months of underwritten claims and administrative expenses for two consecutive
quarters.
 1.1a
    
    A Plan that operates as a Shell Holding Company or a Hybrid Holding Company as
defined in the Preamble hereto is not subject to the BCBSA minimum liquidity
requirement.
 1.2
    
    A Plan shall have a minimum capital equal to or greater than 200% of its Health
Risk-Based Capital (HRBC)* Authorized Control Level (ACL) after covariance as defined by
the NAIC and hereinafter referred to as Authorized Control Level.1.3
    
    Notwithstanding a Plans HRBC level, a Plan shall maintain its minimum SAP reserve (or
equivalent net worth**) at or above the minimum reserve (or net worth level**) established
by each state in which it is domiciled and/or operates.
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    A Plan shall maintain accounting records on an accrual basis subject to an annual audit
resulting in a financial statement opinion that does not express doubts as to the Plans
ability to continue as a going concern. The annual audit shall be performed by an
independent CPA firm acceptable to the Plan Performance and Financial Standards Committee
(Note: Each licensee is required to submit a separate annual certified audit report).
 
 *
    
    The HRBC calculation was designed by the National Association of Insurance Commissioners to
estimate the minimum statutory level of required capital and is used by BCBSA to determine
compliance with BCBSAs minimum HRBC requirement, established PPRP monitoring thresholds and other
requirements and protocols. Given that the HRBC calculation is a retrospective formula, it does not
take into account the potential impact of future events (developing market challenges or
constraints, investments in technology, unexpectedly high claims, changes in business mix,
potential acquisitions or divestitures, etc.) that may have a significant impact on the HRBC of a
Plan. Additional capital may be needed to protect against events not otherwise accounted for in the
HRBC formula and BCBSA encourages Plans to maintain
reserves well above the required HRBC minimum. HRBC was not designed, calibrated or intended for
use in determining excess levels of capital.**
    
    language applicable to non-risk assuming primary licensees. 20




---



##### 



2.2
    
    A Plan shall provide for adequate accounting for loss reserves, actuarial liabilities
and related items as annually certified by a qualified actuary pursuant to a review process
acceptable to the Plan Performance and Financial Standards Committee (See Attachment V;
Note: Each licensee is required to submit a separate certification).2.3
    
    A Plan excluding a Plan acting as a Shell Holding Company or a Hybrid Holding Company
as defined in the Preamble hereto shall be considered noncompliant if it does not meet at
least one of the following:
 2.3a
    
    participate in the guaranty fund in each state in which it operates; or2.3b
    
    establish another method approved by BCBSA which assures the payment of claim
liabilities and continuation of coverage in the event of an insolvency (See
Attachment III); or2.3c
    
    at a minimum, have an HRBC above 800% of its Authorized Control Level and
liquidity of 2.0 months or greater.
 2.3c(i)
    
    If a Plan that has complied with the requirement by maintaining
the financial position defined above no longer meets one or both of the
financial tests, the licensee will have six months to join the guaranty
fund or implement an acceptable alternative mechanism.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
  21




---



##### 



A Plan shall be operated in a manner responsive to customer needs and requirements.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    A Plan shall maintain enrollment performance of not worse than declines of 8% in 1 year
and 20% over 3 years for total Blue members"1 of the Primary Licensee and all
Controlled Affiliate Licensees excluding Life Insurance and Charitable Foundation
affiliates.3.2
    
    A Plans Board shall be notified of the Plans enrollment and service performance
levels in the membership compliance letter as required under Membership Standard 1: Board
of Directors.
 
 (1)
    
    Total Blue Members is defined as total hospital and medical/surgical members,
excluding freestanding, as reported by Licensees to BCBSA. 22




---



##### 



3.3
    
    Effective 1/1/2005 (with the reporting of first quarter 2005 service results) and
through year-end 2005 reporting, a Plan shall not fall below the thresholds for Service
Performance Scorecard Measures in any of its Geographic Markets2 for 2
consecutive quarters as shown in the following table.
 ServicePerformanceScorecard
    
    
    ComplianceMeasures
    
    
    ThresholdEnterprise Total
    
    
    Greater than or
equal to 72 PointsWeighted Market 
Total
    
    
    Greater than or
equal to 72 Points
 
 2
    
    Geographic Market is defined as follows: A)
    
    If a Plans service area comprises primarily a single state or a portion of a single state,
then Geographic Market shall mean the service area.B)
    
    If a Plans service area comprises more than one state and or substantial portions of more
than one state, then each state or portion thereof shall be a separate Geographic Market. If,
however, a
Primary Licensee clearly demonstrates in writing to BCBSA and BCBSA agrees that the
delivery of customer service for two or more states (or portions thereof) within a
service area is processed at a single site and is fully integrated, then the Geographic
Market is defined as those two or more states (or portions thereof). For purposes of
this definition, Puerto Rico and the District of Columbia are defined as states.C)
    
    If consenting and participating Plans offer an all Blue-branded regional Medicare Advantage
PPO (MAPPO) or regional Medicare Part D Prescription Drug Plan (PDP) and the Primary
Licensees demonstrate in writing and BCBSA agrees that the delivery of customer service for the
product is delivered at a single site and is fully integrated, then the Geographic Market is
defined as the applicable MAPPO or PDP Region.
 23




---



##### 



3 2
 ServicePerformanceScorecard
    
    
    ComplianceMeasures
    
    
    ThresholdEnterprise Total
    
    
    Greater than or
equal to 80 PointsWeighted Market 
Total
    
    
    Greater than or
equal to 80 Points
  4.
    
    Sanctions:
 4.1
    
    A Plans Board shall be notified of the Plans noncompliance with the thresholds relating
to enrollment and service performance in the membership compliance letter as required under
Membership Standard 1: Board of Directors
 
 2
    
    Geographic Market is defined as follows: A)
    
    If a Plans service area comprises primarily a single state or a portion of a single state,
then Geographic Market shall mean the service area.B)
    
    If a Plans service area comprises more than one state and or substantial portions of more
than one state, then each state or portion thereof shall be a separate Geographic Market. If,
however, a
Primary Licensee clearly demonstrates in writing to BCBSA and BCBSA agrees that the
delivery of customer service for two or more states (or portions thereof) within a
service area is processed at a single site and is fully integrated, then the Geographic
Market is defined as those two or more states (or portions thereof). For purposes of
this definition, Puerto Rico and the District of Columbia are defined as states.C)
    
    If consenting and participating Plans offer an all Blue-branded regional Medicare Advantage
PPO (MAPPO) or regional Medicare Part D Prescription Drug Plan (PDP) and the Primary
Licensees demonstrate in writing and BCBSA agrees that the delivery of customer service for the
product is delivered at a single site and is fully integrated, then the Geographic Market is
defined as the applicable MAPPO or PDP Region.
 
 3.
    
    For purposes of this guideline, the term Plan shall include a group of Plans in the
case of a regional MAPPO or PDP that has been approved as a Geographic Market as provided in
footnote 2. 24




---



##### 



A Plan shall effectively and efficiently participate in each national program as from time to time
may be adopted by the Member Plans for the purposes of providing portability of membership between
the Plans and ease of claims processing for customers receiving benefits outside of the Plans
Service Area.
 Such programs are applicable to Blue Cross and Blue Shield Plans, and include:
 A.
    
    Transfer Program;B.
    
    Inter-Plan Teleprocessing System (ITS);C.
    
    BlueCard Program;D.
    
    Electronic Claims Routing
Process;E.
    
    National Account Programs, effective January 1, 2002;F.
    
    Business Associate Agreement for Blue Cross and Blue Shield Licensees, effective
April 14, 2003; andG.
    
    Inter-Plan Medicare Advantage Program.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    BlueCard Program and ITS  A Plan shall fully participate in ITS and the BlueCard
Program through compliance with all BlueCard Program Policies and Provisions and all
applicable Inter-Plan Programs Policies and Provisions, unless an exemption has been
granted by the Inter-Plan Programs Committee (IPPC) in accordance with those Policies and
Provisions.
 2.1.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.2.1.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to the PPFSC and
the BCBSA Board of Directors for their action.
 2.2
    
    Electronic Claims Routing Process  A Plan shall fully participate in the Electronic
Claims Routing Process through compliance with all Electronic Claims Routing Process
Policies and Provisions and all applicable Inter-Plan Programs Policies and Provisions.
 25




---



##### 



2.2.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.2.2.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to PPFSC and the
BCBSA Board of Directors for their action.
 2.3
    
    National Account Programs  Effective January 1, 2002, a Plan shall fully participate
in the National Account Programs through compliance with all National Account Program
Policies and Provisions and all applicable Inter-Plan Programs Policies and Provisions.
 2.3.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.2.3.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to PPFSC and the
BCBSA Board of Directors for their action.
 2.4
    
    Business Associate Agreement for Blue Cross and Blue Shield Licensees  A Plan shall
fully comply with the terms and conditions of the Business Associate Agreement for Blue
Cross and Blue Shield Licensees (Attachment VII).
 2.4.a
    
    Compliance determined by certification of adherence to the terms and
conditions of the Business Associate Agreement for Blue Cross and Blue Shield
Licensees.2.4.b
    
    The Association shall commence Mediation/Arbitration or intervene in a
Mediation/Arbitration proceeding among Plans upon a finding by the Plan Performance
and Financial Standards Committee that such action is warranted and a referral of
the matter from PPFSC to the BCBSA Board of Directors for its action.
 2.5
    
    Inter-Plan Medicare Advantage Program  A Plan shall fully participate in the
Inter-Plan Medicare Advantage Program through compliance with all Inter-Plan Medicare
Advantage Program Policies and Provisions.
 2.5a
    
    Compliance determined by periodic review or audits and by reviews initiated by
evidence of problems.2.5b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that such
action is warranted and a referral of the matter from IPPC to PPFSC and the BCBSA
Board of Directors for their action.
 26




---



##### 



3.
    
    Guidelines Subject to Sanctions
 3.1
    
    Transfer Program  A Licensee shall be in compliance with the policies, provisions and
procedures of the program and shall correct any items of noncompliance.
 3.1a
    
    Compliance determined by annual Licensee certification of having appropriately
followed Program procedures to identify and transfer nonresident direct pay and
Medicare Supplemental subscribers, by quarterly volume reporting and by reviews
initiated by evidence of problems.
 4.
    
    Sanctions:
  27




---



##### 



In addition to requirements under the national programs listed in Standard 5:
Participation in National Programs, a Plan shall take such action as required to ensure its
financial performance in programs and contracts of an inter-Plan nature or where the Association is
a party.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    A Plan, except a Plan acting as a Shell Holding Company or a Hybrid Holding Company as
defined in the Preamble hereto, with SAP or equivalent reserve (net worth) of less than
300% of its Authorized Control Level or liquidity for two consecutive quarters of less than
1.5 months of underwritten claims and administrative expenses (standard BCBSA definition)
shall:
 2.1a
    
    Provide an irrevocable and unconditional letter of credit, or other guarantee
of payment satisfactory to BCBSA, in an amount which shall be reset quarterly equal
to:
 2.1a(i)
    
    The Control/Home Plan liabilities as actuarially determined by
BCBSA using the respective Plans historical claim settlement patterns and
actuarial standards of practice for determining incurred health claim
liabilities for:
 (a)
    
    The BlueCard Program;(b)
    
    The Electronic Claims Routing Process (ECRP);(c)
    
    Other transactions settled in whole or in part through
the Central Financial Agency (CFA); and(d)
    
    National Account Service Company, LLC (NASCO)
transactions.
  28




---



##### 



2.1a(ii)
    
    The Participating/Host Plan liabilities including gross variance
settlements, as a result of modified pricing (under BCBSA Inter-Plan
Programs policies and provisions, including, but not limited to, BlueCard
Program Policies and Provisions or the equivalent), due Control/Home Plans
as actuarially determined by BCBSA.
 2.1b
    
    Provide NASCO, on a timely basis, with written authorization to provide BCBSA
with requested NASCO claims information used in connection with the calculation
under paragraph 2.1a(i).2.1c
    
    Provide each Participating/Host Plan with an option to receive from the Plan,
as Control/Home Plan, an irrevocable and unconditional letter of credit or other
guarantee of payment acceptable to each such Participating/Host Plan for Inter-Plan
Programs liabilities occurring outside the CFA and NASCO.
 2.1c(i)
    
    Each such guarantee shall be equal to the greater of:
 (a)
    
    Control/Home Plans Inter-Plan liabilities to each
such Participating/Host Plan as certified by a qualified
independent third party acceptable to BCBSA; or(b)
    
    An amount as actuarially determined by BCBSA.
 2.1c(ii)
    
    The guarantee amount shall be reset quarterly based on the most
recent quarter and include:
 (a)
    
    An estimate of average unpaid claims and
administrative expenses due to Participating/Host Plans,
net of outstanding advances; and(b)
    
    An estimate of financial settlements, outstanding
through the current quarter, due to each
Participating/Host Plan.
 2.1d
    
    Distribute to Participating/Host Plans on a quarterly basis, any funds owed
for national account financial settlements. Any such actual distributions can be
used to offset funds set aside in accordance with 2.1a and 2.1b under this Standard
6.2.1e
    
    Provide to BCBSA, on a quarterly basis, a listing of national accounts in
which the Plan is involved as (Control/Home and Participating/Host), identifying
the national account and the Plans role therein. For those accounts where the Plan
is the Control/Home Plan, the Plan must also specify the Participating/Host Plans
in each national account syndicate.
For any Plan included in the Plan Performance Contingency Protocol
 29




---



##### 



2.1f
    
    For the Blue Quality Centers for Transplant (BQCT) liabilities not settled
in whole or in part through the CFA or otherwise covered herein, the Home Plan must
provide BCBSA with an irrevocable and unconditional letter of credit, or other
guarantee of payment satisfactory to BCBSA, in an amount which shall be reset
quarterly equal to the greater of:
 2.1f(i)
    
    An amount equal to the Plans number of BQCT transplants completed
for the prior twelve months times the most recent estimated U.S. average
billed charges per transplant as determined by Milliman USA or such other
actuarial firm chosen by BCBSA; or2.1f(ii)
    
    An amount as actuarially determined by BCBSA.
 2.1g
    
    Waive any right to challenge the federal super-priority status held by the
Plan for the Federal Employee Program and Medicare Part A.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 30




---



##### 



A Plan shall make adequate disclosure in contracting with third parties and in disseminating
public statements of:
 A.
    
    the structure of the Blue Cross and Blue Shield System;B.
    
    the independent nature of every Plan and;C.
    
    the Plans financial condition.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    A Plan that is in PPRP monitoring for financial reasons shall disseminate to all
providers, accounts, and direct pay subscribers the descriptions contained in the approved
disclosure brochure or other document as set forth in the Brand Book;2.2
    
    A Plan that is in PPRP monitoring for financial reasons shall disseminate to all
providers, accounts, and direct pay subscribers a summary of the Plans year-end audited
balance sheet as set forth in the Brand Book;2.3
    
    A Plan shall comply with the other disclosure requirements as set forth in the Brand
Book;2.4
    
    A Plan shall include the approved form contract provisions in all written contracts
with providers, accounts, and direct pay subscribers as set forth in the Brand Book. If a
state regulator refuses to permit a Plan to add these provisions to any such contract, and
if the Plan provides written evidence of such refusal, BCBSA shall not require the
provisions in such contract and BCBSA shall notify the regulator that the Plan has been
relieved of compliance for as long as the regulator prohibits compliance;2.5
    
    A Plan shall include on each subscriber ID card carrier or mailer enclosed with or
attaching a subscriber ID card the form disclosure statement as set forth in the Brand
Book; and2.6
    
    A Plan shall provide information in such form as requested by the Association
demonstrating that the Plan is complying with the above requirements.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 31




---



##### 



A Plan shall cooperate with the Associations Board of Directors and its Plan Performance and
Financial Standards Committee in the administration of the Plan Performance Response Process and in
addressing Plan performance problems identified thereunder.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    A Plan shall provide the Associations Board of Directors and the Plan Performance and
Financial Standards Committee with such data, action plans and access to the Plan Board of
Directors and on-site visits as required under the Plan Performance Response Process
(PPRP); and2.2
    
    A Plan shall promptly and effectively addressing performance problems identified under
the PPRP on a basis which is consistent with the Plans responsibilities under the PPRP as
determined in the reasonable judgment of the Associations Board of Directors and its Plan
Performance and Financial Standards Committee.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 32




---



##### 



A Plan shall obtain a rating of its financial strength from an independent rating agency
approved by the Associations Board of Directors for such purpose.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    Annually, a Plan shall receive a BCBSA-approved financial strength rating provided,
however: (1) a Plan operating as a Shell Holding Company as defined in the Preamble hereto
is not required to obtain a financial strength rating; (2) a Plan operating as a Hybrid
Holding Company as defined in the Preamble hereto that has outstanding publicly rated debt
is required to receive an Issuer Credit Rating1instead of a financial strength
rating; and (3) a Plan operating as Hybrid Holding Company as defined in the Preamble
hereto that has no outstanding publicly rated debt is required to maintain a financial
strength rating using the rating agencys approved insurance Group Rating Methodology. All
of the foregoing ratings shall be from either Standard & Poors, A.M. Best or Fitch, Inc.2.2
    
    Once a private rating has been issued, the Plan is required to refrain from making
public its private rating2 unless the Plan is compelled to do so by lawful
subpoena or other compulsory legal or regulatory process. If compelled to release the
information, the Plan is to inform BCBSA3of the occurrence.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 
 1
    
    An Issuer Credit Rating is an opinion of an obligors overall financial
creditworthiness to pay its financial obligations. The Issuer Credit Rating is assigned at the
holding company level and is the technical term used by Standard & Poors and A.M. Best. Fitch
uses the technical term Long Term Credit Rating.2
    
    This requirement does not relate to a public rating a Plan may receive from
Standard & Poors, A.M. Best or Fitch, Inc.3
    
    Inform: 
 33




---



##### 



Nothwithstanding any other provision in this License Agreement, during each year, a Plan and
its Controlled Affiliate(s) engaged in providing licensable services (excluding Life Insurance and
Charitable Foundation Services) shall use their best efforts to promote and build the value of the
Blue Cross [for Blue Cross Licensees] and Blue Shield [for Blue Shield Licensees] Marks.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    At least 80% of the annual Combined Local Net Revenue of a Plan* and its Licensable
Controlled Affiliates attributable to health care plans and related services and hospital
services (hereafter Local Health Revenue) offered within the designated Service Area must
be sold, marketed, administered or underwritten under the Licensed Marks and Names.2.2
    
    At least 66-2/3% of the annual Combined National Net Revenue of a Plan** and its
Licensable Controlled Affiliates attributable to health care plans and related services
(hereafter National Health Revenue) must be sold, marketed, administered or underwritten
under the Licensed Marks and Names. The percentage set forth in this paragraph shall not be
changed for at least 10 years from the date of adoption of this paragraph.
 2.2a
    
    If a Plan does not comply with the above National Health Revenue percentage,
then it may comply with this Guideline 2.2 by having at least 66-2/3% of the annual
Combined National Enrollment of the Plan*** and its Licensable Controlled
Affiliates enrolled in health care plans and related services (hereafter National
Health Enrollment) sold, marketed, administered or underwritten under the Licensed
Marks and Names, provided that such Plan was a Primary Licensee on the date this
Guideline was adopted by the BCBSA Board of Directors.
 2.3
    
    Licensable Controlled Affiliate shall mean an entity which would be eligible to receive
a license to utilize the Licensed Marks and Names under BCBSA rules, as amended from time
to time, if control by a Plan as defined in the License Agreement were the only criterion
for licensure under such rules.2.4
    
    In administering this Standard, BCBSA will consider the legitimate strategic interests
of the Plan as embodied in its investments made in reliance on regulations in effect prior
to June 13, 1996, under this Standard 10, including but not limited to the compliance exception for the period prior to
the calendar year beginning January 1, 1999.
 34




---



##### 



2.5
    
    Nothing in these Guidelines or in the Best Efforts Standard shall relieve Blue
Cross and Blue Shield Association or any Plan or Controlled Affiliate from the obligations
imposed under the License Agreement and any Controlled Affiliate License Agreement or from
the obligations to deal in good faith and fairly with each other under the terms of the
License Agreement and/or any Controlled Affiliate License Agreement. These Guidelines may
not be revised without the approval of the Board of Directors.Compliance with Local Best Efforts Standard2.6
    
    In the event that a Plan acquires or takes control of business through a purchase,
merger or any other transaction that results in the Plan, on a pro-forma basis, falling
below the requirement in Paragraph 2.1, the Plan shall:
 2.6a
    
    Come into compliance with Paragraph 2.1 as described below.2.6b
    
    Within 120 days from the closing date of the merger, purchase or transaction,
submit an action plan to BCBSA for PPFSC approval that identifies the steps the
Plan will take to come into compliance with Paragraph 2.1 as soon as possible but
in any event no later than 24 months after the date of the PPFSCs initial
determination on the action plan, unless such time period is extended by the PPFSC
in accordance with Paragraph 2.11.
 2.6b(i)
    
    The action plan (or amended action plan described below) is
subject to the approval of the PPFSC, such approval not to be unreasonably
withheld. In determining whether to approve a proposed action plan, the
PPFSC shall consider the need to avoid harm to the Blue Brands and other
Plans, the need for prompt compliance, the likelihood of serious
disruption or harm to the business of the Plan proposing the action plan
and regulatory constraints, together with any other relevant factors.
Once submitted to BCBSA, the action plan shall be presented to
the PPFSC no later than at its next regular meeting (1) in which
a quorum is present to take action, and (2) for which the action
plan was received by BCBSA not less than five business days
prior to the agenda mailing. The Plan shall have the right to
appear at such meeting, to answer any questions from Committee
members, and to make a presentation to the PPFSC in support of
its action plan. The PPFSC may exclude the Plan, however, from
its deliberations. If the PPFSC requests more
information from the Plan, the PPFSC may exercise its reasonable
discretion and extend accordingly the time within which the Plan
must comply. If the PPFSC disapproves the action plan, the
Committee shall inform the Plan in writing of its decision,
including the basis for the disapproval, and inform the Plan of
its right to file an amended action plan.
 35




---



##### 



2.6b(ii)
    
    If the Plans action plan (or amended action plan) is approved by
the PPFSC, the Plan is required to submit, on a quarterly basis, written
status updates to BCBSA that document the Plans progress towards
compliance with the approved action plan (or amended action plan). The
PPFSC may withdraw approval of a Plans action plan (or amended action
plan) if the PPFSC determines that the Plan is not making sufficient
progress towards compliance with the milestones or schedules described in
the action plan, as evidenced by the Plans quarterly written status
updates. Upon the withdrawal of the Committees approval of the Plans
action plan (or amended action plan), the Committee will notify the Plan
in writing, including the basis for the withdrawal of approval. If the
withdrawal of approval is for the Plans original action plan, the Plan
shall have at least one opportunity to submit an amended action plan as
provided in paragraph 2.6b(i). If the withdrawal of approval is for an
amended action plan, the Committee may in its sole discretion permit the
Plan to file additional amended action plans.
 2.7
    
    If a Plan, for any reason other than the acquisition or taking control of business
through a purchase, merger or any other transaction, falls below the requirement in
Paragraph 2.1, the Plan shall:
 2.7a
    
    Come into compliance with Paragraph 2.1 as described below.2.7b
    
    Within 60 days after the date of PPFSC determination (hereinafter the date of
determination) that the Plan is below the requirement in Paragraph 2.1, submit an
action plan to BCBSA for PPFSC approval that identifies the steps the Plan will
take to comply with Paragraph 2.1 as soon as possible but in any event no later
than 12 months after the date of the PPFSCs initial determination on the action plan, unless such time period is extended by the PPFSC
in accordance with Paragraph 2.11.
 2.7b(i)
    
    The action plan (or amended action plan described below) is
subject to the approval of the PPFSC, such approval not to be unreasonably
withheld. In determining whether to approve a proposed action plan, the
PPFSC shall consider the need
 36




---



##### 



2.7b(ii)
    
    If the Plans action plan (or amended action plan) is approved by
the PPFSC, the Plan is required to submit, on a quarterly basis, written
status updates to BCBSA that document the Plans progress towards
compliance with the approved action plan (or amended action plan). The
PPFSC may withdraw approval of a Plans action plan (or amended action plan) if the PPFSC
determines that the Plan is not making sufficient progress
towards compliance with the milestones or schedules described in
the action plan, as evidenced by the Plans quarterly written
status updates. Upon the withdrawal of the Committees approval
of the Plans action plan (or amended action plan), the Committee will notify the Plan in
writing, including the basis for the withdrawal of approval. If
the withdrawal of approval is for the Plans original action
plan, the Plan shall have at least one opportunity to submit an
amended action plan as provided in paragraph 2.7b(i). If the
withdrawal of approval is for an amended action plan, the
Committee may in its sole discretion permit the Plan to file
additional amended action plans. The first such amended action
plan shall be subject to the requirements stated in the second
sentence of this subparagraph.
 37




---



##### 



Compliance with National Best Efforts Standard2.8
    
    In the event that a Plan is below the requirement in Paragraph 2.2 as of the date of
enactment of Paragraph 2.2, the Plan must:
 2.8a
    
    Come into compliance with Paragraph 2.2 as described below.2.8b
    
    Within 120 days after the enactment of Paragraph 2.2, submit an action plan to
BCBSA for PPFSC approval that identifies the steps the Plan will take to comply
with Paragraph 2.2 as soon as possible but in any event no later than 24 months
after the date of the PPFSCs initial determination on the action plan, unless such
time period is extended by the PPFSC in accordance with Paragraph 2.11.
 2.8b(i)
    
    The action plan (or amended action plan described below) is
subject to the approval of the PPFSC, such approval not to be unreasonably
withheld. In determining whether to approve a proposed action plan, the
PPFSC shall consider the need to avoid harm to the Blue Brands and other
Plans, the need for prompt compliance, the likelihood of serious
disruption or harm to the business of the Plan proposing the action plan
and regulatory constraints, together with any other relevant factors.
Once submitted to BCBSA, the action plan shall be presented to
the PPFSC no later than at its next regular meeting (1) in which
a quorum is present to take action, and (2) for which the action
plan was received by BCBSA not less than five business days
prior to the agenda mailing. The Plan shall have the right to
appear at such meeting, to answer any questions from Committee
members, and to make a presentation to the PPFSC in support of
its action plan. The PPFSC may exclude the Plan, however, from
its deliberations. If the PPFSC requests more information from
the Plan, the PPFSC may exercise its reasonable discretion and
extend accordingly the time within which the Plan must comply.
If the PPFSC disapproves the action plan, the Committee will
inform the Plan in writing of its decision, including the basis
for the disapproval, and inform the Plan of its right to file an
amended action plan. The Plan shall have at least one
opportunity to submit an amended action plan. In the event the
PPFSC disapproves the amended action plan, the
PPFSC may, in its sole discretion permit the Plan to file
further amended action plans. Any such amended action plan must
be submitted to BCBSA within 60 days from the date of
disapproval of the previously submitted action plan. The first
such amended action plan shall be subject to the requirements
stated in the second sentence of this subparagraph.
 38




---



##### 



2.8b(ii)
    
    If the Plans action plan (or amended action plan) is
approved by the PPFSC, the Plan is required to submit, on a quarterly
basis, written status updates to BCBSA that document the Plans progress
towards compliance with the approved action plan (or amended action plan).
The PPFSC may withdraw approval of a Plans action plan (or amended action
plan) if the PPFSC determines that the Plan is not making sufficient
progress towards compliance with the milestones or schedules described in
the action plan, as evidenced by the Plans quarterly written status
updates. Upon the withdrawal of the Committees approval of the Plans
action plan (or amended action plan), the Committee will notify the Plan
in writing, including the basis for the withdrawal of approval. If the
withdrawal of approval is for the Plans original action plan, the Plan
shall have at least one opportunity to submit an amended action plan as
provided in paragraph 2.8b(i). If the withdrawal of approval is for an
amended action plan, the Committee may in its sole discretion permit the
Plan to file further amended action plans.
 2.9
    
    This section applies to any Plan that is in compliance upon enactment of Paragraph 2.2
or has come into compliance pursuant to Paragraph 2.8. In the event that a Plan acquires or
takes control of business through a purchase, merger or any other transaction that results
in the Plan, on a pro-forma basis, falling below the requirement in Paragraph 2.2, the Plan
shall:
 2.9a
    
    Come into compliance with Paragraph 2.2 as described below.2.9b
    
    Within 120 days from the closing date of the merger, purchase or transaction,
submit an action plan to BCBSA for PPFSC approval that identifies the steps the
Plan will take to come into compliance with Paragraph 2.2 as soon as possible but
in any event no later than 24 months after the date of the PPFSCs initial
determination, unless such time period is extended by the PPFSC in accordance with
Paragraph 2.11.
 2.9b(i)
    
    The action plan (or amended action plan described below) is
subject to the approval of the PPFSC, such approval not to be unreasonably
withheld. In determining whether to approve a proposed action plan, the
PPFSC shall consider the need to avoid harm to the Blue Brands and other
Plans, the need for prompt compliance, the likelihood of serious
disruption or harm to the business of the Plan proposing the action plan
and regulatory constraints, together with any other relevant factors.
Once submitted to BCBSA, the action plan shall be presented to
the PPFSC no later than at its next regular meeting (1) in which
a quorum is present to take action, and (2) for which the action
plan was received by BCBSA not less than five business days
prior to the agenda mailing. The Plan shall have the right to
appear at such meeting, to answer any questions from Committee
members, and to make a presentation to the PPFSC
 39




---



##### 



2.9b(ii)
    
    If the Plans action plan (or amended action plan) is approved by
the PPFSC, the Plan is required to submit, on a quarterly basis, written
status updates to BCBSA that document the Plans progress towards
compliance with the approved action plan (or amended action plan). The
PPFSC may withdraw approval of a Plans action plan (or amended action plan) if the PPFSC
determines that the Plan is not making sufficient progress
towards compliance with the milestones or schedules described in
the action plan, as evidenced by the Plans quarterly written
status updates. Upon the withdrawal of the Committees approval
of the Plans action plan (or amended action plan), the
Committee will notify the Plan in writing including the basis
for the withdrawal of approval. If the withdrawal of approval is
for the Plans original action plan, the Plan shall have at
least one opportunity to submit an amended action plan as
provided in paragraph 2.9b(i). If the withdrawal of approval is
for an amended action plan, the Committee may in its sole
discretion permit the Plan to file further amended action plans.
 2.10
    
    This section applies to any Plan that is in compliance upon enactment of Paragraph 2.2
or has come into compliance pursuant to Paragraph 2.8. If the Plan, for any reason other than the acquisition or taking control of business
through a purchase, merger or any other transaction, falls below the requirement in 2.2, the Plan shall:
 2.10a
    
    Come into compliance with
Paragraph 2.2 as described below.
 40




---



##### 



2.10b
    
    Within 60 days after the date of determination that the Plan is below
the requirement in Paragraph 2.2, submit an action plan to BCBSA for PPFSC approval
that identifies the steps the Plan will take to comply with Paragraph 2.2 as soon
as possible but in any event no later than 12 months after the date of the PPFSCs
initial determination on the action plan, unless such time period is extended by
the PPFSC in accordance with Paragraph 2.11.
 2.10b(i)
    
    The action plan (or amended action plan described below) is
subject to the approval of the PPFSC, such approval not to be unreasonably
withheld. In determining whether to approve a proposed action plan, the
PPFSC shall consider the need to avoid harm to the Blue Brands and other
Plans, the need for prompt compliance, the likelihood of serious
disruption or harm to the business of the Plan proposing the action plan
and regulatory constraints, together with any other relevant factors.
Once submitted to BCBSA, the action plan shall be presented to
the PPFSC no later than at its next regular meeting (1) in which
a quorum is present to take action, and (2) for which the action
plan was received by BCBSA not less than five business days
prior to the agenda mailing. The Plan shall have the right to
appear at such meeting, to answer any questions from Committee
members, and to make a presentation to the PPFSC in support of
its action plan. The PPFSC may exclude the Plan, however, from
its deliberations. If the PPFSC requests more information from
the Plan, the PPFSC may exercise its reasonable discretion and
extend accordingly the time within which the Plan must comply.
If the PPFSC disapproves the action plan, the Committee will
inform the Plan in writing of its decision, including the basis
for the disapproval, and inform the Plan of its right to file an
amended action plan. The Plan shall have at least one
opportunity to submit an amended action plan. In the event the
PPFSC disapproves the amended action plan, the PPFSC may, in its
sole discretion permit the Plan to file further amended action
plans. Any such amended action plan must be submitted to BCBSA
within 60 days from the date of disapproval of the previously
submitted action plan. The first such amended action plan shall
be subject to the
requirements stated in the second sentence of this subparagraph.2.10b(ii)
    
    If the Plans action plan (or amended action plan) is approved
by the PPFSC, the Plan is required to submit, on a quarterly basis,
written status updates to BCBSA that document the Plans progress towards
compliance with the approved action plan (or amended action plan). The
PPFSC may withdraw approval of a Plans action plan (or amended action plan) if the PPFSC
determines that the Plan is not making sufficient progress
towards compliance with the milestones or schedules described
 41




---



##### 



2.11
    
    Once the PPFSC has approved an action plan (or amended action plan), the approved
compliance period may not be extended beyond the 12 or 24 month periods as specified in
2.6b, 2.7b, 2.8b, 2.9b and 2.10b, except on meeting all of the following conditions:
 2.11a
    
    The Plan must submit a request to extend the compliance period prior to the expiration of
the previously approved compliance period;2.11b
    
    The Plan must demonstrate to the PPFSC that it made a good faith effort to achieve the action plan (or amended action plan), and
that additional time is needed due to circumstances beyond its control; and2.11c
    
    The amended compliance period must be approved by the PPFSC, such approval not to be
unreasonably withheld.
 2.12
    
    In the event that the PPFSC disapproves a Plans action plan (or amended action plan)
pursuant to 2.6b(i), 2.7b(i), 2.8b(i), 2.9b(i) and 2.10b(i) or extension of the compliance
period pursuant to 2.11, or withdraws its approval of an action plan pursuant to 2.6b(ii),
2.7b(ii), 2.8b(ii), 2.9b(ii) and 2.10b(ii), the Plan shall have the right to appeal the
decision to the BCBSA Board of Directors. The Plan must request such an appeal prior to either one of the next two meetings
of the Board of Directors that take place after the PPFSCs decision to disapprove
or withdraw its approval. Nothing contained herein shall be construed that the Plan
does not have appeal rights with respect to decisions made by the PPFSC regarding
compliance with other Standards or their associated guidelines.
 
 *
    
    Combined Local Net Revenue shall have the meaning ascribed to it in Attachment VI to these
Guidelines.**
    
    Combined National Net Revenue shall have the meaning ascribed to it in Attachment VI to these
Guidelines.***
    
    Combined National Enrollment shall have the meaning ascribed to it in Attachment VI to these
Guidelines. 42




---



##### 



Neither a Plan nor any Larger Controlled Affiliate shall cause or permit an entity other than
a Plan or a Licensed Controlled Affiliate thereof to obtain control of the Plan or Larger
Controlled Affiliate or to acquire a substantial portion of its assets related to licensable
services.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    The Plan shall be considered noncompliant upon a reduction in Combined Local Net
Revenue of the Plan and its Controlled Affiliates in any fiscal quarter in the Service Area
of fifty percent or more compared to such revenue in any fiscal quarter during the prior
thirty-six month period, due in whole or in part to the conveyance of assets, including
goodwill, to a party other than a Plan or Licensed Controlled Affiliate of a Plan which is
in compliance with all rules and regulations of BCBSA. Combined Local Net Revenue shall
have the meaning ascribed to it in Attachment VI to the Guidelines, except that, for
purposes of this section, Combined Local Net Revenue excludes delivery of health care
services; (such as hospital and medical (professional) services), and the sale of health
care products; stand-alone vision, mental, drug, dental, pharmacy management or other
specialty health care financing or administrative programs; workers compensation; and
stand-alone reinsurance and stand-alone stop loss insurance.1.2
    
    The Plan shall be considered noncompliant if, as a result of any transaction with an
entity or group other than Plans or Licensed Controlled Affiliates of Plans, the entity or
group or its owners or members obtain the ability to select a majority of the members of
the Board of Directors of the Plan or any of its Larger Controlled Affiliates or otherwise
gain control of the Plan or Larger Controlled Affiliate.1.3
    
    The Plan shall be considered noncompliant if an officer or other person who is among
the ten most highly compensated employees of a Plan or any of its Larger Controlled
Affiliates shall have a financial arrangement with any entity, other than a Plan or an
entity controlled by the Plan, which permits the entity to influence that person in the
discharge of his duties.1.4
    
    The Plan shall be considered noncompliant if the Plan or any of its Larger Controlled
Affiliates enter into an arrangement for the management of all or a portion of the
operations of the Plan or Larger Controlled Affiliate where the consideration to be paid
for such services exceeds 35% of that entitys administrative expenditures for the fiscal
year with respect to which such services are rendered. Consideration includes payment from any source to an entity or
its Affiliates or Associates (as defined in paragraph 9.d(v)(a) of the
 43




---



##### 



1.5
    
    BCBSA may require the Plan or any of its Larger Controlled Affiliates to make full
disclosure to it of any proposed or completed transaction as BCBSA deems necessary to
ascertain compliance with this Standard, including purchase, lease, employment, consulting
or other financial arrangements between third parties and the Plan or its officers,
directors or members.1.6
    
    An unlicensed party seeking to obtain control over a Plan or Larger Controlled
Affiliate or to acquire a substantial portion of its assets is invited to apply to become a
licensee. To qualify for a grant or assignment of a license, the applicant must meet the
following criteria in addition to all other criteria established by BCBSA in the Bylaws,
License Agreement, Membership Standards and accompanying Guidelines:
 1.6a
    
    The owners, directors, officers, and proposed management team of the applicant
must demonstrate that they possess the character and qualifications to operate the
business in a manner which will enhance the value of the Licensed Marks and Names.1.6b
    
    The applicant must submit a business plan based on realistically-attainable
objectives which indicate that it will operate its business in a manner which will
enhance the value of the Licensed Marks and Names.1.6c
    
    Upon licensure of the applicant, at least 66-2/3% of its consolidated gross
revenues attributable to Health Care Products and Services would be sold, marketed,
underwritten or administered under the Licensed Marks and Names, based on pro forma
consolidation of the applicants and the Plans most recently available financial
statements. Health Care Products and Services includes: i) health care plans and related services
as defined in the License Agreement; ii) the delivery of hospital
services, and medical (professional) services as defined in Attachment VI
of these Guidelines; and iii) health care products as defined in
Attachment VI of these Guidelines.1.6d
    
    The applicant must make a full disclosure to BCBSA of all of the terms of any
proposed transaction with a Plan or any of its Larger Controlled Affiliates
including purchase, lease, employment, consulting or other financial arrangements
with the Plan or any of its Larger Controlled Affiliates or its officers, directors
or members.
 44




---



##### 



1.6e
    
    The applicant, if licensed, would not immediately be in violation of any
provisions of the Bylaws, License Agreement, Membership Standards or accompanying
Guidelines and would not be immediately subject to monitoring under the Plan
Performance Response Process due to its financial status, based on its fiscal
quarter most recently ended.
  2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 45




---



##### 



No provider network, or portion thereof, shall be rented or otherwise made available to a
National Competitor if the Licensed Marks or Names are used in any way with such network.
 A provider network may be rented or otherwise made available, provided there is no use of the
Licensed Marks or Names with respect to the network being rented.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    A Plan shall be considered noncompliant if it or any Licensed Controlled Affiliate
directly or indirectly rents or otherwise makes available to a National Competitor a provider
network or any portion thereof with which such Plan or Licensed Controlled Affiliate is using
the Licensed Marks or Names.2.2
    
    A Plan shall be considered noncompliant if it or any Licensed Controlled Affiliate
directly or indirectly rents or otherwise makes available (through a provision in a provider
contract or otherwise) a provider network or portion thereof which uses the Licensed Marks or
Names to an unlicensed Affiliate or any entity that, in turn, rents or otherwise makes
available such network to a National Competitor, even if such Affiliate makes no other
reference to the Licensed Marks or Names.2.3
    
    Nothing herein shall prohibit an unlicensed Affiliate of a Plan from contracting
separately in its own name with any provider and renting or otherwise making available the
provider network created by such contracts to any person or entity, provided there is no
reference in or use of the Licensed Marks or Names in such contracts or elsewhere with respect
to the rented network.2.4
    
    National Competitor, for purposes of this Standard, is any non-Blue entity, other than a
subsidiary or affiliate of a Blue entity, together with its affiliated companies that:
 (a)
    
    competes against the Blue System for Core Products and Services (as defined
in Brand Regulation 7.5); and(b)
    
    on a consolidated basis, would have less than 66 2/3% of its gross revenues
attributable to Core Products and Services (as defined in Brand Regulation 7.5)
sold, marketed, underwritten or administered under the Licensed Marks and
Names, if it were to acquire the mean-sized Plan (measured by consolidated gross revenues or such
other best-available similar financial information) licensed by Blue Cross
 46




---



##### 



(c)
    
    in addition, an entity that would otherwise meet the definition of National
Competitor, as provided herein, if its revenues were converted to premium
equivalents, shall be considered a National Competitor. In the event there is
uncertainty about whether a non-Blue entity is a National Competitor, the
relevant Plan and/or Licensed Affiliate involved in or contemplating a network
rental arrangement shall provide Blue Cross and Blue Shield Association with
sufficient financial data so that a determination can be made.
 2.5
    
    "[U]se of the Licensed Marks or Names, use of the Licensed Names and Marks, reference
to the Licensed Names and Marks, and similar expressions, for purposes of this Guideline, is
any use of the Licensed Marks or Names in a provider network, including, but not limited to,
use of the Licensed Marks or Names in:
 (a)
    
    contracts with providers in the network; or(b)
    
    communications with providers, subscribers, accounts or others that
refer or relate to the providers in the network or the network itself.
 2.6
    
    Affiliate, for purposes of this Guideline, is defined in Section 9(d)(v) of the License
Agreements.2.7
    
    Nothing in this Standard or these Guidelines shall prevent the rental of any provider
network if the Licensed Marks and Names are not used in any way with that network.2.8
    
    Nothing in this Standard or these Guidelines shall prevent the rental of a provider
network to entities not meeting the definition of National Competitor, including but not
limited to unions or union welfare funds, governments or governmental entities.2.9
    
    If a Licensee or its Affiliate is engaged in an arrangement prohibited by this Standard
that was entered prior to the adoption of this Standard and these Guidelines, the Licensee
shall cause any such arrangement to terminate as soon as practicable, but in no event later
than the earlierof:
 47




---



##### 



(a)
    
    two years from the date of enactment of this Standard and these
Guidelines; or(b)
    
    expiration of the current term of any such arrangement or agreement.
  3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 48




---



##### 



Attachment I  Required Plan Performance Reports and Certifications Schedule
 PERIOD
    
    
    DUE DATEA.
    
    BCBSA Membership Information Request (Triennial Review)
    
    
    Triennial(4)
    
    
    
    (1)B.
    
    Certifications:Procedures having been adopted to enforce code of conduct, compliance
program, other standards of conduct and practices of corporate
governance (See Membership Standard 1)
    
    
    Triennial(4)
    
    
    
    (1)By a qualified actuary of adequate accounting for unpaid claim liability
reserve (See Membership Standard 3)
    
    
    Annual
    
    
    
    5/1(3)Distribution of BCBSA Membership Compliance letter and attachments to
Plan Board members (See Membership Standard 1)
    
    
    Triennial(4)
    
    
    
    12/31The Plan has made a determination that a majority of its Board members
are independent (See Membership Standard 1, Guideline 2.1c)
    
    
    Annual
    
    
    
    5/1C.
    
    Service Mark and disclosure information (See Membership Standard 2 and 7)
    
    
    Biennial
    
    
    
    (1)D.
    
    Changes in governance
    
    
    Ongoing
    
    
    
    (2)E.
    
    Quarterly Financial Report1st Qtr
    
    
    
    5/5-
    
    All financial statements and required schedules, except the reconciliation of
GAAP net worth to SAP net worth
    
    

2nd Qtr
3rd Qtr
4th Qtr
    
    
    
    8/4
11/4
2/28-
    
    Starting first quarter, 2004 and quarterly thereafter, a reconciliation of GAAP
net worth to SAP net worth (only applicable to a risk-assuming licensee that
files its Quarterly Financial Report on a GAAP basis)
    
    
    1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
    
    
    
    5/15
8/15
11/15
2/28F.
    
    Semi-annual Health Risk-Based Capital (HRBC) Report as defined by the
NAIC.
    
    
    Annual filings
    
    
    
    3/15Midyear filings
    
    
    
    8/15G.
    
    Annual Financial Forecast
    
    
    Annual
    
    
    
    2/28H.
    
    Annual Certified Audit Report
    
    
    Annual
    
    
    
    5/1(3)I.
    
    Insurance Department Examination Report
    
    
    As completed by
your Insurance
Department
    
    
    Within 30
days of Plan
receipt of
final reportJ.
    
    Annual Statement filed with State Insurance Department
    
    
    Annual
    
    
    
    5/1(3)K.
    
    Plan, Subsidiary and Affiliate Report
    
    
    Annual
    
    
    
    5/1(3)
 49




---



##### 



Attachment I  Required Plan Performance Reports and Certifications Schedule
 PERIOD
    
    
    DUE DATEL.
    
    Quarterly Enrollment ReportExpanded Medicare and Expat reporting introduced
    
    

1st Qtr, 2006
    
    
    4/30Expanded National Accounts and Ancillary Products reporting introduced
    
    
    2nd Qtr, 2006
3rd Qtr, 2006
4th Qtr, 2006
1st Qtr, 2007
2nd Qtr, 2007
    
    
    7/31
10/31
1/31
4/30
7/31Expanded Consumer Driven Health Plan reporting introduced
    
    
    3rd Qtr, 2007
4th Qtr, 2007
    
    
    10/31
1/31
 PERIOD
    
    
    DUE DATEQuarterly
MTM Direct Measures Report (including Geographic Market
reporting)
    
    

3rd
Qtr. 2006
4th Qtr. 2006
1st Qtr. 2007
2nd Qtr. 2007
3rd Qtr. 2007
4th Qtr. 2007
1st Qtr. 2008
    
    
    10/31
 1/31
 4/30
 7/31
 10/31
 1/31
 4/30Effective 1/1/2008 and quarterly thereafter, Quarterly MTM Direct Measures
Report, (including Geographic Market reporting), amended to include:-
    
    Expanded quarterly inquiry reporting (segregating self-service and manual)
to sunset on January 1, 2009 unless extended by the Board and Member
Plans.Quarterly reporting will continue to be due on the last day of the month following
the quarter being reported.
 1)
    
    Plans may be required to respond to a Membership Information Request on an annual basis as
required under Membership Standard 1: Board of Directors
 2)
    
    Due within 30 days of the decision to change,
  Bylaws
    
     Principal Officers Articles of Incorporation
    
     Board Composition
 3)
    
    Extension up to June 1 only with prior agreement of BCBSA.4)
    
    Plans may be required to respond to a Membership Information Request on an annual basis as
required under Membership Standard 1: Board of Directors
 50




---



##### 



Attachment II
 SANCTION PROTOCOLS  REPORTS AND RECORDS
  1.
    
    BCBSA will initially work directly with Plans to resolve these situations.2.
    
    If chronic problem persists, a letter will be sent to the Plan CEO describing the situation.3.
    
    If no response or resolution, Committee requests meeting with Plan CEO.4.
    
    If necessary, the Committee and BCBSA Board would still have the option to move the Plan to
mediation/arbitration. (The Plans Board will be notified in the Triennial Compliance Letter
of chronic late, inaccurate and/or non-reporting if Mediation/Arbitration is approved by BCBSA
Board of Directors.)
 51




---



##### 



Attachment III
 GUARANTY ASSOCIATION ALTERNATIVES & EVALUATION CRITERIA
  1.
    
    Participate in the guaranty fund in each state in which it operates; OR2.
    
    Establish another method approved by BCBSA which assures the payment of claim liabilities and
continuation of coverage in the event of a licensees insolvency.
    
    
    Hold Harmless Agreement  Providers, by contract or statute, are prohibited from
pursing subscribers for payment of outstanding claims in the event the licensee
becomes insolvent. Provisions must be made by the licensee to fund claim payments due
to providers and subscribers not covered by the hold harmless provisions.
 
    
    Voluntary inter-licensee arrangements  insurance or reinsurance agreements among
a consortium of licensees that have sufficient financial resources to meet the
commitments of the consortium and maintain compliance with the applicable license
agreements. Must be acceptable to state regulators.
 
    
    Reinsurance or a financial pledge  insurance or reinsurance agreements or pledge
of financial resources from a third party that has sufficient financial resources to
meet the commitments. Must be acceptable to state regulators.
 52




---



##### 



Attachment III
 GUARANTY ASSOCIATION ALTERNATIVES & EVALUATION CRITERIA
 
    
    Subscriber Protection Account  establishment of a custodial account consisting of
cash and/or high-grade marketable securities in amount to cover insurance obligations
of licensee. Based on the SAFE-T Account concept developed by State Farm, the licensee
would, with the agreement of the insurance department, continue to admit the
securities as assets of the corporation and would have the ability to trade the
securities as long as the value of the custodial account was equal to the
predetermined requirement. Also necessary is a written agreement with the appropriate
regulators indicating that the custodial account would be used in the case of
insolvency to fund the licensees claim liabilities. Only when all claims have been
paid, could the accounts assets be used for other liquidation expenses.
   1.
    
    The proposal must guarantee all of the licensees insured business (branded and unbranded)
in all jurisdictions in which it is licensed to do business. The mechanism does not need to
include FEP subscribers.2.
    
    The mechanisms are acceptable to all applicable regulators.3.
    
    The amount of required coverage is at least equal to the:
    4.
    
    The amount of proposed coverage must be annually certified by an actuary that it is a good
and sufficient provision for the stated obligation. If the Plan is included in the Plan
Performance Response Process, the certification must be made by an independent, qualified
actuary.
 5.
    
    Provisions must be made for the sufficiency of the coverage to be reviewed, and, if
necessary, adjusted at least annually. If the Plan is included in the Plan Performance
Response Process, the review and necessary adjustments will be required on a more frequent
basis.
 53




---



##### 



Attachment III
 GUARANTY ASSOCIATION ALTERNATIVES & EVALUATION CRITERIA
   
    
    Voluntary inter-licensee arrangements  agreements among 2 or more licensees that
have sufficient financial resources to meet the commitments to continue coverage and
maintain compliance with the applicable license agreements. Must be acceptable to
state regulators.
 
    
    Reinsurance  insurance or reinsurance agreements from a third party that has
sufficient financial resources to meet the commitments. Must be acceptable to state
regulators.
   
    
    Length of time coverage continuation is available  coverage continues from the
date of a BCBSA Member Plan vote to terminate license(s) or resignation, for a period
at least as long as the continuation of coverage period provided by the guaranty fund
statute in the Plans state.
 
    
    Who is offered continuation of coverage  all insured subscribers, excluding FEP
subscribers.
 
    
    What level of benefits must be offered  at least as high as would be offered if
the Plan participated in its state guaranty fund.
 54




---



##### 



Attachment IV
Service Performance Scorecard and MTM Index
         1.
    
    Split the MTM raw score into two components: the claim timeliness points and the all other
points (Refer to Lines 1, 2, and 3 of Table A).2.
    
    Combine the MTM and BlueCard claims timeliness points by:
 a.
    
    Multiplying the MTM claims timeliness raw points by the non-BlueCard percent of total claims
(BlueCard and non-BlueCard) to compute a MTM weighted claims timeliness score (refer to Line 6
of Table A).b.
    
    Converting BlueCard raw score to MTM points by multiplying the BlueCard raw score by the MTM
claim timeliness score and dividing by 100 (refer to Lines 1 and 2 of Table A).
 55




---



##### 



Attachment IV
Service Performance Scorecard and MTM Index
 c.
    
    Multiplying the converted BlueCard score by the BlueCard percent of total claims (BlueCard
and non-BlueCard) to compute a BlueCard Weighted Claims Timeliness Score (Refer to Line 6 of
Table A).d.
    
    Adding the MTM weighted claims timeliness score to the BlueCard weighted claims timeliness
score to compute a Total Claims Timeliness points (Refer to Line 7 of Table A).
 3.
    
    Adding the MTM raw points (excluding the claims timeliness raw points) to the Total Claims
Timeliness points (Refer to Line 8 of Table A) to compute a Non-FEP raw score.
  1.
    
    Multiplying the FEP raw program score by the percent of total membership (FEP and non-FEP) to
compute a Weighted FEP Score (Refer to Line 11 of Table A)
 2.
    
    Multiplying the Non-FEP score by the percent of total membership (FEP and non-FEP) to compute
a Weighted MTM and BlueCard Score (Refer to Line 12 of Table A)
 3.
    
    Add the Weighted FEP Score to the Weighted MTM and BlueCard Score to compute the Weighted
Program/Market Total (Refer to Line 13 of Table A)
 56




---



##### 



Attachment IV
Service Performance Scorecard and MTM Index
 Table A
 Sample Computation
  Weight Market Total Score
    
    Period: 2ndQuarter YTD 2001Plan Name:Blue Cross Blue Shield of Geography
  MTM
    
    BlueCard1.
    
    Individual Raw Program Score
    
    97.1
    
    95.512.
    
    Claims Timelines (C/T)
    
    11 out of 11 Points
    
    .9551 x 11 = 10.51 points(converted to MTM score)3.
    
    MTM minus C/T
    
    97.1 - 11 = 86.104.
    
    Total Claims
    
    3,074,239
    
    116,3525.
    
    % of Claims
    
    96%
    
    4%6.
    
    Weighted C/T
    
    11 x 96% = 10.56
    
    10.51 x 4% = .4204
 7.
    
    Combined MTM & BC Claim Timelines Points
    
    10.56 + .4204 = 10.988.
    
    Combined MTM and BlueCard Score
    
    86.10 + 10.98 = 97.08
  FEP
    
    Non-FEP9.
    
    Membership
    
    49,663
    
    612,20010.
    
    Membership %
    
    8%
    
    92%
 11.
    
    Weighted FEP Score
    
    95 x 8% = 7.612.
    
    Weighted MTM and BlueCard Score
    
    97.08 x 92% = 89.3113.
    
    Weighted Total Market Score
    
    7.6 + 89.31 = 96.92
 57




---



##### 



Attachment IV
Service Performance Scorecard and MTM Index
 Table B
 MTM Index
  MTM Index (effective until 12/31/06)
 Performance
    
    IndexCurrent Measures
    
    Ranges
    
    PointsEnrollment Timeliness
    
    
    60-99
    %
    
    
    9Enrollment Member-Level Accuracy
    
    
    92-99
    %
    
    
    5Enrollment Group-Level Accuracy
    
    
    92-99
    %
    
    
    5Claims Timeliness
    
    
    70-97
    %
    
    
    11Claims Frequency Accuracy
    
    
    90-97
    %
    
    
    15Claims Dollar Accuracy
    
    
    90-99
    %
    
    
    15Inquiry Timeliness
    
    
    60-90
    %
    
    
    8Inquiry Accuracy
    
    
    83-99
    %
    
    
    24Blockage RateMethod 1:
    
    
    16-8
    %
    
    
    4Method 2:
    
    
    5-2
    %Abandoned Rate
    
    
    15-5
    %
    
    
    4Total MTM Index Score
    
    
    
    
    
    
    100
 MTM Index (effective 1/1/07)
 Performance
    
    IndexCurrent Measures
    
    Ranges
    
    PointsEnrollment Timeliness
    
    
    90-99
    %
    
    
    10Enrollment Member-Level Accuracy
    
    
    95-99
    %
    
    
    10Enrollment Group-Level Accuracy
    
    
    95-99
    %
    
    
    10Claims Timeliness
    
    
    85-97
    %
    
    
    10Claims Processing Accuracy
    
    
    93-97
    %
    
    
    13Claims Financial Accuracy
    
    
    93-99
    %
    
    
    13Inquiry Timeliness
    
    
    85-95
    %
    
    
    10Inquiry Accuracy
    
    
    89-99
    %
    
    
    16Blockage RateMethod 1:
    
    
    5-3
    %
    
    
    4Method 2:
    
    
    5-2
    %Abandoned Rate
    
    
    8-5
    %
    
    
    4Total MTM Index Score
    
    
    
    
    
    
    100
 58




---



##### 



Attachment V
Clarification of Requirements for Licensees Annual Actuarial Certification
   1.
    
    If the Licensee is required to submit an annual statutory actuarial certification to its
domiciliary regulatory authority, then that certification can be used to satisfy BCBSAs
requirement, so long as it contains an explicit statement to the effect that it is intended to
be relied upon by the Blue Cross Blue Shield Association.
 2.
    
    If the Licensee is not required to submit an annual statutory actuarial certification to its
domiciliary regulatory authority, then it must submit an annual certification to BCBSA that
complies with the requirements delineated below that apply to a Licensee having an HRBC ratio
below 375%, but with one key exception: here the certification may be issued by any qualified
actuary (as defined below), which might include an employee of the Licensee or one of its
affiliates.
 3.
    
    The annual certification is to be submitted to the Blue Cross Blue Shield Association by May
1 together with a copy of the (NAIC) Annual Statement.
  1.
    
    The annual certification must be issued by a qualified, independent, actuary.
 a)
    
    Qualified
means that the actuary is a member in good standing of the American Academy of Actuaries and
meets its Specific Qualification Standard for the Actuarial Certification in the NAIC Health
Annual Statement.b)
    
    An actuarys degree of independence from the entity about which he/she is opining is left
up to his/her professional judgment, except that the following are not considered independent:
 i)
    
    any current employee, or retiree, of that entity or any of its affiliates;ii)
    
    any
consulting actuary acting in an interim staff capacity with that entity or any of its
affiliates.
 2.
    
    The annual certification must substantially comply with the standards prescribed in the
Actuarial Certification section of the NAIC Annual Statement Instructions applicable to HMDI
companies. For the 12/31/2000 certification, the 1999 HMDI Instructions shall govern;
subsequently, the 200X Health Instructions shall set the standards applicable to the
12/31/200X certification.
 3.
    
    The annual certification should contain an explicit statement that it was prepared for, and
may be relied upon by, the Blue Cross Blue Shield Association.
 59




---



##### 



Attachment V
Clarification of Requirements for Licensees Annual Actuarial Certification
 4.
    
    The annual certification is to be submitted to the Blue Cross Blue Shield Association by May
1 together with a copy of the (NAIC) Annual Statement and a copy of the statutory opinion, if
different from the independent opinion.
 60




---



##### 



ATTACHMENT VI  Definition of Local Net Revenue, Combined Local Net Revenue, National Net Revenue,
Combined National Net Revenue, and Combined National Enrollment
 I. Local Revenues
  Local Net Revenue for Risk Assuming entities is defined as:
 The sum of Branded
and
Unbranded:
    
      Revenue for all Health Insurance Premiums for all lines of business, as listed in the
BCBSA Quarterly Financial Report  Revenue from delivery of hospital services  Revenue from the sale of health care products  Revenue from delivery of medical (professional) services  Administrative Service Contract (ASC) Premium Equivalents  Administrative Service Only (ASO) Premium Equivalents  Ceded health premium under reinsurance agreements  All other health revenue, as listed in the BCBSA Quarterly Financial ReportLess:
    
      Revenue for out-of-service-area national account contracts  Revenue for out-of-service-area FEP contracts  Assumed health premium under reinsurance arrangementsAdjusted for:
    
      Inter-company eliminations
 Local Net Revenue for Non-Risk Assuming entities is defined as:
 The sum of Branded
and Unbranded:
    
      Administrative Service Only (ASO) Premium Equivalents  Administrative Service Contract (ASC)
Premium Equivalents  All other health revenue, as listed in the BCBSA Quarterly Financial ReportAdjusted for:
    
      Inter-company eliminations
 61




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##### 



ATTACHMENT VI  Definition of Local Net Revenue, Combined Local Net Revenue, National Net Revenue,
Combined National Net Revenue, and Combined National Enrollment
 Combined Local Net Revenue is defined as:
 1 2 3
 
 1
    
    Excludes revenue from Medicare, Medicaid, and CHAMPUS fiscal intermediary
contracts and from CHAMPUS risk contracts where the Plan demonstrates to the satisfaction of
BCBSA that government regulations practically prevent the use of the Marks.2
    
    The term hospital services shall be interpreted broadly and shall include, without
limitation, any services or products provided by a hospital. Hospital means (A) an
institution that is engaged in providing, by or under the supervision of physicians, to
inpatients, (i) diagnostic services and therapeutic services for medical diagnosis, treatment,
and care of injured, disabled, or sick persons, or (ii) rehabilitation services for the
rehabilitation of injured, disabled, or sick persons; or (B) any facility or institution
engaged in the delivery of health care services that is located within or adjacent to, or is
an Affiliate3 of, an institution described in (A) The term health care products
shall be interpreted broadly and shall include, without limitation, tangible health-related
goods, other than health care services, for which a Plan provides or administers reimbursement
on behalf of subscribers, including but not limited to, pharmaceuticals, biologics, and
medical equipment or devices. The term medical (professional) services shall be interpreted
broadly and shall include, without limitation, services provided by a physician or other
professional healthcare provider to identify and treat a members illness or injury, which are
consistent with the symptoms, diagnosis, and treatment of the members condition, in
accordance with the standards of good medical practice.3
    
    Affiliate as used in this Attachment shall have the meaning ascribed to that term in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 in
effect as of January 1, 1999. 62




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##### 



ATTACHMENT VI  Definition of Local Net Revenue, Combined Local Net Revenue, National Net Revenue, Combined
National Net Revenue, and Combined National Enrollment
 II. National Revenues and/or National Enrollment
  National Net Revenue for Risk Assuming entities is defined as:
 The sum of Branded
and Unbranded:
    
      Revenue for all Health Insurance Premiums for all lines of business as listed in the
BCBSA Quarterly Financial Report  Revenue from delivery of hospital services  Revenue from the sale of health care products  Revenue from delivery of medical (professional) services  Administrative Service Contract (ASC) Premium Equivalents  Administrative Service Only (ASO) Premium Equivalents  Ceded health premium under reinsurance agreements  All other health revenue as listed in the BCBSA Quarterly Financial ReportLess:
    
      Assumed health premium under reinsurance arrangementsAdjusted for:
    
      Inter-company eliminations
 National Net Revenue for Non-Risk Assuming entities is defined as:
 The sum of Branded
and Unbranded:
    
      Administrative Service Only (ASO) Premium Equivalents  Administrative Service Contract (ASC) Premium Equivalents  All other health revenue as listed in the BCBSA Quarterly Financial ReportAdjusted for:
    
      Inter-company eliminations
 63




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##### 



ATTACHMENT VI
Definition of Local Net Revenue, Combined Local Net Revenue, National Net Revenue, Combined
National Net Revenue, and Combined National Enrollment"
 Combined National Net Revenue is defined as:
 1 2 3
 Combined National Enrollment
 The sum of Branded
and
Unbranded:
    
    
    
    Administrative Service Only (ASO) Members
    
    Administrative Service Contract (ASC) Members
    
    All other health membership as listed in
the BCBSA Quarterly Enrollment Report.
 3
 
 1
    
    Excludes revenue from Medicare, Medicaid and CHAMPUS fiscal intermediary
contracts and from CHAMPUS risk contracts where the Plan demonstrates to the satisfaction of
BCBSA that government regulations practically prevent the use of the Marks.2
    
    The term Hospital Services shall be interpreted broadly and shall include, without
limitation, any services or products provided by a hospital. Hospital means (A) an
institution that is engaged in providing, by or under the supervision of physicians, to
inpatients, (i) diagnostic services and therapeutic services for medical diagnosis, treatment,
and care of injured, disabled, or sick persons, or (ii) rehabilitation services for the
rehabilitation of injured, disabled, or sick persons; or (B) any facility or institution
engaged in the delivery of health care services that is located within or adjacent to, or is
an Affiliate3 of, an institution described in (A). The term health care products
shall be interpreted broadly and shall include, without limitation, tangible health-related
goods, other than health care services, for which a Plan provides or administers reimbursement
on behalf of subscribers, including but not limited to, pharmaceuticals, biologics, and
medical equipment or devices. The term medical (professional) services shall be
interpreted broadly and shall include, without limitation, services provided by a physician
or other professional healthcare provider to identify and treat a members illness or
injury, which are consistent with the symptoms, diagnosis, and treatment of the members
condition, in accordance with the standards of good medical practice.3
    
    Affiliate as used in this Attachment shall have the meaning ascribed to that term in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 in
effect as of January 1, 1999. 64




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
 BUSINESS ASSOCIATE AGREEMENT FOR BLUE CROSS AND BLUE SHIELD LICENSEES
      65




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 2 of 22
 A.
    
    Privacy and Security of Protected Health Information.
 1. Permitted Uses and Disclosures
 Party as Business Associate
 Party as Subcontractor
 66




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 3 of 22
  2. Other Permitted Uses and Disclosures.
 Partys Operations
  67




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 4 of 22
    3. Information Safeguards.
 4. Security Incident Reporting.
 5 Subcontractors
 68




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 5 of 22
 B.
    
    Protected Health Information Access, Amendment and Disclosure
Accounting.
 1. Access.
 2. Amendment .
 3. Disclosure Accounting.
 4. Inspection of Books and Records.
 C.
    
    Breach of Obligations.
 1. Reporting.
 69




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 6 of 22
  2. Dispute Resolution.
 D.
    
    Termination of Agreement.
 1. Right to Terminate a Scheduled Agreement.
 70




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 7 of 22
 2. Termination of this Agreement.
   3. Termination of this Agreement with Respect to a Scheduled
Agreement.
 4.
Obligations upon Termination of a Scheduled Agreement.
 5. Continuing Privacy and Security Obligations.
 71




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 8 of 22
 E.
    
    Indemnification.
 1. General.
  2. Basic Principles.
   72




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 9 of 22
  3. Notice of Claim.
 4. Cooperation.
 5. Right to Tender or Undertake Defense.
 Undertaking of Defense by Indemnitor
 73




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 10 of 22
 Undertaking of Defense by Indemnitee
 Resolution of Claims
 6.
Disputes.
 7.
Delivery of Notices.
 74




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 11 of 22
 F. Compliance with Standard Transactions.
 1.
Compliance Date.
 2.
Requirement of Compliance.
 3.
Trading Partner Provisions.
     75




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 12 of 22
 G.
Gramm-Leach-Bliley Compliance.
 H. General Provisions.
 1.
Amendment to Agreement.
 2.
Conflicts.
 3.
State Privacy Law Requirements.
 4.
No Third-Party Beneficiaries.
 5.
Interpretation.
 6.
Notices.
 76




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 13 of 22
 SCHEDULE A
   1.
    
    All Blue Cross License Agreements Between BCBSA and Primary Licensees2.
    
    All Blue Cross Controlled Affiliate License Agreements Between BCBSA and  Controlled
Affiliates of Primary Licensees3.
    
    All Blue Shield License Agreements Between BCBSA and Primary Licensees4.
    
    All Blue Shield Controlled Affiliate License Agreements Between BCBSA and Controlled
Affiliates of Primary Licensees5.
    
    All ITS License Agreements Between BCBSA and Licensees6.
    
    All Blue Quality Centers for Transplant Plan Participation Agreements Between BCBSA
and Licensees7.
    
    All Data Center InterPlan Operating Agreements Among Licensees for the Medicare
Program8.
    
    Data Processing InterPlan Operating Agreements Among Licensees for the Medicare
Program9.
    
    All Away From Home Care Guest Membership Agreements Between BCBSA and Licensees10.
    
    All Government Business Services Contracts Between BCBSA and Licensees11.
    
    All Service Benefit Plan (FEP) Participation Agreements Between BCBSA and Licensees12.
    
    BlueCard Worldwide Contract Between BCBSA and Blue Cross and Blue Shield of South Carolina13.
    
    All National Account Servicing Agreements Between Blue Cross and Blue Shield of Louisiana
and Other Licensees
 77




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 14 of 22
  14.
    
    The Following Agreements Between Blue Cross and Blue Shield of Kansas City and Other
Licensees:Cost Reimbursement Agreement with Triple-S, Inc.National Account Servicing Plan Agreement with Blue Cross and Blue Shield of KansasCustom Arrangements for BlueCard National Accounts with Empire Blue Cross Blue ShieldAll Alternate Control Licensee Designation Forms and Similar Agreements with Other
LicenseesAll Participation Request Agreements and Similar Agreements with Other Licensees for
Servicing Dairy Farmers of America, Inc.Participating/Servicing Plan Master Agreement (NASCO) for National Accounts with Blue Cross
and Blue Shield of MichiganServicing/Participating Plan Agreement (NASCO) and National Account HMO Participation
Agreement with Community Insurance Company d/b/a Anthem Blue Cross and Blue ShieldNational Accounts Lead Agreement (NASCO) and Notification of National Account BlueCard Sale
with Blue Cross and Blue Shield of MassachusettsParticipating Plan Agreement for National Accounts (NASCO) with CareFirst of Maryland, Inc.All National Account ITS/BlueCard Custom Arrangements with Other LicenseesAll Administrative Services Agreements with Other LicenseesNetwork Access and Joint Operating Agreement with Premier Health, Inc. and Blue Cross and
Blue Shield of Kansas, Inc.Participating Payor Transaction Submission Agreement with Administrative Services of
Kansas, Inc.
 16.
    
    All National Account Servicing Agreements Between Blue Cross & Blue Shield of Wisconsin and
Other Licensees17.
    
    All Alternate Control Licensee Designation Agreements and Similar Agreements Between Blue
Cross & Blue Shield of Wisconsin and Other Licensees
 78




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 15 of 22
 18.
    
    Information Systems Services Agreement between Blue Cross Blue Shield of South Carolina and
Blue Cross & Blue Shield of Wisconsin, dated as of August 23, 199619.
    
    All National Account Servicing Agreements Between Horizon Blue Cross and Blue Shield of New
Jersey and Other Licensees20.
    
    Reciprocal Dental Network Agreement Between Blue Cross and Blue Shield of Rhode Island and
Blue Cross and Blue Shield of Massachusetts, Inc.21.
    
    [Intentionally omitted.]22.
    
    [Intentionally omitted.]23.
    
    [Intentionally omitted]24.
    
    Complementary Insurance Agreement Regarding Data Transfer Between Blue Cross and Blue
Shield of Vermont and Anthem Health Plans of New Hampshire, Inc.25.
    
    Administrative Services Agreement for the New England Managed Care Initiative Between
Anthem Health Plans of Maine, Inc., Anthem Health Plans of New Hampshire, Inc., Anthem Health
Plans, Inc., Blue Cross and Blue Shield of Massachusetts, Blue Cross and Blue Shield of
Vermont, and Blue Cross and Blue Shield of Rhode Island26.
    
    All National Account Servicing Agreements Between Empire Blue Cross Blue Shield and Other
Licensees27.
    
    Joint Operating Agreement Between the Pennsylvania Blue Shield, Capital Blue Cross dated
January 1, 1976; All Addenda and Amendments Thereto (the JOA); and All Agreements Between the
Parties Relating to Termination of the Joint Business Under the JOA28.
    
    January 1, 1984 Agreement Between Pennsylvania Blue Shield, Capital Blue Cross and Blue
Cross of Northeastern Pennsylvania for the Establishment of the Comp I
Center, and All Amendments Thereto29.
    
    Administrative Services Agreement for Medicare Crossover Data Between Capital Blue Cross
and Pennsylvania Blue Shield Dated January 23, 199530.
    
    Service Agreement Between Health Benefits Management, Inc., Pennsylvania Blue Shield,
Capital Blue Cross and the Shared Services Center, Dated September 15, 198731.
    
    Administrative Services Agreement Regarding POS Programs Among Synertech Health Systems
Solutions, Inc., Capital Blue Cross and Highmark, Effective January 1, 1997
 79




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 16 of 22
 32.
    
    Agreement Between Highmark and NCAS Pennsylvania (undated)33.
    
    Electronic Coordination of Medicare Benefits Agreement Between Highmark, Inc. d/b/a Veritus
Medicare Services and Capital Blue Cross, Dated October 26, 1999, Together With Amendatory
Rider Effective April 1, 200234.
    
    Electronic Coordination of Medicare Benefits Agreement Between Highmark, Inc. d/b/a
HGSAdministrator and Capital Blue Cross Dated May 23, 200235.
    
    Members Agreement Between Pennsylvania Blue Shield, Capital Blue Cross and The Caring
Foundation of Pennsylvania, Dated August 13, 199336.
    
    Amendment of Purchase Service Agreement Between Capital Blue Cross and Blue Cross of
Western Pennsylvania, Effective October 1, 198537.
    
    Agreement for Precertification Program, Between Capital Blue Cross and Health Benefits
Management, Inc., d/b/a the Precertification Center, Effective January 1, 1994, Together With
Amendatory Rider Effective January 1, 199738.
    
    Medicare+Choice Administrative Services Agreement Between Capital Blue Cross and Keystone
Health Plan Central Effective as of January 1, 199939.
    
    Hospital and Related Health Care Benefits For Keystone Health Plan, Inc. Dated January 1,
198740.
    
    Amended Administrative Services Agreement Between Capital Advantage Insurance Company and
Trans-General Casualty Insurance Company, Inc., Effective January 1, 199641.
    
    Profit Sharing Agreement Between Capital Advantage Insurance Company and Trans-General
Casualty Insurance Company, Inc., Effective as of January 1, 1986 and Amended as of January 1,
199842.
    
    Agreement Between Trans-General Life Insurance Company and Consolidated Benefits, Inc.
Dated as of January 1, 199943.
    
    Confidentiality and Indemnification Agreement in Favor of Capital Blue Cross,Pennsylvania Blue Shield and Capital Advantage Insurance Company Executed by the Highmark
Life & Casualty Group Inc. and Dated March 3, 200044.
    
    Dental Agency Agreement Between United Concordia Companies, Inc., United Concordia Life and
Health Insurance Company and United Concordia Dental Plan of Pennsylvania Inc., on the one
hand, and Capital Blue Cross, on the other, dated June 1, 199845.
    
    License Agreement for the Shared Automated Major Medical System, Among Capital Blue Cross,
Blue Cross of Northeastern Pennsylvania, Blue Cross of Western Pennsylvania, and PBS, Effective
July 1, 1983
 80




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 17 of 22
 46.
    
    Guaranty Agreement between Capital Blue Cross, Hospital Services Association of
Northeastern Pennsylvania (d/b/a Blue Cross of Northeastern Pennsylvania), Independence Blue
Cross and Highmark, Inc. Dated October 2, 200047.
    
    All Custom Blue Card Arrangements Between Blue Cross Blue Shield of Michigan and Other
Licensees48.
    
    All Participating Plan Agreements Between Blue Cross Blue Shield of Michigan and Other
Licensees49.
    
    All National Accounts Servicing/Participating Plan Agreements Between Blue Cross and Blue
Shield of Minnesota and Other Licensees50.
    
    All National Account Servicing Plan Agreements Between Blue Cross and Blue Shield of
Arizona, Inc. and Other Licensees51.
    
    All Agreements Related to Medicare Supplemental Claims Payments and Medicare Crossover
Services Between CareFirst Blue Cross Blue Shield and Other Licensees52.
    
    Co-Branding Agreement Between CareFirst Blue Cross Blue Shield and CareFirst of Maryland,
Inc.53.
    
    All Par Plan Agreements between Independence Blue Cross (and all of its applicable
subsidiaries) and Other Licensees54.
    
    All Control Plan Agreements between Independence Blue Cross (and all of its applicable
subsidiaries) and Other Licensees55.
    
    The Joint Operating Agreement between Pennsylvania Blue Shield and Independence Blue Cross
dated January 1, 197656.
    
    The Independence Blue Cross and Pennsylvania Blue Shield System Use Agreement effective
January 1, 200057.
    
    The Independence Blue Cross and Pennsylvania Blue Shield 1999 Agreement for Electronic
Coordination of Medicare Benefits58.
    
    The Independence Blue Cross and Pennsylvania Blue Shield Consulting Services Agreement
dated May 7, 200259.
    
    The Independence Blue Cross and Pennsylvania Blue Shield Major Medical Claims Processing
Agreement Dated October 1, 199560.
    
    All National Account Servicing Agreements Between Blue Cross and Blue Shield of Alabama and
other Licensees61.
    
    All Participating Plan Agreements Between Blue Cross and Blue Shield of Alabama and Other
Licensees
 81




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 18 of 22
 62.
    
    All Custom Blue Card Arrangements Between Blue Cross and Blue Shield of Alabama and Other
Licensees63.
    
    All Custom National Account Arrangements Between Blue Cross and Blue Shield of Alabama and
Other Licensees64.
    
    All Control Plan Agreements Between Blue Cross and Blue Shield of Alabama and Other
Licensees65.
    
    All Service Agreements between Blue Cross and Blue Shield of Alabama or its affiliates, and
Other Licensees with respect to the Medicare Program66.
    
    Trading Partner Medicare Part A Service Agreement between Capital BlueCross and Blue Cross
and Blue Shield of Florida, Inc.67.
    
    All Custom ITS Arrangements Between Wellmark, Inc. (and/or all its applicable subsidiaries)
and Other Licensees68.
    
    Highmark Inter-Plan Network Management Information System License Agreement between
Highmark, Inc. and Anthem Insurance Companies, Inc.69.
    
    All NASCO Par Plan Servicing Agreements Between Blue Cross and Blue Shield of Alabama and
Other Licensees70.
    
    Master Software Maintenance Agreement Between Inter-Data Business Systems and Blue Cross of
Minnesota71.
    
    Cost Reimbursement Agreement Between Blue Cross of Minnesota and Triple-S, Inc.72.
    
    Master Software Maintenance Agreement for Inter-Data Business Systems (IBS) Between
WellChoice, Inc.(and/or all of its applicable subsidiaries) and Participating Licensees73.
    
    All Alternate Control Licensee Designation Agreements and Similar Agreements Between
WellChoice, Inc. (and/or all of its applicable subsidiaries) and Other Licensees74.
    
    All Participating Plan Agreements for National Accounts Between WellChoice, Inc.
(and/or all of its applicable subsidiaries) and Other Licensees75.
    
    All Par Plan Agreements Between WellChoice, Inc. (and/or all of its applicable
subsidiaries) and Other Licensees76.
    
    All Control Plan Agreements Between WellChoice, Inc. (and/or all of its applicable
subsidiaries) and Other Licensees
 82




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 19 of 22
 77.
    
    All Custom Blue Card Arrangements Between WellChoice, Inc. (and/or all of its applicable
subsidiaries) and Other Licensees78.
    
    All Agreements Related to Medicare Supplemental Claims Payments and Medicare Crossover
Services Between WellChoice, Inc. (and/or all of its applicable subsidiaries) and Other
Licensees79.
    
    All Custom ITS Arrangements Between WellChoice, Inc. (and/or all of its applicable
subsidiaries) and Other Licensees80.
    
    All Custom ITS and Custom BlueCard Arrangements Between Highmark and Other Licensees81.
    
    All National Account Servicing Agreements Between Highmark and Other Licensees82.
    
    All Alternate Control Licensee Designation Agreements and Similar Agreements Between
Highmark and Other Licensees83.
    
    All Administrative Service Agreements Between Highmark and Other Licensees84.
    
    All Information Systems Services Agreements Between Highmark and Other Licensees85.
    
    All System Use Agreements Between Highmark and Other Licensees86.
    
    All Joint Operating Agreements Between Highmark and Other Licensees87.
    
    All Government Business Service Agreements Between Highmark and Other Licensees88.
    
    All Consulting/Training Services Agreements Between Highmark and Other Licensees89.
    
    All Inter-Plan Network Management Information System License Agreements Between Highmark
and Other Licensees90.
    
    All Service Agreements Between Highmark and Mountain State Blue Cross Blue Shield91.
    
    All Electronic Media/Claims Processing Agreements Between Highmark and Other Licensees92.
    
    The Crossover Service Agreement Between Noridian Mutual Insurance Company and Blue Cross
and Blue Shield of Arizona, Inc.93.
    
    All custom Blue Card Agreements or Participating Agreements Between Blue Cross and Blue
Shield of Nebraska and Other Licensees
 83




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 20 of 22
 94.
    
    All Custom Blue Card Arrangements Between HealthNow New York, Inc. d/b/a BlueCross
BlueShield of Western New York and BlueShield of Northeastern New York, and Other Licensees95.
    
    All Participating Plan Agreements Between HealthNow New York, Inc. d/b/a BlueCross
BlueShield of Western New York and BlueShield of Northeastern New York, and Other Licensees96.
    
    All Control Plan Agreements Between HealthNow New York, Inc. d/b/a BlueCross BlueShield of
Western New York and BlueShield of Northeastern New York, and Other Licensees97.
    
    All Agreements Related to Medicare Supplemental Claims Payment and Medicare Crossover
Services Between HealthNow New York, Inc. d/b/a BlueCross BlueShield of Western New York and
BlueShield of Northeastern New York, and Other Licensees98.
    
    Participating Service Plan Master Agreement (NASCO) for National Accounts Blue Cross and
Blue Shield of Michigan and HealthNow New York, Inc.99.
    
    All Account Specific Agreements Between Blue Cross Blue Shield of Michigan and Other
Licensees100.
    
    All National Account Servicing Agreements Between Blue Cross and Blue Shield of Florida
and Other Licensees101.
    
    Custom ITS Point of Service Agreements Between Blue Cross and Blue Shield of Illinois and
Other Licensees102.
    
    Local Area Processing Point of Service Agreements Between Blue Cross and Blue Shield of
Illinois and Other Licensees103.
    
    Pharmacy Benefits Management Agreement Between The Regence Group, Regence Blue Shield of
Idaho, Blue Cross Blue Shield of Michigan and Blue Care Network of Michigan104.
    
    All Control
Plan Agreements Between Blue Cross Blue Shield of Delaware, Inc. and Other Licensees.105.
    
    All Par Plan Agreements Between Blue Cross Blue Shield of Delaware, Inc. and Other
Licensees106.
    
    All Agreements Related to Medicare Supplement Claims Payment and Medicare Crossover
Services Between Blue Cross Blue Shield of Delaware, Inc. and Other Licensees107.
    
    All National Account ITS/BlueCard Arrangements Between Blue Cross Blue Shield of Delaware,
Inc. and Other Licensees
 84




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 21 of 22
 108.
    
    All National Account/ITS Custom BlueCard Arrangements Between Blue Cross Blue Shield of
Delaware, Inc. and Other Licensees109.
    
    All Non-Blue Card Arrangements Between Blue Cross Blue Shield of Delaware, Inc. and Other
Licensees for the Administration and Servicing of Specific Multi-State Accounts Including, but
not limited to, MBNA and Nemours110.
    
    Participating/Servicing Plan Agreement for National Accounts (NASCO) with CareFirst of
Maryland, Inc., Blue Cross and Blue Shield of Michigan and any Other Applicable Licensees111.
    
    All Agreements for National Account HMO Participation Between Blue Cross Blue Shield of
Delaware, Inc., and Other Licensees112.
    
    All Par Plan Agreements Between WellPoint, Inc. (and all of its applicable subsidiaries)
and Other Licensees113.
    
    All Control Plan Agreements Between WellPoint, Inc. (and all of its applicable
subsidiaries) and Other Licensees114.
    
    All Agreements for National Accounts Between WellPoint, Inc. (and all of its applicable
subsidiaries) and Other Licensees
 85




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##### 



Attachment VII
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 22 of 22
 Schedule B
 Security Incidents
    1.
    
    Pings on a Partys firewall,2.
    
    Port scans,3.
    
    Attempts to log on to a system or enter a database with an invalid password or
username, and4.
    
    Denial-of-service attacks that do not result in a server being taken off-line.5.
    
    Malware (e.g., worms, viruses)
  86




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##### 



1




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##### 



GUIDELINES TO ADMINISTER  THE CONTROLLED AFFILIATE LICENSE AGREEMENTS  AND STANDARDS
 Table
of Contents
 Preamble
    
    5Matrix to determine which Standards Apply
    
    7Standard 1
 Organization and Governance
    
    8Standard 2
 Financial Responsibility
    
    15Standard 3
 State Licensure/Certification
    
    19Standard 4
 Certain Disclosures
    
    21Standard 5
 Reports and Records for Certain Smaller Controlled Affiliates
    
    22Standard 6
 Other Standards for Larger Controlled Affiliates
    
    23Standard 6(A): Board of Directors
    
    24Standard 6(B): Responsiveness to Customers
    
    26Standard 6(C): Participation in National Programs
    
    28Standard 6(D): Financial Performance Requirements
    
    31Standard 6(E): Cooperation with Plan Performance Response Process
    
    34Standard 6(F): Independent Financial Rating
    
    35Standard 6(G): Local and National Best Efforts
    
    36Standard 6(H): Financial Responsibility
    
    49Standard 6(I): Reports and Records
    
    52Standard 6(J): Control by Unlicensed Entities Prohibited
    
    55Standard 7
 Other Standards for Risk-Assuming Workers Compensation Affiliates
    
    57Standard 7(A): Financial Responsibility
    
    58Standard 7(B): Reports and Records
    
    60Standard 7(C): Loss Prevention
    
    63Standard 7(D): Claims Administration
    
    64Standard 7(E): Disability and Provider Management
    
    65
 2




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##### 



GUIDELINES TO ADMINISTER  THE CONTROLLED AFFILIATE LICENSE AGREEMENTS  AND STANDARDS
 
 Description
    
    
    
    
    
    PageStandard 8
    
    
    
    Cooperation with Controlled Affiliate License PerformanceResponse Process Protocol
    
    66Standard 9A
    
    
    
    Participation in National Programs by SmallerControlled Affiliates That Were Former Primary Licensees
    
    67Standard 9B
    
    
    
    Participation in National Programs by Smaller
    
    70Controlled AffiliatesStandard 10
    
    
    
    Other Standards for Controlled Affiliates Whose PrimaryBusiness is Government Non-Risk
    
    73Standard 10(A): Organization and Governance
    
    74Standard 10(B): Financial Responsibility
    
    75Standard 10(C): Reports and Records
    
    77Standard 11
    
    
    
    Participation in Electronic Claims Routing Process
    
    80Standard 12
    
    
    
    Participation in Master Business Associate Agreement by SmallerControlled Affiliate Licensees.
    
    82Attachment I
    
    
    
    Required Report and Reporting Performance Measures
    
    83Attachment II
    
    
    
    Clarification of Requirements
for Controlled Affiliates Annual ActuarialCertification
    
    85Attachment III
    
    
    
    Guaranty Association Alternatives & Evaluation Criteria
    
    87Attachment IV
    
    
    
    Required Performance Reports and CertificationsSchedule For Larger Controlled Affiliates
    
    90Attachment V
    
    
    
    Sanction Protocols - Reports and Records
    
    92Attachment VI
    
    
    
    Required Performance Reports and Certifications ScheduleFor Risk-Assuming Workers Compensation Affiliates
    
    93Attachment VII
    
    
    
    Definition of Local Net
Revenue & Combined Local Net Revenue
    
    94Attachment VIII
    
    
    
    Required Performance Reports and Certifications ScheduleFor Controlled Affiliates Whose Primary Business is Government Non-Risk
    
    98
 3




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##### 



GUIDELINES TO ADMINISTER  THE CONTROLLED AFFILIATE LICENSE AGREEMENTS  AND STANDARDS
 
 Description
    
    
    
    
    
    PageAttachment IX
    
    
    
    Business Associate Agreement For Blue Cross and Blue Shield Licensees
    
    99
 4




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##### 



GUIDELINES TO ADMINISTER  THE CONTROLLED AFFILIATE LICENSE AGREEMENTS AND STANDARDS
 Preamble
 
  
    
    Guidelines allow start-up operations to qualify for Licensure;
    
    Guidelines provide an objective, measurable test of compliance with each License Standard;
and
    
    Guidelines define compliance with Standards at an acceptable level of performance, not
at a target performance level.
  -
    
    The owners or persons or entities with authority to select or appoint members or
board members (other than the Plan or Plans), directors, officers, and proposed
management team of the applicant must demonstrate that they possess the character
and qualifications to operate the business in a manner which will enhance the value
of the Licensed Marks and Name.-
    
    The applicant must submit a business plan based on realistically- attainable
objectives which indicate that it will operate its business in a manner which will
enhance the value of the Licensed Marks and Name.-
    
    The applicant must make a full disclosure to BCBSA of all of the terms of any
proposed transaction with its owners or persons or entities with authority to
select or appoint members or board members of the Controlled Affiliate (other than
a Plan or Plans), or their Controlled Affiliates, including purchase, lease,
employment, consulting or other financial arrangements with the applicant or its officers,
directors, employees, or members.
 5




---



##### 



GUIDELINES TO ADMINISTER  THE CONTROLLED AFFILIATE LICENSE AGREEMENTS AND STANDARDS
 Preamble, continued
 -
    
    The applicant, if licensed, would not be in violation of any provisions of the
Bylaws, Controlled Affiliate License Agreements, Controlled Affiliate License
Standards or accompanying Guidelines and would not be subject to monitoring under
the Plan Performance Response Process due to its financial status, based on its
fiscal quarter most recently ended.
      6




---



##### 



STANDARDS FOR LICENSED CONTROLLED AFFILIATES
   More than 50%
    
    
    50%
    
    100% and Primary Business isGovernment Non-Riskò
    
    
    ò
    
    òStandard 1A, 4
    
    
    Standard 1B, 4Standard 4*,10A
 *
    
    Applicable only if
using the names and
marks. IN ADDITION,
   Yes
    
    
    
    
    
    No÷
    
    ò
    
    ø
    
    ÷
    
    ò
    
    øControlled Affiliate
    
    Controlled Affiliate
    
    Controlled Affiliate
    
    Controlled Affiliate
    
    Controlled Affiliate
    
    Controlledunderwrites any
    
    comprises < 15%
    
    comprises > 15%
    
    comprises < 15%
    
    comprises > 15%
    
    Affiliates Primaryindemnity portion
    
    of total member
    
    of total member
    
    of total member
    
    of total member
    
    Business isof workers
    
    enrollment of Plan
    
    enrollment of Plan
    
    enrollment of Plan
    
    enrollment of Plan
    
    Government Non-compensation
    
    and its licensed
    
    and its licensed
    
    and its licensed
    
    and its licensed
    
    Riskinsurance
    
    affiliates, and does
    
    affiliates, and does
    
    affiliates
    
    affiliatesò
    
    not underwrite the
    
    not underwrite theStandards 7A-7E, 12
    
    indemnity portion of
    
    indemnity portion of
    
    ò
    
    ò
    
    òworkers
    
    workerscompensation
    
    compensation
    
    
    
    Standard 6H
    
    Standard 10Binsurance
    
    insuranceò
    
    òStandard 2
    
    Standard 6H
    
    Standard 2(Guidelines 1.1,1.2)
    
    
    
    (Guidelines 1.1,1.3)and Standard 11
    
    
    
    and Standard 11
 IN ADDITION,
  Yes
    
    
    Noò
    
    
    òStandard 3A
    
    
    Standard 3B
 IN ADDITION,
   Yes
    
    
    
    
    
    Noò
    
    ÷
    
    ÷
    
    ò
    
    øStandards 6A-6J
    
    Controlled Affiliate
    
    Controlled Affiliate is
    
    Controlled Affiliate is not a
    
    Controlled Affiliatesis not a former
    
    a former primary
    
    former primary licensee
    
    Primary Business isprimary licensee
    
    licensee
    
    and does not elect to
    
    Government Non-Riskand elects to
    
    
    
    participate in BCBSAparticipate in
    
    ò
    
    national programs
    
    òBCBSA national
    
    
    
    òprogramsStandards 5,8,9B,12
    
    Standards
5,8,9A,11,12
    
    Standards 5,8,12
    
    Standards 8, 10(C),12
 7




---



##### 



Standard 1(A)  Organization and Governance
  A Controlled Affiliate shall be organized and operated in such a manner that a licensed Plan or
Plans authorized to use the Licensed Marks in the Service Area of the Controlled
Affiliate pursuant to separate License Agreement(s) with BCBSA, other than such Controlled
Affiliates License Agreement(s), (the Controlling Plan(s)), have the legal authority,
directly or indirectly through wholly-owned subsidiaries:
 A.
    
    to select members of the Controlled Affiliates governing body having more than 50% voting
control thereof; andB.
    
    to prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not
concur; andC.
    
    to exercise control over the policy and operations of the Controlled
Affiliate.
 In addition, a Plan or Plans directly or indirectly through wholly-owned subsidiaries shall own
more than 50% of any for-profit Controlled Affiliate.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    A Controlling Plan is a Plan that holds a Primary License with BCBSA to use the
Service Marks in the Service Area of the Controlled Affiliate.1.2
    
    Controlling Plan(s) directly or indirectly through wholly-owned subsidiaries must: (a)
have the legal authority to select members of the Controlled Affiliates governing body
having more than 50% of the voting control thereof; and (b) have the legal authority to
prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which such Plan(s) do(es) not concur;
and (c) have the legal authority to exercise control over the policy and operations of the
Controlled Affiliate.
 8




---



##### 



Standard 1(A)  Organization and Governance
 1.3
    
    In the case of a for-profit Controlled Affiliate, Controlling Plan(s) or other Plans
licensed to use the Blue Cross and/or Blue Shield Marks by BCBSA must hold directly or
indirectly through wholly-owned subsidiaries more than 50% ownership of the Controlled
Affiliate.1.4
    
    If the controlled affiliate has members with the authority to nominate, elect, or
remove any board member or amend or recommend revisions to articles of incorporation,
bylaws, or other governing documents, the Controlled Affiliate shall be considered
noncompliant if more than 50% of the voting control of the Controlled Affiliate resides in
members that are, or are selected, appointed, or designated by, or are employed by, or are
officers or directors of, or have a direct or indirect financial interest in:
 1.4.a
    
    persons or entities with the authority to select or appoint members of the
controlled affiliate (other than a licensee of BCBSA or an entity controlled by a
licensee);1.4.b
    
    Affiliates and Associates (as defined in Rule 12b-2 under the Securities
Exchange Act of 1934 and other than a licensee of BCBSA or an entity controlled by
a licensee) of the persons or entities described in 1.4.a; or1.4.c
    
    other persons or entities (other than a licensee of BCBSA or an entity
controlled by a licensee) that provide goods or services to a person or entity
described in 1.4.a.
  1.5
    
    An affiliate shall be considered noncompliant if more than 50% of the voting control of
the affiliates board resides in board members who are, or are selected, appointed, or
designated by, or are employed by, or are officers or directors of, or have a direct or
indirect financial interest in:
 1.5.a
    
    owners, or persons or entities with the authority to select or appoint board
members of the affiliate (other than a licensee of BCBSA or an entity controlled by
a licensee);1.5.b
    
    Affiliates and Associates (as defined in Rule 12b-2 under the Securities
Exchange Act of 1934 and other than a licensee of BCBSA or an entity controlled by
a licensee) of the persons or entities described in 1.5.a; or1.5.c
    
    other persons or entities (other than a licensee of BCBSA or an entity
controlled by a licensee) that provide goods or services to a person or entity
described in 1.5.a.
 9




---



##### 



Standard 1(A)  Organization and Governance, continued
  2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 10




---



##### 



Standard 1(B)  Organization and Governance
  A Controlled Affiliate shall be organized and operated in such a manner that a licensed Plan or
Plans authorized to use the Licensed Marks in the Service Area of the Controlled
Affiliate pursuant to separate License Agreement(s) with BCBSA, other than such Controlled
Affiliates License Agreement(s), (the Controlling Plan(s)), have the legal authority,
directly or indirectly through wholly-owned subsidiaries:
 A.
    
    to select members of the Controlled Affiliates governing body having not less than 50% voting
control thereof; andB.
    
    to prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not
concur; andC.
    
    to exercise control over the policy and operations of the Controlled Affiliate at least equal to
that exercised by persons or entities (jointly or individually) other than the Controlling Plan(s).
 Notwithstanding anything to the contrary in A through C hereof, the Controlled Affiliates
establishing or governing documents must also require written approval by the Controlling Plan(s)
before the Controlled Affiliate can:
 
    
    change the geographic area in which it operates
    
    change its legal and/or trade names
    
    change any of the types of businesses in which it engages
    
    create, or become liable for by way of guarantee, any indebtedness, other than
indebtedness arising in the ordinary course of business
    
    sell any assets, except for sales in the ordinary course of business or sales of
equipment no longer useful or being replaced
    
    make any loans or advances except in the ordinary course of business
    
    enter into any arrangement or agreement with any party directly or indirectly
affiliated with any of the owners or persons or entities with the authority to select or
appoint members or board members of the Controlled Affiliate, other than the Plan or Plans
(excluding owners of stock holdings of under 5% in a publicly traded Controlled Affiliate)
    
    conduct any business other than under the Licensed Marks and Name
 11




---



##### 



Standard 1(B)  Organization and Governance, continued
 
    
    take any action that any Controlling Plan or BCBSA reasonably believes will
adversely affect the Licensed Marks and Name.
 In addition, a Plan or Plans directly or indirectly through wholly-owned subsidiaries shall
own at least 50% of any for-profit Controlled Affiliate.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    A Controlling Plan is a Plan that holds a Primary License with BCBSA to use the
Service Marks in the Service Area of the Controlled Affiliate.1.2
    
    Controlling Plan(s) must directly or indirectly through wholly-owned subsidiaries: (a)
have the legal authority to select members of the Controlled Affiliates governing body
having not less than 50% voting control thereof; and (b) have the legal authority to
prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the controlled affiliate with which the Controlling Plan(s) do(es)
not concur; and (c) have the legal authority to exercise control over the policy and
operations of the Controlled Affiliate at least equal to that exercised by persons or
entities (jointly or individually) other than the Controlling Plan(s).1.3
    
    Notwithstanding anything to the contrary above, the Controlled Affiliates establishing
or governing documents must also require the written approval by the Controlling Plan(s)
before the Controlled Affiliate can:
 1.3.a
    
    change the geographic area in which it operates1.3.b
    
    change its legal and/or trade names1.3.c
    
    change any of the types of businesses in which it engages1.3.d
    
    create, or become liable for by way of guarantee, any indebtedness, other
than indebtedness arising in the ordinary course of business1.3.e
    
    sell any assets, except for sales in the ordinary course of business or sales
of equipment no longer useful or being replaced1.3.f
    
    make any loans or advances except in the ordinary course of business1.3.g
    
    enter into any arrangement or agreement with any party directly or indirectly
affiliated with any of the owners or persons or
entities with the authority to select or appoint members or board members of the
Controlled Affiliate, other than the Plan or Plans (excluding owners
 12




---



##### 



Standard 1(B)  Organization and Governance, continued
  1.3.h
    
    conduct any business other than under the Licensed Marks and Names1.3.i
    
    take any action that any Controlling Plan or BCBSA reasonably believes will
adversely affect the Licensed Marks and Name.
 1.4
    
    In the case of a for-profit Controlled Affiliate, Controlling Plan(s) or other Plans
licensed to use the Blue Cross and/or Blue Shield Marks by BCBSA must hold directly or
indirectly through wholly-owned subsidiaries at least 50% ownership of the Controlled
Affiliate.1.5
    
    If the controlled affiliate has members with the authority to nominate, elect, or
remove any board member or amend or recommend revisions to articles of incorporation,
bylaws, or other governing documents, the controlled affiliate shall be considered
noncompliant if more than 50% of the voting control of the controlled affiliate resides in
members that are, or are selected, appointed, or designated by, or are employed by, or are
officers or directors of, or have a direct or indirect financial interest in:
 1.5.a
    
    persons or entities with the authority to select or appoint members of the
controlled affiliate (other than a licensee of BCBSA or an entity controlled by a
licensee);1.5.b
    
    Affiliates and Associates (as defined in Rule 12b-2 under the Securities
Exchange Act of 1934 and other than a licensee of BCBSA or an entity controlled by
a licensee) of the persons or entities described in 1.5.a; or1.5.c
    
    other persons or entities (other than a licensee of BCBSA or an entity
controlled by a licensee) that provide goods or services to a person or entity
described in 1.5.a.
 Direct or indirect financial interest excludes stock holdings of under 5% a
publicly traded company.1.6
    
    An affiliate shall be considered noncompliant if more than 50% of the voting control of
the affiliates board resides in board members who are, or are selected, appointed, or
designated by, or are employed by, or are officers or directors of, or have a direct or
indirect financial interest in:
 1.6.a
    
    owners, or persons or entities with the authority to select or appoint board
members of the affiliate (other than a licensee of BCBSA or an entity controlled by
a licensee);
 13




---



##### 



Standard 1(B)  Organization and Governance, continued
 1.6.b
    
    Affiliates and Associates (as defined in Rule 12b-2 under the Securities
Exchange Act of 1934 and other than a licensee of BCBSA or an entity controlled by
a licensee) of the persons or entities described in 1.6.a; or1.6.c
    
    other persons or entities (other than a licensee of BCBSA or an entity
controlled by a licensee) that provide goods or services to a person or entity
described in 1.6.a.
  2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 14




---



##### 



Standard 2  Financial Responsibility
  A controlled affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers. If a risk-assuming
controlled affiliate ceases operations for any reason, Blue Cross and/or Blue Shield Plan coverage
will be offered to all controlled affiliate subscribers without exclusions, limitations or
conditions based on health status. If a nonrisk-assuming controlled affiliate ceases operations for
any reason, the sponsoring Plan(s) will provide for services to its (their) customers. The
requirements of the preceding two sentences shall apply to all lines of business unless a line of
business is specifically exempted from the requirement(s) by the BCBSA Board of Directors.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    Compliance for all smaller controlled affiliate licensees, except those subject to
Standard 7, is based on:
 1.1.a
    
    Accounting records maintained on an accrual basis subject. A controlled
affiliate shall file an annual certified audit report with BCBSA if the controlled
affiliate is required to file such a report with its domicilary State Insurance
Department. If no such requirement is in force and the controlled affiliate is a
risk-assuming entity, the controlled affiliate is not required to submit an annual
certified audit report with BCBSA provided the controlled affiliates SAP reserve
(or equivalent net worth) is disclosed separately in the primary licensees annual
certified audit report for the same period. If the controlled affiliate is a
nonrisk assuming entity, an annual certified audit report is not required.
 1.1a(i)
    
    If the certified audit is required by the State Insurance
Department, the independent financial statement opinion included in the
controlled affiliates annual audit report shall not express doubts as to
the licensees ability to continue as a going concern. The annual audit is
to be performed by an independent CPA firm acceptable to PPFSC; and
 1.1.b
    
    An appropriate conversion/service agreement from the sponsoring Plan(s)
unless a line of business is specifically exempted from the requirement(s) by the
BCBSA Board of Directors. In situations where the parent and controlled affiliate
prefer, the parent and controlled affiliate may, upon the agreement of BCBSA,
provide alternative protections; and
 1.1b(i)
    
    BCBSA Board approved exemptions under Guideline 1.1.b included all
types of Part C Medicare Advantage programs, Part D Medicare Prescription
Drug Plans, Title XXI State Childrens Health Insurance Program (SCHIP)
and all types of Title XIX Medicaid programs.
 15




---



##### 



Standard 2  Financial Responsibility, continued
 1.1.c
    
    The controlled affiliate and Sponsoring Plan(s) certifying to BCBSA that
the Sponsoring Plan(s) guarantees to the full extent of its (their) assets, all of
the contractual and financial obligations of the controlled affiliate to its
customers. In situations where such a guaranty is not permitted by regulation or
statute, or where the parent and controlled affiliate prefer, the parent
and controlled affiliate may, upon agreement of BCBSA, provide alternative
protections which may include, but are not limited to, the Payment of
Claims Liabilities  Alternative Mechanisms enumerated in Attachment III
(Guaranty Association Alternatives & Evaluation Criteria).
  1.2
    
    Compliance for a risk-assuming smaller controlled affiliate that does not underwrite
the indemnity portion of workers compensation insurance, in addition to Guideline 1.1 is
based on:
 1.2.a
    
    For a controlled affiliate at greater than 50% Plan ownership:
 1.2a(i)
    
    A net worth (SAP equivalent) of at least its  Health Risk Based
Capital (HRBC) Authorized Control Level (ACL) after co-variance as defined
by the NAIC and hereinafter referred to as Authorized Control Level.
Notwithstanding a Controlled Affiliates HRBC level, a Controlled Affiliate
shall maintain its SAP reserve (or equivalent net worth) at or above the
minimum reserve (or net worth level) established by each state in which it
is domiciled and/or operates or if there is no state minimum, $3.0 million.
The following exception exists for transition purposes:
 1.2a(i)(1)
    
    Controlled Affiliates are required to maintain a net
worth (SAP equivalent) of at least their Authorized Control Level,
the state minimum, or if there is no state minimum, $3.0 million.1.2a(i)(2)
    
    Compliance with this requirement may also be met if the
state regulatory authority, in lieu of a capital infusion, has
accepted a written financial guarantee, which contractually
obligates the sponsoring Plan(s) for the financial commitments of
the controlled affiliate, and the situation meets the following
criteria:
 A
    
    the amount of such guarantee is at least equal to 150%
of the unpaid claim liabilities of the controlled
affiliate; andB
    
    the Plans SAP reserve is at least equal to or greater
than 600% of the Plans Authorized Control Level.
 1.2.b
    
    For a controlled affiliate at 50% Plan ownership:
 16




---



##### 



Standard 2  Financial Responsibility, continued
 1.2b(i)
    
    As of 12/31/99 and thereafter, a net worth (SAP equivalent)
equal to the greater of its Authorized Control Level, the state minimum or
$3.0 million; and liquidity (standard BCBSA definition) equal to the
greater of $3.0 million or .5 months of claims and administrative
expenses.
 1.2b (i)(1)
    
    Controlled Affiliates are required to maintain net
worth (SAP equivalent) equal to the greater of its Authorized
Control Level, the state minimum or $3.0 million. In all cases,
Controlled Affiliates are required to comply with the minimum
liquidity (standard BCBSA definition) requirement equal to the
greater of $3.0 million or .5 months of claims and administrative
expenses.
 1.2.c
    
    If a controlled affiliate is licensed as a life insurer or property and
casualty insurer in the states where it does business, it must have a SAP or
equivalent net worth that is the higher of:
 1.2.c(i)
    
    an amount exceeding the Authorized Control Level as
defined in the NAICs Risk-Based Capital (RBC) for Insurers Model
Act; or1.2.c(ii)
    
    if the state has not adopted the NAICs Risk-Based
Capital (RBC) for Insurers Model Act, the minimum statutory
reserve requirement of the state in which the life insurance
company is domiciled
 1.2.d
    
    Each controlled affiliate also is required to submit evidence of adequate
accounting for loss reserves, actuarial liabilities and related items as
annually certified by a qualified actuary pursuant to a review process
acceptable to PPFSC (See Attachment II; Note: Each licensee is required to
submit a separate certification).
  1.3
    
    Compliance for a nonrisk-assuming smaller controlled affiliate in addition to 1.1 is
based on:
 1.3.a
    
    A net worth of at least 8.33% of annual net operating expenses.
  2.
    
    Guidelines Subject to Mediation/Arbitration
 17




---



##### 



Standard 2  Financial Responsibility, continued
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 18




---



##### 



Standard 3(A)  State Licensure/Certification
 3A.)
    
    The Standard for a controlled affiliate that employs, owns or contracts on a
substantially exclusive basis for medical services is:
 A controlled affiliate shall maintain appropriate and unimpaired licensure and certifications.
  1.
    
    Hospitals shall have Joint Commission on Accreditation of Healthcare Organizations
certification of at least the partial level; and2.
    
    Physicians shall hold applicable current state licenses; and3.
    
    All other providers shall have applicable current state licenses; and4.
    
    Licensee shall obtain liability insurance or otherwise provide financial arrangements to
protect against liability from its operations in an amount and form approved by BCBSA. BCBSA
shall be named as an additional insured and be named as an indemnitee under such financial
arrangements, and licensee shall supply a certificate of insurance or evidence of the
financial arrangement demonstrating that BCBSA is an additional insured or indemnitee under
the financial arrangements. Liability insurance or financial arrangements shall not be
modified by the licensee or canceled without prior sixty (60) days written notice to BCBSA, or
less if required by the insurer to the Licensee; and5.
    
    A controlled affiliate shall be in good standing with the state (or states) in which it
operates; and6.
    
    Where applicable, indemnity claims adjusters shall maintain current state certification.
  19




---



##### 



Standard 3(B)  State Licensure/Certification
 3B.)
    
    The Standard for a controlled affiliate that does not employ, own or contract on a
substantially exclusive basis for medical services is:
 A controlled affiliate shall maintain appropriate and unimpaired licensure and certifications.
  1.
    
    A controlled affiliate shall be in good standing with the state (or states) in which it
operates; and2.
    
    Where applicable, indemnity claims adjusters shall maintain current state certification.
  20




---



##### 



Standard 4  Certain Disclosures
  A controlled affiliate shall make adequate disclosure in contracting with third parties and in
disseminating public statements of:
 A.
    
    the structure of the Blue Cross and Blue Shield System; andB.
    
    the independent nature of every licensee; andC.
    
    the controlled affiliates financial condition.
  1.
    
    A controlled affiliate that is in PPRP monitoring for financial reasons shall disseminate to
all providers, accounts, and direct pay subscribers (if any) the descriptions contained in the
approved disclosure brochure or other document as set forth in the Brand Book; and
 2.
    
    A controlled affiliate that is in PPRP monitoring for financial reasons shall disseminate to
all providers, accounts, and direct pay subscribers (if any) a summary of the controlled
affiliates year-end audited balance sheet as set forth in the Brand Book; and
 3.
    
    A controlled affiliate shall comply with the other disclosure requirements as set forth in
the Brand Book; and
 4.
    
    A controlled affiliate shall include the approved form contract disclosure provisions in all
written contracts with providers, accounts, and direct pay subscribers (if any) as set forth
in the Brand Book. If a state regulator refuses to permit a controlled affiliate to add these
provisions to any such contract, and if the controlled affiliate provides written evidence of
such refusal, BCBSA shall not require the provisions in such contract and BCBSA shall notify
the regulator that the controlled affiliate has been relieved of compliance for as long as the
regulator prohibits compliance; and
 5.
    
    A controlled affiliate shall include on each subscriber ID card carrier or mailer enclosed
with or attached to a subscriber ID card the form disclosure statement as set forth in the
Brand Book; and
 6.
    
    A controlled affiliate shall provide information in such form as requested by the Association
demonstrating that the controlled affiliate is complying with the above requirements.
  21




---



##### 



Standard 5  Reports and Records for Certain Smaller Controlled Affiliates
  A controlled affiliate and/or its licensed Plan(s) shall furnish, on a timely and accurate basis,
reports and records relating to these Standards and the License Agreements between BCBSA and
controlled affiliate.
  1.
    
    Compliance for all smaller Controlled Affiliates that do not underwrite the indemnity
portion of workers compensation insurance is based on:
 1.1
    
    The timely submission of accurate and complete reports as required by the BCBSA Board
of Directors (see Attachment I), to include indication of compliance with the License
Agreements, as interpreted in the Brand Book; and1.2
    
    Mandatory reporting to BCBSA of any untoward events associated with the controlled
affiliate, such as malpractice suits or other legal/financial events that would materially
affect controlled affiliate operations and/or performance; and1.3
    
    The controlled affiliate and sponsoring Licensed Plan(s):
 1.3.a
    
    agreeing upon
request by BCBSA to an examination; and1.3.b
    
    providing access to requested staff and/or
documentation.
 2.
    
    Noncompliance for smaller Controlled Affiliates is a result of the following:
 2.1
    
    Reporting  substantial incompleteness and/or inaccuracy and/or lateness and/or
nonsubmission of required reports as described in Attachment I; or2.2
    
    Examination  failure to comply with any one of the examination issues; or2.3
    
    Untoward Events  failure to report timely and accurately events materially affecting
the controlled affiliate; and2.4
    
    BCBSA management, after contact with Plan management, concludes that compliance is not
likely to be reached, given existing controlled affiliate/Plan efforts.
  22




---



##### 



Standard 6  Other Standards for Larger Controlled Affiliates
  23




---



##### 



Standard 6(A): Board of Directors
  A controlled affiliate Governing Board shall act in the interest of its Corporation in providing
cost-effective health care services to its customers. A controlled affiliate shall maintain a
governing Board, which shall control the controlled affiliate, composed of a majority of persons
other than providers of health care services, who shall be known as public members. A public
member shall not be an employee of or have a financial interest in a health care provider, nor be a
member of a profession which provides health care services.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    The controlled affiliates Board shall be composed of a majority of members (greater
than 50% of the total) who are:
 2.1.a
    
    public members*; and2.1.b
    
    not, in any combination, a controlling faction of the controlled affiliates
Board with a common interest in any business, governmental, lobbying, or other
organized group or entity, excluding Plan directors.
 
 *
    
    A public member excludes any person who: 
    
    is engaged or has engaged at any time in the practice of a health care profession (other
than an employee of the Plan);
    
    is a director, officer, partner or employee of an organization that primarily sells health
care services (other than the Plan or an organization controlled by the Plan); or
    
    is a director, officer, partner or employee of an organization of health care providers;
or
    
    has direct or indirect beneficial interest of more than five percent of the equity of an
organization that sells or delivers health care services.
 24




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##### 



Standard 6(A): Board of Directors, continued
 2.2
    
    Notwithstanding anything in this Paragraph 2.2, a controlled affiliate in
violation of Paragraph 2.1 of these Guidelines shall be subject to immediate termination.2.3
    
    The controlled affiliate CEO or Corporate Secretary must certify to the PPFSC that the
triennial BCBSA license compliance letter (including the controlled affiliates licensure
status, a copy of the Licensure Standards and Guidelines, a report of the controlled
affiliates licensure status by Standard, and PPFSC comments or concerns, if any, about the
controlled affiliates compliance with the License Agreements and Standards), has been
distributed to all controlled affiliate Board Members. Such certification may be in the
form of the minutes of the controlled affiliate Board meeting or other documentation
demonstrating timely compliance with the distribution requirement.
 2.3.a
    
    Controlled Affiliates, as deemed appropriate by the PPFSC, may be required to
respond to an annual BCBSA controlled affiliate licensure information request,
which will result in an annual BCBSA license compliance letter sent to the
controlled affiliates CEO. Controlled Affiliates included in the Plan Performance
Response Process** will be required to respond to an annual BCBSA controlled
affiliate licensure information request, which will result in an annual BCBSA
license compliance letter sent to the controlled affiliates CEO.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 25




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##### 



Standard 6(B): Responsiveness to Customers
  A controlled affiliate shall be operated in a manner responsive to customer needs and requirements.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    A Controlled Affiliate shall maintain enrollment performance of not worse than declines
of 8% in one year and 20% over three years for total Blue
members1 of the
Controlled Affiliate Licensee and its Blue affiliates excluding Life Insurance and
Charitable Foundation affiliates.3.2
    
    Effective 1/1/2004, the Primary Licensees will collect and report MTM Direct Measures
data and Service Performance Scorecard data for each Geographic Market and on an enterprise
basis for all licensed affiliates with branded health business to BCBSA.
 
 (1)
    
    Total Blue Members is defined as total hospital and medical/surgical members,
excluding freestanding, as reported by Licensees to BCBSA. 26




---



##### 



Standard 6(B): Responsiveness to Customers, continued
   27




---



##### 



Standard 6(C): Participation in National Programs
  A controlled affiliate shall effectively and efficiently participate in each national program as
from time to time may be adopted by the Member Plans for the purposes of providing portability of
membership between the licensees and ease of claims processing for customers receiving benefits
outside of the controlled affiliates Service Area.
 Such programs are applicable to licensees, and include:
 A.
    
    Transfer Program;B.
    
    BlueCard Program;C.
    
    Inter-Plan Teleprocessing System (ITS);D.
    
    Electronic
Claims Routing Process;E.
    
    National Account Programs, effective January 1,
2002;F.
    
    Business Associate Agreement for Blue Cross and Blue Shield Licensees, effective April 14, 2003;
andG.
    
    Inter-Plan Medicare Advantage Program.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    BlueCard Program and ITS  A controlled affiliate shall fully participate in ITS and
the BlueCard Program through compliance with all BlueCard Program Policies and Provisions
and all applicable Inter-Plan Programs Policies and Provisions, unless an exemption has
been granted by the Inter-Plan Programs Committee (IPPC) in accordance with those Policies
and Provisions.
 2.1.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.2.1.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to the PPFSC and
the BCBSA Board of Directors for their action.
 28




---



##### 



Standard 6(C): Participation in National Programs, continued
 2.2
    
    Electronic Claims Routing Process  A Controlled Affiliate shall fully
participate in the Electronic Claims Routing Process through compliance with all Electronic
Claims Routing Process Policies and Provisions and all applicable Inter-Plan Programs
Policies and Provisions.
 2.2.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.2.2.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC
that such action is warranted and a referral of the matter from IPPC to PPFSC and
the BCBSA Board of Directors for their action.
 2.3
    
    National Account Programs  Effective January 1, 2002, a controlled affiliate shall
fully participate in the National Account Programs through compliance with all National
Account Program Policies and Provisions and all applicable Inter-Plan Programs Policies and
Provisions.
 2.3.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.2.3.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to PPFSC and the
BCBSA Board of Directors for their action.
 2.4
    
    Business Associate Agreement for Blue Cross and Blue Shield Licensees  A controlled
affiliate shall fully comply with the terms and conditions of the Business Associate
Agreement for Blue Cross and Blue Shield Licensees (Attachment IX).
 2.4.a
    
    Compliance determined by certification of adherence to the terms and conditions
of the Business Associate Agreement for Blue Cross and Blue Shield Licensees.2.4.b
    
    The Association shall commence Mediation/Arbitration or intervene in a
Mediation/Arbitration proceeding among Plans and/or controlled affiliate licensees upon a
finding by the Plan Performance and Financial Standards Committee that such action is
warranted and a referral of the matter from PPFSC to the BCBSA Board of Directors for its
action.
 2.5
    
    Inter-Plan Medicare Advantage Program  A Controlled Affiliate shall fully participate
in the Inter-Plan Medicare Advantage Program through compliance with all Inter-Plan
Medicare Advantage Program Policies and Provisions.
 2.5a
    
    Compliance determined by periodic review or audits and by reviews initiated by evidence of problems.
 29




---



##### 



Standard 6(C): Participation in National Programs, continued
 2.5b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to PPFSC and the
BCBSA Board of Directors for their action.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    Transfer Program  A controlled affiliate shall be in compliance with the policies and
procedures of the program and shall correct any items of noncompliance. Compliance
determined by annual controlled affiliate certification of having appropriately followed
program procedures to identify and transfer non-resident direct pay and Medicare
Supplemental subscribers, by quarterly volume reporting, and by reviews initiated by
evidence of problems.
 Sanctions:A controlled affiliates Board shall be notified, if the controlled affiliates
performance is not in compliance with the above, in the BCBSA license compliance
letter, as required under Standard 6A: Board of Directors.
 30




---



##### 



Standard 6(D): Financial Performance Requirements
  In addition to requirements under the national programs listed in Standard 6C: Participation in
National Programs, a controlled affiliate shall take such action as required to ensure its
financial performance in programs and contracts of an inter-licensee nature or where BCBSA is a
party.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration (Note: If this guideline is applicable,
Sponsoring Licensed Plan or Controlled Affiliate that has no insurance or insurance
administration operation may request, on an annual basis, that the PPFSC not apply the
requirements to such entity.)
 2.1
    
    A Controlled Affiliate with SAP or equivalent reserve (net worth) of less than 300% of
its Authorized Control Level or liquidity for two consecutive quarters of less than 1.5
months of underwritten claims and administrative expenses (standard BCBSA definition)
shall:
 2.1.a
    
    Provide an irrevocable and unconditional letter of credit, or other guarantee
of payment satisfactory to BCBSA in an amount which shall be reset quarterly equal
to the controlled affiliates:
 2.1a(i)
    
    Control/Home Plan liabilities as actuarially determined by BCBSA
using the respective controlled affiliates historical claim settlement
patterns and actuarial standards of practice for determining incurred
health claim liabilities for:
 (a)
    
    The BlueCard Program;(b)
    
    The Electronic Claims Routing Process (ECRP);(c)
    
    Other transactions settled in whole or in part through the
Central Financial Agency (CFA); and(d)
    
    National Account Service Company, LLC (NASCO)
transactions.
 31




---



##### 



Standard 6(D): Financial Performance Requirements, continued
 And
 2.1a(ii)
    
    The controlled affiliates Participating/Host Plan liability
including gross variance settlements, as a result of modified pricing
(under BCBSA Inter-Plan Programs policies and provisions, including, but
not limited to, BlueCard Program Policies and Provisions or the
equivalent), due Control/Home Plans as actuarially determined by BCBSA.
 2.1.b
    
    Provide NASCO, on a timely basis, with written authorization to provide BCBSA
with requested NASCO claims information used in connection with the calculation
under Paragraph 2.1a(i).2.1.c
    
    Provide each Participating/Host Plan with an option to receive from the
controlled affiliate, as Control/Home Plan, an irrevocable and unconditional letter
of credit or other guarantee of payment acceptable to each such Participating/Host
Plan for Inter-Plan Programs liabilities occurring outside the CFA and NASCO.
 2.1c(i)
    
    Each such guarantee shall be equal to the greater of:
 (a)
    
    The controlled affiliates Control/Home Inter-Plan
liabilities to each such Participating/Host Plan, as certified
by a qualified independent third party acceptable to BCBSA; or(b)
    
    An amount as actuarially determined by BCBSA.
 2.1c(ii)
    
    The guarantee amount shall be reset quarterly based on the most
recent quarter and include:
 (a)
    
    An estimate of average unpaid claims and administrative
expenses due to Participating /Host Plans, net of outstanding
advances; and(b)
    
    An estimate of financial settlements, outstanding through
the current quarter, due to each Participating/Host Plan.
 2.1.d
    
    Distribute to Participating/Host Plans on a quarterly basis, any funds owed
for national account financial settlements. Any such actual distributions can be
used to offset funds set aside in accordance with 2.1a and 2.1b under this Standard
6(D).
 32




---



##### 



Standard 6(D): Financial Performance Requirements, continued
 2.1.e
    
    Provide to BCBSA, on a quarterly basis, a listing of national accounts
in which the controlled affiliate is involved (as Control/Home and
Participating/Host), identifying the national account and the controlled
affiliates role therein. For those accounts where the controlled affiliate is
acting as the Control/Home Plan, the controlled affiliate must also specify the
Participating/Host Plans in each national account syndicate. For any controlled
affiliate included in the Plan Performance Contingency Protocol (PPCP), that
controlled affiliates information will be distributed to the other members of each
national account syndicate.2.1.f
    
    For the Blue Quality Centers for Transplant (BQCT) liabilities not settled
in whole or in part through the CFA or otherwise covered herein, the Home Plan must
provide BCBSA with an irrevocable and unconditional letter of credit, or other
guarantee of payment satisfactory to BCBSA, in an amount which shall be reset
quarterly equal to the greater of:
 2.1f(i)
    
    An amount equal to the controlled affiliates number of BQCT
transplants completed for the prior twelve months times the most recent
estimated U.S. average billed charges per transplant as determined by
Milliman or such other actuarial firm chosen by BCBSA; or2.1f(ii)
    
    An amount as actuarially determined by BCBSA.
 2.1.g
    
    Waive any right to challenge the federal super-priority status held by the
controlled affiliate for the Federal Employee Program and Medicare Part A.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 33




---



##### 



Standard 6(E): Cooperation with Plan Performance Response Process
  A controlled affiliate shall cooperate with BCBSAs Board of Directors and its Plan Performance and
Financial Standards Committee in the administration of the Plan Performance Response Process and in
addressing controlled affiliate performance problems identified thereunder.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    A controlled affiliate shall provide BCBSAs Board of Directors and PPFSC with such
data, action plans and access to the controlled affiliate Board of Directors and on-site
visits as required under the Plan Performance Response Process (PPRP); and2.2
    
    A controlled affiliate shall promptly and effectively address performance problems
identified under the PPRP on a basis which is consistent with the controlled affiliates
responsibilities under the PPRP as determined in the reasonable judgment of BCBSAs Board
of Directors and its PPFSC.
 3.
    
    Guidelines Subject to SanctionsNone
 34




---



##### 



Standard 6(F): Independent Financial Rating
  A controlled affiliate shall obtain a rating of its financial strength from an independent rating
agency approved by BCBSAs Board of Directors for such purpose.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    Annually, a controlled affiliate shall receive a BCBSA-approved financial strength
rating provided, however: (1) each controlled affiliate that is controlled by a Plan
operating as a Shell Holding Company as defined in the Preamble hereto is to maintain a
separate financial strength rating; and (2) each controlled affiliate that is controlled by
a Plan operating as a Hybrid Holding Company as defined in the Preamble hereto is required
to maintain a financial strength rating using the rating agencys approved insurance Group
Rating Methodology. All of the foregoing ratings shall be from either Standard & Poors,
A.M. Best or Fitch, Inc.2.2
    
    Once a private rating has been issued, the controlled affiliate is required to refrain
from making public its private rating* unless the controlled affiliate is compelled to do
so by lawful subpoena or other compulsory legal or regulatory process. If compelled to
release the information, the controlled affiliate is to inform BCBSA** of the occurrence.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 
 *
    
    This requirement does not relate to a public rating a Plan may receive from Standard &
Poors, A.M. Best or Fitch, Inc..**
    
    Inform: 
 35




---



##### 



Standard 6(G): Local and National Best Efforts
  Notwithstanding any other provision in the Plans License Agreement with BCBSA or in this License
Agreement, during each year, a controlled affiliate shall use its best efforts to promote and build
the value of the Blue Cross [applicable to Blue Cross Licensees] and Blue Shield [applicable to
Blue Shield Licensees] Marks.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    At least 80% of the annual Combined Local Net Revenue of a controlled affiliate
attributable to health care plans and related services (hereafter Local Health Revenue)
offered within the designated Service Area must be sold, marketed, administered or
underwritten under the Licensed Marks and Names.2.2
    
    At least 66-2/3% of the annual Combined National Net Revenue of the Controlled Affiliate** attributable to health care
plans and related services (hereafter National Health Revenue) must be sold, marketed,
administered or underwritten under the Licensed Marks and Names. The percentage set forth
in this paragraph shall not be changed for at least 10 years from the date of adoption of
this paragraph.
 2.2a
    
    If the Controlled Affiliate does not comply with the above National
Health Revenue percentage, then it may comply with this Guideline 2.2 by having at least
66-2/3% of the annual Combined National Enrollment of the Controlled Affiliate*** enrolled
in health care plans and related services (hereafter National Health Enrollment) sold,
marketed, administered or underwritten under the Licensed Marks and Names, provided that
such the Controlled Affiliate was a Licensee on the date this Guideline was adopted by the
BCBSA Board of Directors.
 2.3
    
    In administering this Standard, BCBSA will consider the
legitimate strategic interests of the controlled affiliate as embodied in its investments
made in reliance on regulations in effect prior to June 13, 1996 under this Standard 6(G),
including but not limited to the compliance exception for the period prior to the calendar
year beginning January 1, 1999.2.4
    
    Net Revenue shall have the meaning ascribed to it in Attachment VII to these
Guidelines.
 36




---



##### 



Standard 6(G): Local and National Best Efforts, continued
 2.5
    
    Nothing in these Guidelines or in the Best Efforts Standard shall relieve BCBSA or
any Plan or the controlled affiliate from the obligations imposed under the License
Agreement and/or any controlled affiliate License Agreement or from the obligations to deal
in good faith and fairly with each other under the terms of the License Agreement and/or
any controlled affiliate License Agreement. These Guidelines may not be revised without
the approval of the Board of Directors.Compliance with Local Best Efforts Standard
 2.6
    
    In the event that a Controlled Affiliate acquires or takes control of business
through a purchase, merger or any other transaction that results in the Controlled
Affiliate, on a pro-forma basis, falling below the requirement in Paragraph 2.1, the
Controlled Affiliate shall:
 2.6a
    
    Come into compliance with Paragraph 2.1 as described below.2.6b
    
    Within 120 days from the closing date of the merger, purchase or transaction,
submit an action plan to BCBSA for PPFSC approval that identifies the steps the
Controlled Affiliate will take to come into compliance with Paragraph 2.1 as soon
as possible but in any event no later than 24 months after the date of the PPFSCs
initial determination on the action plan, unless such time period is extended by
the PPFSC in accordance with Paragraph 2.11.
 2.6b(i)
    
    The action plan (or amended action plan described below) is
subject to the approval of the PPFSC, such approval not to be unreasonably
withheld. In determining whether to approve a proposed action plan, the
PPFSC shall consider the need to avoid harm to the Blue Brands and other
Controlled Affiliates or Plans, the need for prompt compliance, the
likelihood of serious disruption or harm to the business of the Controlled
Affiliate proposing the action plan and regulatory constraints, together
with any other relevant factors. Once submitted to BCBSA, the action plan
shall be presented to the PPFSC no later than at its next regular meeting
(1) in which a quorum is present to take action, and (2) for which the
action plan was received by BCBSA not less than five business days prior
to the agenda mailing.
 37




---



##### 



Standard 6(G): Local and National Best Efforts
 The Controlled Affiliate shall have the right to appear at
such meeting, to answer any questions from Committee members,
and to make a presentation to the PPFSC in support of its action
plan. The PPFSC may exclude the Controlled Affiliate, however,
from its deliberations. If the PPFSC requests more information
from the Controlled Affiliate, the PPFSC may exercise its
reasonable discretion and extend accordingly the time within
which the Controlled Affiliate must comply. If the PPFSC
disapproves the action plan, the Committee shall inform the
Controlled Affiliate in writing of its decision, including the
basis for the disapproval, and inform the Controlled Affiliate
of its right to file an amended action plan. The Controlled
Affiliate shall have at least one opportunity to submit an
amended action plan. In the event the PPFSC disapproves the
amended action plan, the PPFSC may, in its sole discretion
permit the Controlled Affiliate to file further amended action
plans. Any such amended action plan must be submitted to BCBSA
within 60 days from the date of disapproval of the previously
submitted action plan. The first such amended action plan shall
be subject to the requirements stated in the second sentence of
this subparagraph.
 2.6b(ii)
    
    If the Controlled Affiliates action plan (or amended
action plan) is approved by the PPFSC, the Controlled Affiliate is
required to submit, on a quarterly basis, written status updates
to BCBSA that document the Controlled Affiliates progress towards
compliance with the approved action plan (or amended action plan).
The PPFSC may withdraw approval of a Controlled Affiliates action
plan (or amended action plan) if the PPFSC determines that the
Controlled Affiliate is not making sufficient progress towards
compliance with the milestones or schedules described in the
action plan, as evidenced by the Controlled Affiliates quarterly
written status updates. Upon the withdrawal of the Committees
approval of the Controlled Affiliates action plan (or amended
action plan), the Committee will notify the Controlled Affiliate
in writing, including the basis for the withdrawal
 38




---



##### 



Standard 6(G): Local and National Best Efforts
 of approval. If the withdrawal of approval
is for the Controlled Affiliates original action
plan, the Controlled Affiliate shall have at
least one opportunity to submit an amended action
plan as provided in paragraph 2.6b(i). If the
withdrawal of approval is for an amended action
plan, the Committee may in its sole discretion
permit the Controlled Affiliate to file
additional amended action plans.
 2.7
    
    If a Controlled Affiliate, for any reason other than the acquisition or taking
control of business through a purchase, merger or any other transaction, falls
below the requirement in Paragraph 2.1, the Controlled Affiliate shall:
 2.7a
    
    Come into compliance with Paragraph 2.1 as described below.2.7b
    
    Within 60 days after the date of PPFSC determination (hereinafter the
date of determination) that the Controlled Affiliate is below the
requirement in Paragraph 2.1, submit an action plan to BCBSA for PPFSC
approval that identifies the steps the Controlled Affiliate will take to
comply with Paragraph 2.1 as soon as possible but in any event no later
than 12 months after the date of the PPFSCs initial determination on the
action plan, unless such time period is extended by the PPFSC in
accordance with Paragraph 2.11.
 2.7b(i)
    
    The action plan (or amended action plan described below)
is subject to the approval of the PPFSC, such approval not to be
unreasonably withheld. In determining whether to approve a
proposed action plan, the PPFSC shall consider the need to avoid
harm to the Blue Brands and other Controlled Affiliates or Plans,
the need for prompt compliance, the likelihood of serious
disruption or harm to the business of the Controlled Affiliate
proposing the action plan and regulatory constraints, together
with any other relevant factors. Once submitted to BCBSA, the
action plan shall be presented to the PPFSC no later than at its
next regular meeting (1) in which a quorum is present to take
action, and (2) for which the action plan was received by BCBSA
not less than five business days prior to the agenda mailing.
The Controlled Affiliate shall have the right
 39




---



##### 



Standard 6(G): Local and National Best Efforts
 to appear at such meeting, to answer any questions
from Committee members, and to make a presentation to
the PPFSC in support of its action plan. The PPFSC may
exclude the Controlled Affiliate, however, from its
deliberations. If the PPFSC requests more information
from the Controlled Affiliate, the PPFSC may exercise
its reasonable discretion and extend accordingly the
time within which the Controlled Affiliate must comply.
If the PPFSC disapproves the action plan, the Committee
will inform the Controlled Affiliate in writing of its
decision, including the basis for the disapproval, and
inform the Controlled Affiliate of its right to file an
amended action plan. The Controlled Affiliate shall
have at least one opportunity to submit an amended
action plan. In the event the PPFSC disapproves the
amended action plan, the PPFSC may, in its sole
discretion permit the Controlled Affiliate to file
further amended action plans. Any such amended action
plan must be submitted to BCBSA within 60 days from the
date of disapproval of the previously submitted action
plan. The first such amended action plan shall be
subject to the requirements stated in the second
sentence of this subparagraph.2.7b(ii)
    
    If the Controlled Affiliates action plan (or amended
action plan) is approved by the PPFSC, the Controlled Affiliate is
required to submit, on a quarterly basis, written status updates
to BCBSA that document the Controlled Affiliates progress towards
compliance with the approved action plan (or amended action plan).
The PPFSC may withdraw approval of a Controlled Affiliates
action plan (or amended action plan) if the PPFSC determines that
the Controlled Affiliate is not making sufficient progress towards
compliance with the milestones or schedules described in the
action plan, as evidenced by the Controlled Affiliates quarterly
written status updates. Upon the withdrawal of the Committees
approval of the
 40




---



##### 



Standard 6(G): Local and National Best Efforts
 Controlled Affiliates action plan (or amended
action plan), the Committee will notify the Controlled
Affiliate in writing, including the basis for the
withdrawal of approval. If the withdrawal of approval is
for the Controlled Affiliates original action plan, the
Controlled Affiliate shall have at least one opportunity
to submit an amended action plan as provided in
paragraph 2.7b(i). If the withdrawal of approval is for
an amended action plan, the Committee may in its sole
discretion permit the Controlled Affiliate to file
additional amended action plans. The first such amended
action plan shall be subject to the requirements stated
in the second sentence of this subparagraph.
 Compliance with National Best Efforts Standard2.8
    
    In the event that a Controlled Affiliate is below the requirement in Paragraph
2.2 as of the date of enactment of Paragraph 2.2, the Controlled Affiliate must:
 2.8a
    
    Come into compliance with Paragraph 2.2 as described below.2.8b
    
    Within 120 days after the enactment of Paragraph 2.2, submit an action plan to BCBSA for PPFSC
approval that identifies the steps the Controlled Affiliate will take to comply
with Paragraph 2.2 as soon as possible but in any event no later than 24 months
after the date of the PPFSCs initial determination on the action plan, unless such
time period is extended by the PPFSC in accordance with Paragraph 2.11.
 2.8b(i)
    
    The action plan (or amended action plan described below) is subject to the approval of
the PPFSC, such approval not to be unreasonably withheld. In determining whether
to approve a proposed action plan, the PPFSC shall consider the need to avoid harm
to the Blue Brands and other Controlled Affiliates or Plans, the need for prompt
compliance, the likelihood of serious disruption or harm to the business of the
Controlled Affiliate proposing the action plan and regulatory constraints, together
with any other relevant factors. Once submitted to BCBSA
 41




---



##### 



Standard 6(G): Local and National Best Efforts
 the action plan shall be presented to the PPFSC no
later than at its next regular meeting (1) in which a
quorum is present to take action, and (2) for which the
action plan was received by BCBSA not less than five
business days prior to the agenda mailing. The Controlled
Affiliate shall have the right to appear at such meeting,
to answer any questions from Committee members, and to
make a presentation to the PPFSC in support of its action
plan. The PPFSC may exclude the Controlled Affiliate,
however, from its deliberations. If the PPFSC requests
more information from the Controlled Affiliate, the PPFSC
may exercise its reasonable discretion and extend
accordingly the time within which the Controlled Affiliate
must comply. If the PPFSC disapproves the action plan,
the Committee will inform the Controlled Affiliate in
writing of its decision, including the basis for the
disapproval, and inform the Controlled Affiliate of its
right to file an amended action plan. The Controlled
Affiliate shall have at least one opportunity to submit an
amended action plan. In the event the PPFSC disapproves
the amended action plan, the PPFSC may, in its sole
discretion permit the Controlled Affiliate to file further
amended action plans. Any such amended action plan must
be submitted to BCBSA within 60 days from the date of
disapproval of the previously submitted action plan. The
first such amended action plan shall be subject to the
requirements stated in the second sentence of this
subparagraph.2.8b(ii)
    
    If the Controlled Affiliates action plan (or amended action
plan) is approved by the PPFSC, the Controlled Affiliate is required to
submit, on a quarterly basis, written status updates to BCBSA that
document the Controlled Affiliates progress towards compliance with the
approved action plan (or amended action plan). The PPFSC may withdraw
approval of a Controlled Affiliates action plan (or amended action plan)
if the PPFSC determines that the Controlled Affiliate is not making
sufficient progress towards compliance with the milestones or schedules described in the action plan
as evidenced by the Controlled Affiliates quarterly written status
 42




---



##### 



Standard 6(G): Local and National Best Efforts
 updates. Upon the withdrawal of the Committees approval of the Controlled
Affiliates action plan (or amended action plan), the Committee will notify the Controlled
Affiliate in writing, including the basis for the withdrawal of approval. If the withdrawal
of approval is for the Controlled Affiliates original action plan, the Controlled
Affiliate shall have at least one opportunity to submit an amended action plan as provided
in paragraph 2.8b(i). If the withdrawal of approval is for an amended action plan, the
Committee may in its sole discretion permit the Controlled Affiliate to file further
amended action plans.
 2.9
    
    This section applies to any Controlled Affiliate that is in
compliance upon enactment of Paragraph 2.2 or has come into compliance pursuant to
Paragraph 2.8. In the event that a Controlled Affiliate acquires or takes control of
business through a purchase, merger or any other transaction that results in the Controlled
Affiliate, on a pro-forma basis, falling below the requirement in Paragraph 2.2, the
Controlled Affiliate shall:
 2.9a
    
    Come into compliance with Paragraph 2.2 as described below.2.9b
    
    Within 120 days from the closing date of the merger, purchase or transaction,
submit an action plan to BCBSA for PPFSC approval that identifies the steps the Controlled
Affiliate will take to come into compliance with Paragraph 2.2 as soon as possible but in
any event no later than 24 months after the date of the PPFSCs initial determination,
unless such time period is extended by the PPFSC in accordance with Paragraph 2.11.
 2.9b(i)
    
    The action plan (or amended action plan described below) is
subject to the approval of the PPFSC, such approval not to be unreasonably
withheld. In determining whether to approve a proposed action plan, the
PPFSC shall consider the need to avoid harm to the Blue Brands and other
Controlled Affiliates or Plans, the need for prompt compliance, the
likelihood of serious disruption or harm to the business of the Controlled
Affiliate proposing the action plan and regulatory constraints, together
with any other relevant factors. Once submitted to BCBSA, the action plan
shall be presented to the PPFSC no later than at is next regular meeting
(1) in which a quorum is present to take action, and (2) for which the
action plan was received by BCBSA not
 43




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##### 



Standard 6(G): Local and National Best Efforts
 less than five business days prior to the agenda
mailing. The Controlled Affiliate shall have the right to
appear at such meeting, to answer any questions from
Committee members, and to make a presentation to the PPFSC
in support of its action plan. The PPFSC may exclude the
Controlled Affiliate, however, from its deliberations. If
the PPFSC requests more information from the Controlled
Affiliate, the PPFSC may exercise its reasonable
discretion and extend accordingly the time within which
the Controlled Affiliate must comply. If the PPFSC
disapproves the action plan, the Committee shall inform
the Controlled Affiliate in writing of its decision,
including the basis for the disapproval, and inform the
Controlled Affiliate of its right to file an amended
action plan. The Controlled Affiliate shall have at least
one opportunity to submit an amended action plan. In the
event the PPFSC disapproves the amended action plan, the
PPFSC may, in its sole discretion permit the Controlled
Affiliate to file further amended action plans. Any such
amended action plan must be submitted to BCBSA within 60
days from the date of disapproval of the previously
submitted action plan. The first such amended action plan
shall be subject to the requirements stated in the second
sentence of this subparagraph.2.9b(ii)
    
    If the Controlled Affiliates action plan (or amended action
plan) is approved by the PPFSC, the Controlled Affiliate is required to
submit, on a quarterly basis, written status updates to BCBSA that
document the Controlled Affiliates progress towards compliance with the
approved action plan (or amended action plan). The PPFSC may withdraw
approval of a Controlled Affiliates action plan (or amended action plan)
if the PPFSC determines that the Controlled Affiliate is not making
sufficient progress towards compliance with the milestones or schedules
described in the action plan, as evidenced by the Controlled Affiliates
quarterly written status updates. Upon the withdrawal of the Committees
approval of the Controlled Affiliates action plan
(or amended action plan), the Committee will notify the Controlled
Affiliate in writing including the basis for the
 44




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##### 



Standard 6(G): Local and National Best Efforts
 withdrawal of approval. If the withdrawal of approval is for the Controlled
Affiliates original action plan, the Controlled Affiliate shall have at least one
opportunity to submit an amended action plan as provided in paragraph 2.9b(i). If the
withdrawal of approval is for an amended action plan, the Committee may in its sole
discretion permit the Controlled Affiliate to file further amended action plans.
 2.10
    
    This
section applies to any Controlled Affiliate that is in compliance upon enactment of
Paragraph 2.2 or has come into compliance pursuant to Paragraph 2.8. If the Controlled
Affiliate, for any reason other than the acquisition or taking control of business through
a purchase, merger or any other transaction, falls below the requirement in 2.2, the
Controlled Affiliate shall:
 2.10a
    
    Come into compliance with Paragraph 2.2 as described
below.2.10b
    
    Within 60 days after the date of determination that the Controlled Affiliate
is below the requirement in Paragraph 2.2, submit an action plan to BCBSA for PPFSC
approval that identifies the steps the Controlled Affiliate will take to comply with
Paragraph 2.2 as soon as possible but in any event no later than 12 months after the date
of the PPFSCs initial determination on the action plan, unless such time period is
extended by the PPFSC in accordance with Paragraph 2.11.
 2.10b(i)
    
    The action plan (or
amended action plan described below) is subject to the approval of the PPFSC, such approval
not to be unreasonably withheld. In determining whether to approve a proposed action plan,
the PPFSC shall consider the need to avoid harm to the Blue Brands and other Controlled
Affiliates or Plans, the need for prompt compliance, the likelihood of serious disruption
or harm to the business of the Controlled Affiliate proposing the action plan and
regulatory constraints, together with any other relevant factors. Once submitted to BCBSA,
the action plan shall be presented to the PPFSC no later than at its next regular meeting
(1) in which a quorum is present to take action, and (2) for which the action plan was
received by BCBSA not less than five business days prior to the agenda mailing. The
Controlled Affiliate shall have the right to appear at such meeting, to answer any
questions from Committee members, and to make a
 45




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##### 



Standard 6(G): Local and National Best Efforts
 presentation to the PPFSC in support of its action
plan. The PPFSC may exclude the Controlled Affiliate,
however, from its deliberations. If the PPFSC requests
more information from the Controlled Affiliate, the PPFSC
may exercise its reasonable discretion and extend
accordingly the time within which the Controlled Affiliate
must comply. If the PPFSC disapproves the action plan, the
Committee will inform the Controlled Affiliate in writing
of its decision, including the basis for the disapproval,
and inform the Controlled Affiliate of its right to file
an amended action plan. The Controlled Affiliate shall
have at least one opportunity to submit an amended action
plan. In the event the PPFSC disapproves the amended
action plan, the PPFSC may, in its sole discretion permit
the Controlled Affiliate to file further amended action
plans. Any such amended action plan must be submitted to
BCBSA within 60 days from the date of disapproval of the
previously submitted action plan. The first such amended
action plan shall be subject to the requirements stated in
the second sentence of this subparagraph.2.10b(ii)
    
    If the Controlled Affiliates action plan (or amended action
plan) is approved by the PPFSC, the Controlled Affiliate is required to
submit, on a quarterly basis, written status updates to BCBSA that
document the Controlled Affiliates progress towards compliance with the
approved action plan (or amended action plan). The PPFSC may withdraw
approval of a Controlled Affiliates action plan (or amended action plan)
if the PPFSC determines that the Controlled Affiliate is not making
sufficient progress towards compliance with the milestones or schedules
described in the action plan, as evidenced by the Controlled Affiliates
quarterly written status updates. Upon the withdrawal of the Committees
approval of the Controlled Affiliates action plan (or amended action
plan), the Committee will notify the Controlled Affiliate in writing
including the basis for the withdrawal of approval. If the withdrawal of
approval is for the Controlled Affiliates original action plan, the
Controlled Affiliate shall have at least one opportunity to submit an
amended action plan as provided in paragraph 2.10b(i). If the withdrawal
of
 46




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##### 



Standard 6(G): Local and National Best Efforts
 approval is for an amended action plan, the Committee may in its sole discretion permit
the Controlled Affiliate to file further amended action plans.
 2.11
    
    Once the PPFSC has approved an
action plan (or amended action plan), the approved compliance period may not be extended beyond the
12 or 24 month periods as specified in 2.6b, 2.7b, 2.8b, 2.9b and 2.10b, except on meeting all of
the following conditions:
 2.11a
    
    The Controlled Affiliate must submit a request to extend the
compliance period prior to the expiration of the previously approved compliance period;2.11b
    
    The
Controlled Affiliate must demonstrate to the PPFSC that it made a good faith effort to achieve the
action plan (or amended action plan), and that additional time is needed due to circumstances
beyond its control; and2.11c
    
    The amended compliance period must be approved by the PPFSC, such
approval not to be unreasonably withheld.
 2.12
    
    In the event that the PPFSC disapproves a Controlled
Affiliates action plan (or amended action plan) pursuant to 2.6b(i), 2.7b(i), 2.8b(i), 2.9b(i) and
2.10b(i) or extension of the compliance period pursuant to 2.11, or withdraws its approval of an
action plan pursuant to 2.6b(ii), 2.7b(ii), 2.8b(ii), 2.9b(ii) and 2.10b(ii), the Controlled
Affiliate shall have the right to appeal the decision to the BCBSA Board of Directors. The
Controlled Affiliate must request such an appeal prior to either one of the next two meetings of
the Board of Directors that take place after the PPFSCs decision to disapprove or withdraw its
approval. Nothing contained herein shall be construed that the Controlled Affiliate does not have
appeal rights with respect to decisions made by the PPFSC regarding compliance with other Standards
or their associated guidelines.
 
 *
    
    Combined Local Net Revenue shall have the meaning ascribed to it
in Attachment VII to these Guidelines.**
    
    Combined National Net Revenue shall have the meaning ascribed to it in Attachment VII to these
Guidelines.***
    
    Combined National Enrollment shall have the meaning ascribed to it in Attachment VII to these
Guidelines. 47




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##### 



Standard 6(H): Financial Responsibility
  A controlled affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    A controlled affiliate shall have liquidity (standard BCBSA definition) equal to at
least 1.0 months of underwritten claims and administrative expenses for 2 consecutive
quarters.1.2
    
    Notwithstanding other requirements, a controlled affiliate shall have a
minimum capital equal to or greater than 200% of its Authorized Control Level.1.3
    
    Notwithstanding a Controlled Affiliates Health Risk Based Capital (HRBC)* level, a
controlled affiliate shall maintain its minimum SAP reserve (or equivalent net worth**) at
or above the minimum reserve (or net worth level**) established by each state in which it
is domiciled and/or operates.
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    A controlled affiliate shall maintain accounting records on an accrual basis. A
controlled affiliate shall file an annual certified audit report with BCBSA if the
controlled affiliate is required to file such a report with its domicilary State Insurance
Department. If no such requirement is in force, a controlled affiliate is not required to
submit an annual certified audit report with BCBSA provided the controlled affiliates SAP
reserve (or equivalent net worth) is disclosed separately in the primary licensees annual
certified audit report for the same period.
 
 *
    
    The HRBC calculation was designed by the National Association of Insurance Commissioners to
estimate the minimum statutory level of required capital and is used by BCBSA to determine
compliance with BCBSAs minimum HRBC requirement, established PPRP monitoring thresholds and other
requirements and protocols. Given that the HRBC calculation is a retrospective formula, it does
not take into account the potential impact of future events (developing market challenges or
constraints, investments in technology, unexpectedly high claims, changes in business mix,
potential acquisitions or divestitures, etc.) that may have a significant impact on the HRBC of a
Controlled Affiliate. Additional capital may be needed to protect against events not otherwise
accounted for in the HRBC formula and BCBSA encourages Plans to maintain reserves well above the
required HRBC minimum. HRBC was not designed, calibrated or intended for use in determining excess
levels of capital.**
    
    language applicable to non-risk assuming Controlled Affiliate Licensees 48




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##### 



Standard 6(H): Financial Responsibility, continued
 2.1.a
    
    If the certified audit is required by the State Insurance Department,
the independent financial statement opinion included in the controlled affiliates
annual audit report shall not express doubts as to the controlled affiliates
ability to continue as a going concern. The annual audit shall be performed by an
independent CPA firm acceptable to PPFSC.
 2.2
    
    A controlled affiliate shall provide for adequate accounting for loss reserves,
actuarial liabilities and related items as annually certified by a qualified actuary
pursuant to a review process acceptable to PPFSC (See Attachment II; Note: Each licensee is
required to submit a separate certification).2.3
    
    A Controlled Affiliate shall be considered noncompliant if it does not meet at least
one of the following:
 2.3a
    
    participate in the guaranty fund in each state in which it operates; or2.3b
    
    establish another method approved by BCBSA which assures the payment of claim
liabilities and continuation of coverage in the event of an insolvency (See
Attachment III); or2.3c
    
    at a minimum, have an HRBC above 800% of its Authorized Control Level and
liquidity of 2.0 months or greater.
 2.3.c(i)
    
    If a controlled affiliate that has complied with the
requirement by maintaining the financial position defined above no
longer meets one or both of the financial tests, the controlled
affiliate will have six months to join the guaranty fund or implement
an acceptable alternative mechanism.
 2.4
    
    The controlled affiliate and Sponsoring Licensed Plan(s) certifying to BCBSA that the
Sponsoring Licensed Plan(s) guarantees to the full extent of its (their) assets, all of the
contractual and financial obligations of the controlled affiliate to its customers. In
situations where such a guaranty is not permitted by regulation or statute, or where the
parent and controlled affiliate prefer, the parent and affiliate may, upon agreement of
BCBSA, provide alternative protections which may include, but are not limited to, the
Payment of Claims Liabilities  Alternative Mechanisms enumerated in Attachment III
(Guaranty Association Alternatives & Evaluation Criteria).
 3.
    
    Guidelines Subject to Sanction
 49




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##### 



Standard 6(H) Reports and Records, continued
 3.1
    
    None.
 50




---



##### 



Standard 6(I) Reports and Records
  A controlled affiliate shall furnish to BCBSA, on a timely and accurate basis, reports and records
relating to compliance with these Standards and the License Agreements between BCBSA and controlled
affiliate. Such reports and records are the following:
 A.
    
    BCBSA Controlled Affiliate Licensure Information Request; andB.
    
    Biennial trade name and service mark usage material, including disclosure material; andC.
    
    Changes in the ownership and governance of the controlled affiliate, including changes in its
charter****, articles of incorporation****, or bylaws****, changes in a controlled affiliates
Board composition, or changes in the identity of the controlled affiliates Principal Officers, and
changes in risk acceptance, contract growth, or direct delivery of medical care;* andD.
    
    Quarterly Financial Report, Semi-annual NAIC Health Risk-Based Capital (HRBC) Report as
defined by the NAIC, Annual Financial Forecast, Annual Certified Audit Report, Insurance Department
Examination Report**, Annual Statement filed with State Insurance Department (with all
attachments), andE.
    
    Quarterly Enrollment Report.
 
 *
    
    Submit within 30 days of change to address indicated below**
    
    If applicable  See Standard 6(H)***
    
    Forward within 30 days of receipt by the controlled affiliate of the final report accompanied
by a formal comment thereon from the controlled affiliates CEO, if appropriate, to: 
 
 ****
    
    Include a red-lined version that clearly identifies the changes 51




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##### 



Standard 6(I) Reports and Records, continued
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    Each licensee is required to submit separate reports and records; therefore, each
controlled affiliate is required to submit the listed reports and records listed in item C
above by the due dates listed in Attachment IV. These reports are in addition to reports
required under any other Guidelines to Administer Standards and License Agreements
applicable to Sponsoring Licensed Plans and/or to other types of Controlled Affiliates.2.2
    
    Noncompliance is a result of the following:
 2.2.a
    
    Late Reporting  A report will be considered late if it is received by BCBSA
after the published deadline or after an agreed upon extension (see Attachment IV
for reporting due dates).2.2.b
    
    Incomplete/inaccurate reporting  A report will be considered
incomplete/inaccurate if the data submitted do not conform to published
instructions.2.2.c
    
    Non-submission  A report will be considered not submitted if data are not
presented to BCBSA within 30 days after the published deadline or after an
agreed-upon extension. A report will also be considered not submitted if accuracy
concerns or missing data, leading to the misrepresentation of performance and
inability to publish data, are not resolved within 30 days after the published
deadline or an agreed-upon extension (see Attachment IV for reporting due dates).
 52




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##### 



Standard 6(I) Reports and Records, continued
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    Each licensee is required to submit separate reports and records; therefore, each
controlled affiliate is required to submit the listed reports and records listed in item D
and E above by the due dates required in Attachment IV. These reports are in addition to
reports required under any other Guidelines to Administer Standards and License Agreements
applicable to Sponsoring Licensed Plans and/or to other types of Controlled Affiliates.3.2
    
    Noncompliance is a result of the following:
 3.2.a
    
    Late Reporting  A report will be considered late if it is received by BCBSA
after the published deadline or after an agreed upon extension (see Attachment IV
for reporting due dates).3.2.b
    
    Incomplete/inaccurate Reporting  A report will be considered
incomplete/inaccurate if the data submitted do not conform to published
instructions.3.2.c
    
    Non-submission  A report will be considered not submitted if data are not
presented to BCBSA within 30 days after the published deadline or after a
reasonable agreed-upon extension. A report will also be considered not submitted
if accuracy concerns or missing data, leading to the misrepresentation of
performance and inability to publish data, are not resolved within 30 days after
the published deadline or an agreed-upon extension (See Attachment IV for reporting
due dates).
 Refer to Attachment V for specific sanctions relating to reports listed in Item D
above.
 53




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##### 



Standard 6(J): Control by Unlicensed Entities Prohibited
  No controlled affiliate shall cause or permit an entity other than a Plan or a Licensed Controlled
Affiliate thereof to obtain control of the controlled affiliate or to acquire a substantial portion
of its assets related to licensable services.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    A controlled affiliate shall be considered noncompliant upon a reduction in Combined
Local Net Revenue of the controlled affiliate, its sponsoring Plan, and any other of the
Plans Controlled Affiliates in any fiscal quarter in the Service Area of fifty percent or
more compared to such revenue in any fiscal quarter during the prior thirty-six month
period, due in whole or in part to the conveyance of assets, including goodwill, to a party
other than a Plan or Licensed Controlled Affiliate of a Plan which is in compliance with
all rules and regulations of BCBSA. Combined Local Net Revenue shall have the meaning
ascribed to it in Attachment VII to the Guidelines, except that, for purposes of this
section, Combined Local Net Revenue excludes delivery of health care services (such as
hospital and medical (professional) services), and the sale of health care products;
stand-alone vision, mental, drug, dental, pharmacy management or other specialty health
care financing or administrative programs; workers compensation; stand-alone reinsurance
and stand-alone stop loss insurance.1.2
    
    A controlled affiliate shall be considered noncompliant if, as a result of any
transaction with an entity or group other than Plans or Licensed Controlled Affiliates of
Plans, the entity or group or its owners or members obtain the ability to select a majority
of the members of the Board of Directors of the controlled affiliate or otherwise gain
control of the controlled affiliate.1.3
    
    A controlled affiliate shall be considered noncompliant if an officer or other person
who is among the ten most highly-compensated employees of the controlled affiliate shall
have a financial arrangement with any entity, other than a Plan or an entity controlled by
a Plan, which permits the entity to influence that person in the discharge of his duties.1.4
    
    A controlled affiliate shall be considered noncompliant if the controlled affiliate
enters into an arrangement for the management of all or a portion of its operations where
the consideration to be paid for such services
 54




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##### 



Standard 6(J): Control by Unlicensed Entities Prohibited, continued
 exceeds 35% of the controlled affiliates administrative expenditures for the
fiscal year with respect to which such services are rendered. Consideration
includes payment from any source to the controlled affiliate or its Affiliates and
Associates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934),
other than a Plan or an entity controlled by a Plan, but shall exclude amounts paid
for claims processing and other clerical functions if no other management services
are provided by the same entity or its Affiliates or Associates.
 1.5
    
    BCBSA may require a controlled affiliate to make full disclosure to it of any proposed
or completed transaction as BCBSA deems necessary to ascertain compliance with this
Standard, including purchase, lease, employment, consulting or other financial arrangements
between third parties and the controlled affiliate or its officers, directors or members.1.6
    
    An unlicensed party seeking to obtain control over a controlled affiliate or to acquire
a substantial portion of its assets, in cases where the Plans license is also terminating,
is invited to apply to become a licensee pursuant to the rules outlined in Guidelines to
Standard 11 of the Membership Standards.
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 55




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##### 



Standard 7  Other Standards for Risk-Assuming Workers Compensation Controlled
Affiliates
  56




---



##### 



Standard 7(A): Financial Responsibility
  A controlled affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers.
  1.
    
    Compliance for workers compensation Controlled Affiliates that HAVE sufficient operating
experience to obtain a public rating is based upon:
 1.1
    
    Through December 31, 2003, a controlled affiliate shall receive an independent rating
from either Standard & Poors Insurance Rating Services or A.M. Best Company of its
financial strength on an annual basis. As of January 1, 2004, a controlled affiliate shall
receive an independent rating from either Standard & Poors Insurance Rating Services, A.M.
Best Company or Fitch, Inc. of its financial strength on an annual basis. The controlled
affiliate must maintain either a:
 1.1.a
    
    Claims-Paying Ability Rating of BBB- or higher from Standard &
Poors; or1.1.b
    
    Bests Rating of B+ or higher from A.M. Best; or1.1.c
    
    Insurer financial strength rating of BBB- or higher from Fitch, Inc.
  1.2
    
    A controlled affiliate must maintain a minimum statutory Total Adjusted Capital
exclusive of surplus notes equal to or exceeding 500% of the year-end Adjusted
Authorized Control Level (as defined by BCBSA) of NAIC Risk-Based Capital for Property
and Casualty Insurers; and1.3

   
    Accounting records maintained on an accrual basis subject to an annual audit resulting
in a financial statement opinion that does not express doubts as to the licensees ability
to continue as a going concern. The annual audit is to be performed by an independent CPA
firm acceptable to PPFSC. Each licensee is required to submit an individual annual
certified audit report; and
 57




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##### 



Standard 7(A): Financial Responsibility, continued
 1.4
    
    Each controlled affiliate is required to submit evidence of adequate accounting
for loss reserves and loss adjustment expense reserves, as annually opined by a member of
the American Academy of Actuaries.
  2.
    
    Compliance for workers compensation Controlled Affiliates that CANNOT obtain a public rating
due to insufficient operating experience is based upon:
 2.1
    
    A controlled affiliate must maintain a minimum statutory Total Adjusted Capital
exclusive of surplus notes equal to or exceeding 600% of the year-end Adjusted
Authorized Control Level (as defined by BCBSA) of NAIC Risk-Based Capital for Property
and Casualty Insurers; and2.2
    
    A controlled affiliate must maintain a minimum capital and surplus of 50% of annual
net written premium; and2.3
    
    Accounting records maintained on an accrual basis subject to an annual audit resulting
in a financial statement opinion that does not express doubts as to the licensees ability
to continue as a going concern. The annual audit is to be performed by an independent CPA
firm acceptable to PPFSC. Each licensee is required to submit an individual annual
certified audit report; and2.4
    
    Each controlled affiliate is required to submit evidence of adequate accounting for
loss reserves and loss adjustment expense reserves, as annually opined by an INDEPENDENT,
qualified member of the American Academy of Actuaries acceptable to the PPFSC. At a
minimum, this evidence will include a loss reserve opinion certifying the liability in the
annual statement and the actuarial report.
  58




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##### 



Standard 7(B): Reports and Records
  A controlled affiliate shall furnish, on a timely and accurate basis, reports and records relating
to compliance with these Standards and the License Agreements between BCBSA and the controlled
affiliate. Such reports and records are the following:
 A.
    
    BCBSA Controlled Affiliate Licensure Information Request; andB.
    
    Biennial trade name and service mark usage materials, including disclosure material; andC.
    
    Annual Certified Audit Report, Annual Statement as filed with the State Insurance Department
(with all attachments), Annual NAICs Risk-Based Capital Worksheets for Property and Casualty
Insurers, and Annual Financial Forecast; andD.
    
    Quarterly Financial Report, Quarterly Estimated Risk-Based Capital for Property and Casualty
Insurers, Insurance Department Examination Report; Quarterly Enrollment Report; andE.
    
    Notification of all changes and proposed changes to independent ratings within 30 days of
receipt and submission of a copy of all rating reports;** andF.
    
    Changes in the ownership and governance of the controlled affiliate, including changes in its
charter***, articles of incorporation***, or bylaws***, changes in a controlled affiliates Board
composition, Plan control, state license status, operating area, the controlled affiliates
Principal Officers or direct delivery of medical care.**
 
 *
    
    Forward within 30 days of receipt by the controlled affiliate of the final report
accompanied by a formal comment thereon from the controlled affiliates CEO, if
appropriate, to: 
 **
    
    Submit within 30 days of change to address indicated above.***
    
    Include a red-lined version that clearly identifies the
changes
 59




---



##### 



Standard 7(B): Reports and Records, continued
  1.
    
    Compliance is based on:
 1.1
    
    The timely submission of accurate and complete reports as required by the BCBSA Board
of Directors (see Attachment VI), to include indication of compliance with the License
Agreements, as interpreted in the Brand Book; and1.2
    
    Mandatory reporting of any untoward events associated with the controlled
affiliate, such as malpractice suits or other legal, financial events that would
materially affect controlled affiliate operations and/or performance; and1.3
    
    The controlled affiliate and sponsoring Licensed Plan(s):
 1.3.a
    
    agreeing upon request by BCBSA to an examination; and1.3.b
    
    providing access to requested staff and/or documentation.
 1.4
    
    Compliance is also based on a controlled affiliate being in compliance with the
regulations pertaining to service mark use promulgated pursuant to paragraph 3 of the
License Agreements (see Brand Book).
 2.
    
    Noncompliance is a result of the following:
 2.1
    
    Reporting  substantial incompleteness and/or inaccuracy and/or lateness and/or
nonsubmission of required reports as described in Attachment VI: or
 2.1.a
    
    Incomplete/Inaccurate Reporting: A report will be considered
incomplete/inaccurate if the data submitted do not conform to published
instructions.2.1.b
    
    Late Reporting: A report will be considered late if it is not received by
BCBSA after the published deadline or after an agreed upon extension.
 60




---



##### 



Standard 7(B): Reports and Records, continued
 2.1.c
    
    Non-submission: A report will be considered not submitted if data are
not presented to BCBSA within 30 days after the published deadline or after an
agreed upon extension. A report will also be considered not submitted if accuracy
concerns or missing data leading to the misrepresentation of performance and
inability to publish data, are not resolved within 30 days after the published
deadline or an agreed upon extension.
 2.2
    
    Examination  failure to comply with any one of the examination issues; or2.3
    
    Untoward events  failure to report timely and accurately events materially
affecting the controlled affiliate; and2.4
    
    BCBSA management, after contact with Plan management, concludes that
compliance is not likely to be reached, given existing controlled affiliate/Plan
efforts.
  61




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##### 



Standard 7(C): Loss Prevention
  A controlled affiliate shall apply loss prevention protocol to both new and existing business.
  1.
    
    A controlled affiliate shall ensure that all prospective clients employee safety and other
loss control programs are reviewed during the underwriting process; and
 2.
    
    A controlled affiliate shall annually review all clients employee safety and other loss
control programs (e.g., regulatory compliance, identification of workplace hazards, management
commitment and effectiveness) and advise clients on appropriate enhancements.
  62




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##### 



Standard 7(D): Claims Administration
  A controlled affiliate shall maintain an effective claims administration process that includes all
the necessary functions to assure prompt and proper resolution of medical and indemnity claims.
  1.
    
    A controlled affiliate shall receive a satisfactory audit on an annual basis conducted by
a reinsurer, outside entity or state; and
 2.
    
    A controlled affiliate shall have a reporting capability that is available 24-hours-a-day,
seven days a week, which should include the use of a 1-800 telephone reporting system, fax
reporting, or electronic submission; and
 3.
    
    A controlled affiliate shall ensure that all appropriate claims are referred simultaneously
to the claims adjuster and the Medical Manager within 24 hours of initial notification; and
 4.
    
    A controlled affiliate shall ensure that appropriate compensability decisions are made within
five business days from initial notification for 95 percent of claims; and
 5.
    
    A controlled affiliate shall ensure that all lost time benefit checks are accurately
calculated and issued to injured employees within five business days (unless state
requirements differ) after the expiration of a statutory waiting period. Subsequent checks
shall be paid on a timely basis as they become due; and
 6.
    
    A controlled affiliate shall ensure that 95 percent of all properly documented medical bills
are paid within 14 days of receipt; and
 7.
    
    A controlled affiliate shall ensure that all cases are recognized for subrogation and/or
second injury fund recovery potential.
  63




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##### 



Standard 7(E): Disability and Provider Management
  A controlled affiliate shall arrange for the provision of appropriate and necessary medical and
rehabilitative services to facilitate early intervention by medical professionals and timely and
appropriate return to work.
  1.
    
    A controlled affiliate shall receive a satisfactory audit on an annual basis conducted by
a reinsurer, outside entity or state; and2.
    
    A controlled affiliate shall establish an occupational managed care network, unless
prohibited by state law; and3.
    
    A controlled affiliate shall ensure that all network physicians are board eligible or
certified in their practicing specialty (unless state law or regulations prohibit compliance
and the controlled affiliate provides evidence of such state law or regulation); and4.
    
    A controlled affiliate shall ensure that a Medical Manager establishes and documents a
treatment plan, on assigned claims, within three business days from initial notification, with
a projected return-to-work date; and5.
    
    A controlled affiliate shall ensure that 85 percent of medical payments are made to network
providers, unless state requirements limit the ability to direct treatment.
  64




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##### 



Standard 8: Cooperation with Controlled Affiliate License Performance Response
Process Protocol
  A controlled affiliate and its sponsoring Plan(s) shall cooperate with BCBSAs Board of Directors
and its Plan Performance and Financial Standards Committee in the Administration of the Controlled
Affiliate Licensee Performance Response Process Protocol (ALPRPP) and in addressing controlled
controlled affiliate compliance problems identified thereunder.
  1.
    
    A controlled affiliate and its Sponsoring Plan(s) shall provide BCBSAs Board of Directors
and the Plan Performance and Financial Standards Committee with such data, action plans and
on-site visits as required under ALPRPP; and
 2.
    
    A controlled affiliate and its Sponsoring Plan(s) shall promptly and effectively address
performance problems identified under the ALPRPP as determined in the reasonable judgment of
BCBSAs Board of Directors and its Plan Performance and Financial Standards Committee.
  65




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##### 



Standard 9(A): Participation in National Programs by Smaller Controlled Affiliates that
were former Primary Licensees
  A smaller controlled affiliate that formerly was a Primary Licensee shall effectively and
efficiently participate in certain national programs from time to time as may be adopted by Member
Plans for the purposes of providing ease of claims processing for customers receiving benefits
outside of the controlled affiliates service area and be subject to certain relevant financial and
reporting requirements.
 A.
    
    National program requirements include:
 
    
    BlueCard Program;
    
    Inter-Plan Teleprocessing System (ITS);
    
    Transfer Program;
    
    Electronic Claims Routing Process, effective until October 16, 2003; and
    
    National Account Programs, effective January 1, 2002.
 B.
    
    Financial Requirements include:
 
    
    Standard 6(D): Financial Performance Requirements and Standard 6(H): Financial
Responsibility; or
    
    A financial guarantee covering the Controlled Affiliates BlueCard Program
obligations in a form, and from a guarantor, acceptable to BCBSA.
 C.
    
    Reporting requirements include:
 
    
    Semi-annual Health Risk-Based Capital (HRBC) Report as defined by the NAIC.
  1.
    
    Guidelines Subject to Immediate Termination.
 1.1
    
    BlueCard Program and ITS  A controlled affiliate shall fully participate in ITS and
the BlueCard Programs through compliance with all BlueCard Program Policies and Provisions
and all applicable Inter-Plan Programs Policies and Provisions, unless an exemption has
been granted by the Inter-Plan Programs Committee (IPPC) in accordance with those Policies
and Provisions.
 66




---



##### 



Standard 9(A): Participation in National Programs by Smaller Controlled Affiliates that were
former Primary Licensees, continued
 1.1.a
    
    Compliance determined by periodic reviews or audits and by reviews
initiated by evidence of problems.1.1.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to the PPFSC and
the BCBSA Board of Directors for their action.
 1.2
    
    Electronic Claims Routing Process until the mandated date for implementation of the
HIPAA standard transaction  A controlled affiliate shall fully participate in the
Electronic Claims Routing Process through compliance with all Electronic Claims Routing
Process Policies and Provisions and all applicable Inter-Plan Programs Policies and
Provisions.
 1.2.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.1.2.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to the PPFSC and
the BCBSA Board of Directors for their action.
 1.3
    
    National Account Programs  Effective January 1, 2002, a controlled affiliate shall
fully participate in the National Account Programs through compliance with all National
Account Program Policies and Provisions and all applicable Inter-Plan Programs Policies and
Provisions.
 1.3.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.1.3.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to PPFSC and the
BCBSA Board of Directors for their action.
 1.4
    
    If applicable, a controlled affiliate shall adhere to the Determination of Compliance
sections listed in Standards 6(D) and 6(H).1.5
    
    If applicable, the controlled affiliate shall submit a financial guarantee covering the
controlled affiliates BlueCard Program obligations in a form, and from a guarantor,
acceptable to BCBSA.
 67




---



##### 



Standard 9(A): Participation in National Programs by Smaller Controlled Affiliates that were
former Primary Licensees, continued
 1.6
    
    A controlled affiliate shall submit the Semi-annual Health Risk-Based Capital as
indicated in Attachment IV.
  2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    Transfer Program  a controlled affiliate shall be in compliance with the policies and
procedures of the program and shall correct any items of noncompliance. Compliance
determined by annual controlled affiliate certification of having appropriately followed
program procedures to identify and transfer non-resident direct pay and Medicare
Supplemental subscribers, by quarterly volume reporting, and by reviews initiated by
evidence of problems.
   68




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##### 



Standard 9(B): Participation in National Programs by Smaller Controlled Affiliates
  A smaller controlled affiliate that voluntarily elects to participate in national programs in
accordance with BlueCard and other relevant Policies and Provisions shall effectively and
efficiently participate in national programs from time to time as may be adopted by Member Plans
for the purposes of providing ease of claims processing for customers receiving benefits outside of
the controlled affiliates service area and be subject to certain relevant financial and reporting
requirements.
 A.
    
    National program requirements include:
 
    
    BlueCard Program;
    
    Inter-Plan Teleprocessing System (ITS);
    
    Electronic Claims Routing Process, effective until October 16, 2003; and
    
    National Account Programs, effective January 1, 2002
 B.
    
    Financial Requirements include:
 
    
    Standard 6(D): Financial Performance Requirements and Standards 6(H): Financial
Responsibility; or
    
    A financial guarantee covering the controlled affiliates BlueCard Program obligations
in a form, and from a guarantor, acceptable to BCBSA.
 69




---



##### 



Standard 9(B): Participation in National Programs by Smaller Controlled Affiliates,
continued
  1.
    
    Guidelines Subject to Immediate Termination.
 1.1
    
    BlueCard Program and ITS  A controlled affiliate shall fully participate in ITS and
the BlueCard Programs through compliance with all BlueCard Program Policies and Provisions
and all applicable Inter-Plan Programs Policies and Provisions, unless an exemption has
been granted by the Inter-Plan Programs Committee (IPPC) in accordance with those Policies
and Provisions.
 1.1.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.1.1.b
    
    Meditation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to the PPFSC and
the BCBSA Board of Directors for their action.
 1.2
    
    Electronic Claims Routing Process until October 16, 2003  A controlled affiliate
shall fully participate in the Electronic Claims Routing Process through compliance with
all Electronic Claims Routing Process Policies and Provisions and all applicable Inter-Plan
Programs Policies and Provisions.
 1.2.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.1.2.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to the PPFSC and
the BCBSA Board of Directors for their action.
 1.3
    
    National Account Programs  Effective January 1, 2002, a controlled affiliate shall
fully participate in the National Account Programs through compliance with all National
Account Program Policies and Provisions and all applicable Inter-Plan Programs Policies and
Provisions.
 1.3.a
    
    Compliance determined by periodic reviews or audits and by reviews initiated
by evidence of problems.1.3.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC that
such action is warranted and a referral of the matter from IPPC to PPFSC and the
BCBSA Board of Directors for their action.
 70




---



##### 



Standard 9(B): Participation in National Programs by Smaller Controlled Affiliates,
continued
 1.4
    
    If applicable, a controlled affiliate shall adhere to the Determination of
Compliance sections listed in Standards 6(D) and 6(H).1.5
    
    If applicable, the controlled affiliate shall submit a financial guarantee covering the
controlled affiliates BlueCard Program obligations in a form, and from a guarantor,
acceptable to BCBSA.
  2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 71




---



##### 



Standard 10  Other Standards for Controlled Affiliates Whose Primary Business is Government
Non-Risk
  72




---



##### 



Standard 10(A)  Organization and Governance
  A controlled affiliate shall be organized and operated in such a manner that it is
 A.
    
    wholly owned by a licensed Plan or Plans andB.
    
    the sponsoring licensed Plan or Plans have the legal ability to prevent any change in the
articles of incorporation, bylaws or other establishing or governing documents of the controlled
affiliate with which it does not concur.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    Sponsoring-Licensed Plan(s) wholly owns the controlled affiliate; and1.2
    
    Sponsoring-Licensed Plan(s) have the legal ability to replace the controlled
affiliates Board of Directors and prevent any change in the articles of incorporation,
bylaws or other establishing or governing documents of the controlled affiliate with which
it does not concur.
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    None
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 73




---



##### 



Standard 10(B)  Financial Responsibility
  A controlled affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers.
 1.
    
    Compliance is based on:
 1.1
    
    Accounting records maintained on an accrual basis. A controlled affiliate shall file
an annual certified independent audit report with BCBSA.
 1.1.a
    
    The certified independent audit is required by the State Insurance
Department, the independent financial statement opinion included in the controlled
affiliates annual audit report shall not express doubts as to the licensees
ability to continue as a going concern. The annual audit is to be performed by an
independent CPA firm acceptable to PPFSC; and
 1.2
    
    The controlled affiliate and Sponsoring Plan(s), to the full extent of their assets,
indemnifying BCBSA against any claims asserted against it resulting from the contractual
and financial obligations of the controlled affiliate, and all costs and professional fees
associated therewith. In situations where the Sponsoring Plan(s) and controlled affiliate
prefer, the Sponsoring Plan(s) and controlled affiliate may, upon the agreement of BCBSA,
provide alternative protections.1.3
    
    If the controlled affiliate is not a risk assuming entity, the affiliate shall have a
SAP or equivalent net worth of at least 8.33% of annual net operating expenses. Compliance
with this requirement may also be met if the state regulatory authority, in lieu of a
capital infusion, has accepted a written financial guarantee which contractually obligates
the sponsoring Plan(s) for the financial commitments of the controlled affiliate in an
amount that is at least 8.33% of the controlled affiliates annual net operating expenses,
reduced by the SAP or equivalent net worth of the controlled affiliate and:
 1.3.a
    
    The controlled affiliate has SAP or equivalent net worth of at least the
minimum statutory reserve level of the state in which the controlled affiliate is
domiciled, or if there is no minimum statutory reserve requirement, $3.0 million;
and1.3.b
    
    The Plan(s) SAP reserve as a percent of Capital Benchmark is at least 120%.
 1.4
    
    If the controlled affiliate is a risk assuming entity, the controlled affiliate shall
have a SAP or equivalent net worth that is the higher of:
 74




---



##### 



Standard 10(B)  Financial Responsibility, continued
 1.4.a
    
    An amount exceeding the Plan regulatory action level as defined in the
NAICs Risk-Based Capital for Life and/or Insurers Model Act (i.e., exceeding 200%
of Base Adjusted Capital or 250% of Base Adjusted Capital with a negative trend);
or1.4.b
    
    The minimum statutory reserve requirement of the state in which the
controlled affiliate is domiciled.
  75




---



##### 



Standard 10(C): Reports and Records
  A controlled affiliate shall furnish, on a timely and accurate basis, reports and records
relating to compliance with these Standards and the License Agreements between BCBSA and the
affiliate. Such reports and records are the following:
 A.
    
    BCBSA Affiliate Licensure Information Request; andB.
    
    Biennial trade name and service mark usage materials, including disclosure material; andC.
    
    Annual Certified Audit Report, Annual Statement (if required) as filed with the State Insurance
Department (with all attachments), Annual NAIC Risk-Based Capital Worksheets (if required) as
filed with the State Insurance Department (with all attachments), and Insurance Department
Examination Report (if applicable)*; andD.
    
    Changes in the ownership and governance of the controlled affiliate, including changes in its
charter**, articles of incorporation**, or bylaws**, changes in the controlled affiliates Board
composition, Plan control, state license status, operating area, the controlled affiliates
Principal Officers or direct delivery of medical care.**
  1.
    
    Compliance is based on:
 
 *
    
    Forward within 30 days of receipt by the controlled affiliate of the final report
accompanied by a formal comment thereon from the affiliates CEO, if applicable, to:
 
 **
    
    Submit within 30 days of change to address indicated above and include a red-lined version
that clearly identifies the changes.
 76




---



##### 



Standard 10(C): Reports and Records, continued
 1.1
    
    The timely submission of accurate and complete reports as required by BCBSA Board
of Directors (see Attachment VIII), to include indication of compliance with the License
Agreements, as interpreted in the Brand Book; and1.2
    
    Mandatory reporting of any untoward events associated with the affiliate, such as
malpractice suits or other legal, financial events that would materially affect affiliate
operations and/or performance; and1.3
    
    The affiliate and sponsoring Licensed Plan(s):
 1.3.a

    
    agreeing upon request by BCBSA to an examination; and1.3.b

    
    providing access to requested staff and/or documentation.
 2.
    
    Compliance is also based on an affiliate being in compliance with the regulations pertaining
to service mark use promulgated pursuant to paragraph 3 of the License Agreements (see Brand
Book).3.
    
    Noncompliance is a result of the following:
 3.1
    
    Reporting  substantial incompleteness and/or inaccuracy and/or lateness and/or
nonsubmission of required reports as described in Attachment VIII; or
 3.1.a

    
    Incomplete/Inaccurate Reporting: A report will be considered
incomplete/inaccurate if the data submitted do not conform to published
instructions.3.1.b

    
    Late Reporting: A report will be considered late if it is not received by
BCBSA after the published deadline or after an agreed upon extension.3.1.c

    
    Non-submission: A report will be considered not submitted if data are not
presented to BCBSA within 30 days after the published deadline or after an agreed
upon extension. A report will also be considered not submitted if accuracy concerns
or missing data leading to the misrepresentation of performance and inability to
publish data, are not resolved within 30 days after the published deadline or an
agreed upon extension.
 3.2
    
    Examination  failure to comply with any one of the examination issues; or3.3
    
    Untoward events  failure to report timely and accurately events materially affecting
the affiliate; and
 77




---



##### 



Standard 10(C): Reports and Records, continued
 3.4
    
    BCBSA management, after contact with Plan management, concludes that compliance is
not likely to be reached, given existing affiliate/Plan efforts.
  78




---



##### 



Standard 11: Participation in Electronic Claims Routing Process
  A smaller controlled affiliate for which this standard applies pursuant to the Preamble section
of Exhibit A of the Controlled Affiliate License Agreement shall effectively and efficiently
participate in certain national programs from time to time as may be adopted by Member Plans for
the purposes of providing ease of claims processing for customers receiving benefits outside of
the controlled affiliates service area.
 National program requirements include:
 A.
    
    Electronic Claims Routing Process effective upon October 16, 2003; andB.
    
    Inter-Plan Medicare Advantage Program.
  1.
    
    Guidelines Subject to Immediate Termination
 1.1
    
    None
 2.
    
    Guidelines Subject to Mediation/Arbitration
 2.1
    
    Electronic Claims Routing Process effective upon October 16, 2003   A controlled
affiliate shall fully participate in the Electronic Claims Routing Process through
compliance with all Electronic Claims Routing Process Policies and Provisions and all
applicable Inter-Plan Programs Policies and Provisions.
 2.1.a
    
    Compliance determined by periodic reviews or audits and by reviews
initiated by evidence of problems.2.1.b
    
    Mediation/Arbitration shall be commenced only upon a finding by the
Inter-Plan Programs Committee (IPPC) that such action is warranted and a
referral of the matter from IPPC to the PPFSC and the BCBSA Board of Directors
for their action.
 2.2
    
    Inter-Plan Medicare Advantage Program  A Controlled Affiliate shall fully
participate in the Inter-Plan Medicare Advantage Program through compliance with all
Inter-Plan Medicare Advantage Program Policies and Provisions.
 2.2.a
    
    Compliance determined by periodic review or audits and by reviews initiated
by evidence of problems.
 79




---



##### 



Standard 11: Participation in Electronic Claims Routing Process
 2.2.b
    
    Mediation/Arbitration shall be commenced only upon a finding by IPPC
that such action is warranted and a referral of the matter from IPPC to PPFSC and
the BCBSA Board of Directors for their action.
 3.
    
    Guidelines Subject to Sanctions
 3.1
    
    None
 80




---



##### 



Standard 12: Participation in Master Business Associate Agreement by Smaller Controlled
Affiliate Licensees
  Effective April 14, 2003, all smaller controlled affiliates shall comply with the terms of the
Business Associate Agreement for Blue Cross and Blue Shield Licensees to the extent they perform
the functions of a business associate or subcontractor to a business associate, as defined by the
Business Associate Agreement.
  1.
    
    Guidelines Subject to Mediation/Arbitration
 1.1
    
    Business Associate Agreement for Blue Cross and Blue Shield Licensees  A controlled
affiliate shall fully comply with the terms and conditions of the Business Associate
Agreement for Blue Cross and Blue Shield Licensees (Attachment IX).
 1.1.a
    
    Compliance determined by certification of adherence to the terms and
conditions of the Business Associate Agreement for Blue Cross and Blue Shield
Licensees.1.1.b
    
    The Association shall commence Mediation/Arbitration or intervene in a
Mediation/Arbitration proceeding among Plans and/or controlled affiliate licensees
upon a finding by the Plan Performance and Financial Standards Committee that such
action is warranted and a referral of the matter from PPFSC to the BCBSA Board of
Directors for its action.
 81




---



##### 



Attachment I
Required Reports and Reporting Performance Measures
  
    
    Controlled Affiliates comprising less than fifteen percent (15%) of total member enrollment
of Plan and its licensed Controlled Affiliates (as reported on the BCBSA Quarterly Enrollment
Report excluding rider and freestanding coverage and treating an entity seeking licensure as
licensed), and not underwriting the indemnity portion of workers compensation insurance, are
required to submit the following reports.
 
    
    Quarterly Financial Report.
    
    Annual Financial Forecast.
    
    Quarterly Enrollment Report.
    
    Annual Health Risk-Based Capital (HRBC) Report as defined by the NAIC.
    
    BCBSA Controlled Affiliate Licensure Information Request
    
    Annual Certified Audit Report (if applicable  see Standard 2)
    
    Annual Statement as filed with State Insurance Department, if appropriate
    
    Biennial trade name and service mark usage materials, including disclosure material
    
    Insurance Department Examination Report*
    
    The sponsoring Plan(s) or controlled affiliate shall within 30 days of the decision notify
BCBSA of any changes to the governance and status of the controlled affiliate. Included
are changes in:
 
    
    bylaws**
    
    articles of incorporation**
    
    principal officers
    
    board composition
    
    Plan control
    
    risk acceptance
    
    direct delivery of medical care
    
    member growth exceeding fifteen percent (15%)of parents and other licensed Controlled Affiliates enrollment
    
    state license status
    
    operating area
 82




---



##### 



Attachment I
Required Reports and Reporting Performance Measures
 *
    
    Forward within 30 days of receipt by the controlled affiliate of the final report
accompanied by a formal comment thereon from the controlled affiliates CEO, if appropriate, to:
 
 **
    
    Include a red-lined version that clearly identifies the changes
  
    
    Incomplete/Inaccurate Reporting: A report will be considered incomplete/inaccurate if the
data submitted do not conform to published instructions.
    
    Late Reporting: A report will be considered late if it is received by BCBSA after the
published deadline or after an agreed upon extension.
    
    Non-submission: A report will be considered not submitted if data are not presented to
BCBSA within 30 days after the published deadline or after a reasonable agreed upon extension.
A report will also be considered not submitted if accuracy concerns or missing data, leading
to the misrepresentation of performance and inability to publish data, are not resolved within
30 days after the published deadline or an agreed-upon extension.
 83




---



##### 



Attachment II
Clarification of Requirements for Controlled Affiliates Annual Actuarial Certification
 The requirements applicable to the annual actuarial certification depend on the HRBC ratio of the
affiliate, and possibly also on the HRBC ratio of its sponsoring Primary Licensee, as of the
valuation date, i.e., the requirements for the 12/31/200X certification depend on the 12/31/200X
HRBC ratio(s).
  1.
    
    If the affiliate is required to submit an annual statutory actuarial certification to its
domiciliary regulatory authority, then that certification can be used to satisfy the
requirement, so long as it contains an explicit statement to the effect that it is intended to
be relied upon by the Blue Cross Blue Shield Association.
 2.
    
    If the affiliate is not required to submit an annual statutory actuarial certification to its
domiciliary regulatory authority, then it must submit a certification that complies with the
requirements delineated below that apply to an affiliate having an HRBC ratio below 375%, but
with one key exception: here the certification may be issued by any qualified actuary (as
defined below), which might include an employee of the affiliate or another company in its
corporate family.
 3.
    
    The annual certification is to be submitted to the Blue Cross Blue Shield Association by May
1 together with a copy of the (NAIC) Annual Statement.
 84




---



##### 



Attachment II
Clarification of Requirements for Controlled Affiliates Annual Actuarial Certification
 Requirements for: Larger Controlled Affiliates Whose Year-end (12/31) HRBC Ratio is at or Below
375% and That Do Not Qualify for Enterprise Monitoring, and; Smaller Controlled Affiliates Whose
Year-end (12/31) MCO-RBC Ratio is at or Below 375% and Whose Primary Licensees HRBC Ratio is at or
Below 375%
 1.
    
    The certification must be issued by a qualified, independent, actuary.
 a)
    
    Qualified means that the actuary is a member in good standing of the American Academy of
Actuaries and meets its Specific Qualification Standard for the Actuarial Certification in the
NAIC Health Annual Statement.b)
    
    An actuarys degree of independence from the entity about which he/she is opining is left
up to his/her professional judgement, except that the following are not considered
independent:
 i)
    
    any current employee, or retiree, of that entity or any of its affiliates;ii)
    
    any
consulting actuary acting in an interim staff capacity with that entity or any of its
affiliates.
 2.
    
    The annual certification must substantially comply with the standards prescribed in the
Actuarial Certification section of the NAIC Annual Statement Instructions applicable to HMDI
companies. For the 12/31/2000 certification, the 1999 HMDI Instructions shall govern;
subsequently, the 200X Health Instructions shall set the standards applicable to the
12/31/200X certification.
 3.
    
    The certification should contain an explicit statement that it was prepared for, and may be
relied upon by, the Blue Cross Blue Shield Association.
 4.
    
    The certification is to be submitted to the Blue Cross Blue Shield Association by May 1.
 85




---



##### 



Attachment III
Guaranty Association Alternatives & Evaluation Criteria
  1.
    
    Participate in the guaranty fund in each state in which it operates; or
 2.
    
    Establish another method approved by BCBSA which assures the payment of claim liabilities and
continuation of coverage in the event of a licensees insolvency.
  Payment of Claim Liabilities  Alternative Mechanisms
  
    
    Hold Harmless Agreement  Providers, by contract or statute, are prohibited from pursuing
subscribers for payment of outstanding claims in the event the licensee becomes insolvent.
Provisions must be made by the licensee to fund claim payments due to providers and
subscribers not covered by the hold harmless provisions.
 
    
    Voluntary inter-licensee arrangements  insurance or reinsurance agreements among a
consortium of licensees that have sufficient financial resources to meet the commitments of
the consortium and maintain compliance with the applicable license agreements. Must be
acceptable to state regulators.
 
    
    Reinsurance or a financial pledge  insurance or reinsurance agreements or pledge of
financial resources from a third party that has sufficient financial resources to meet the
commitments. Must be acceptable to state regulators.
 86




---



##### 



Attachment III
Guaranty Association Alternatives & Evaluation Criteria
 
    
    Subscriber Protection Account  establishment of a custodial account consisting of cash
and/or high-grade marketable securities in amount to cover insurance obligations of licensee.
Based on the SAFE-T Account concept developed by State Farm, the licensee would, with the
agreement of the insurance department, continue to admit the securities as assets of the
corporation and would have the ability to trade the securities as long as the value of the
custodial account was equal to the predetermined requirement. Also necessary is a written
agreement with the appropriate regulators indicating that the custodial account would be used
in the case of insolvency to fund the licensees claim liabilities. Only when all claims have
been paid, could the accounts assets be used for other liquidation expenses.
 Payment of Claim Liabilities  Evaluation Criteria
  1.
    
    The proposal must guarantee all of the licensees insured business (branded and unbranded) in
all jurisdictions in which it is licensed to do business. The mechanism does not need to include
FEP subscribers.2.
    
    The mechanisms are acceptable to all applicable regulators.3.
    
    The amount of required coverage is at least equal to the:
 
    
    Unpaid claim liability of the fully underwritten book of business; and
    
    2% of net subscription revenue of ASC/Cost Plus/AFA products; and
    
    the related loss
adjustment reserve for the above two classifications.
 4.
    
    The amount of proposed coverage must be annually certified by an actuary that it is a good and
sufficient provision for the stated obligation. If the controlled affiliate is included in the
Plan Performance Response Process, the certification must be made by an independent, qualified
actuary.5.
    
    Provisions must be made for the sufficiency of the coverage to be reviewed, and, if necessary,
adjusted at least annually. If the controlled affiliate is included in the Plan Performance
Response Process, the review and necessary adjustments will be required on a more frequent basis.
 87




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##### 



Attachment III  Guaranty Association Alternatives & Evaluation Criteria
 Continuation of Coverage  Alternative Mechanisms
  
    
    Voluntary inter-licensee arrangements  agreements among two or more licensees that have
sufficient financial resources to meet the commitments to continue coverage and maintain
compliance with the applicable license agreements. Must be acceptable to state regulators.
 
    
    Reinsurance  insurance or reinsurance agreements from a third party that has sufficient
financial resources to meet the commitments. Must be acceptable to state regulators.
 Continuation of Coverage  Evaluation Criteria
  
    
    Length of time coverage continuation is available  coverage continues from the date of a
BCBSA Member Plan vote to terminate license(s) or resignation, for a period at least as long
as the continuation of coverage period provided by the guaranty fund statute in the controlled
affiliates state.
 
    
    Who is offered continuation of coverage  all insured subscribers, excluding FEP
subscribers.
 
    
    What level of benefits must be offered  at least as high as would be offered if the
controlled affiliate participated in its state guaranty fund.
 88




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##### 



Attachment IV  Required Performance Reports and Certifications Schedule
 PERIOD
    
    
    DUE DATEA.
    
    BCBSA Controlled Affiliate Licensure Information Request (Triennial Review)
    
    
    Triennial (4)
    
    
    
    (1)B. Certifications:Procedures having been adopted to enforce code of conduct policies for employees,
officers and Directors (See Standard 6A)
    
    
    Triennial (4)
    
    
    
    (1)By a qualified actuary of adequate accounting for unpaid claim liability reserve (See
Standard 6H)
    
    
    Annual
    
    
    
    5/1(3)Distribution of BCBSA License Compliance Letter and attachments to controlled
affiliate Board members (See Standard 6A)
    
    
    Triennial (4)
    
    
    
    (1)C.
    
    Service Mark use and disclosure information (See Standards 4 and 7)
    
    
    Biennial
    
    
    
    (1)D.
    
    Changes in Governance and Status
    
    
    Ongoing
    
    
    
    (2)E.
    
    Quarterly Financial Report-
    
    All financial statements and required schedules, except the reconciliation of
GAAP net worth to SAP net worth
    
    

1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
    
    
    
    5/5
8/4
11/4
2/28-
    
    Starting first quarter, 2004 and quarterly thereafter, a reconciliation of GAAP
net worth to SAP net worth (only applicable to a risk-assuming licensee that
files its Quarterly Financial Report on a GAAP basis)
    
    
    1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
    
    
    
    5/15
8/15
11/15
2/28F.
    
    Semi-annual  Health Risk-Based Capital (HRBC) Report as defined by the
NAIC.
    
    
    Annual filings
    
    
    
    3/15Mid-year filings
    
    
    
    8/15
  89




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##### 



Attachment IV  Required Performance Reports and Certifications Schedule
 PERIOD
    
    
    DUE DATEG.
    
    Annual Financial Forecast
    
    Annual
    
    
    2/28H.
    
    Annual Certified Audit Report (See Standard 6(H))
    
    Annual (5)
    
    
    5/1 (3)I.
    
    Insurance Department Examination Report
    
    Within 30 days of controlled
affiliate receipt of final reportJ.
    
    Annual Statement filed with State Insurance Department
    
    Annual
    
    
    5/1 (3)K.
    
    Quarterly Enrollment ReportExpanded Medicare and Expat reporting introduced
    

1st Qtr, 2006
    
    
    4/30Expanded National Accounts and Ancillary Products reporting introduced
    

2nd Qtr, 2006
    
    
    7/313rd Qtr, 2006
    
    
    10/314th Qtr, 2006
    
    
    1/311st Qtr, 2007
    
    
    4/302nd Qtr, 2007
    
    
    7/31Expanded Consumer Driven Health Plan reporting introduced
    
    3rd Qtr, 2007
    
    
    10/314th Qtr, 2007
    
    
    1/31L.
    
    A controlled affiliate subject to Standard 6(D) is required to 1) provide an
unconditional and irrevocable letter of credit or other guarantee of payment
satisfactory to BCBSA, 2) waive rights under certain national account programs,
and 3) waive rights to challenge the federal super-priority status held by the
controlled affiliate for certain federal programs
    
    Quarterly
as of 12/31/93
    
    
    N/A
  (1)
    
    Due date included with information request; typically first week in August.(2)
    
    Due within 30 days of the decision to change.(3)
    
    Extension up to June 1 only with prior agreement of BCBSA.(4)
    
    Controlled Affiliates may be required to respond to a BCBSA Controlled Affiliate Licensure Information Request on
an annual basis as required under Standard 6A.(5)
    
    If applicable, see Standard 6(H).
 90




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##### 



Attachment V  Sanction Protocols  Reports and Records
  1.
    
    BCBSA will initially work directly with Plans to resolve these situations.2.
    
    If chronic problem persists, a letter will be sent to the Plan CEO describing the situation.3.
    
    If no response or resolution, Committee requests meeting with Plan CEO.4.
    
    If necessary, the Committee and BCBSA Board would still have the option to move the Plan to
mediation/arbitration. (The Plans Board will be notified in the Triennial Compliance Letter of
chronic late, inaccurate and/or non-reporting if Mediation/Arbitration is approved by BCBSA Board
of Directors.)
 91




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##### 



Attachment VI  Required Performance Reports and Certifications Schedule
 PERIOD
    
    
    DUE DATEA.
    
    BCBSA Controlled Affiliate Licensure Information Request (Triennial Review)
    
    
    Triennial (4)
    
    
    
    (1
    )B.
    
    Opinion of Loss Reserve and Loss Adjusting Expense Reserves and Actuarial Report
    
    
    Annual
    
    
    
    5/1
    (2)C.
    
    Property Casualty Risk-Based Capital Workpapers
    
    
    Annual
    
    
    
    5/1
    (2)D.
    
    Annual Financial Forecast
    
    
    Annual
    
    
    
    2/28E.
    
    Annual Certified Audit Report
    
    
    Annual
    
    
    
    5/1
    (2)F.
    
    Annual Statement filed with State Insurance Department
    
    
    Annual
    
    
    
    5/1
    (2)G.
    
    Quarterly Financial Report
    
    All financial statements and required schedules, except the reconciliation of GAAP net
worth to SAP net worth
    
    

1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
    
    
    
    5/5
8/4
11/4
2/28
    
    Starting first quarter, 2004 and quarterly thereafter, a reconciliation of GAAP net worth to
SAP net worth (only applicable to a risk-assuming licensee that files its Quarterly Financial
Report on a GAAP basis)
    
    
    1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
    
    
    
    5/15
8/15
11/15
2/28H.
    
    Quarterly Estimate of Risk Based Capital for Property and Casualty Insurers Worksheet
    
    

1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
    
    
    
    5/15
8/15
11/15
3/15I.
    
    Insurance Department Examination Reports
    
    
    Within 30 days of
controlled affiliate
receipt of final report.J.
    
    Changes in Independent Rating and All Rating Reports
    
    
    Ongoing
    
    
    
    (3
    )K.
    
    Quarterly Enrollment ReportExpanded Medicare and Expat reporting introduced
    
    
    1st Qtr, 2006
    
    
    
    4/30Expanded National Accounts and Ancillary Products reporting introduced
    
    
    2nd Qtr, 2006
    
    
    
    7/313rd Qtr, 2006
4th Qtr, 2006
1st Qtr, 2007
2nd Qtr, 2007
    
    
    
    10/31
1/31
4/30
7/31Expanded Consumer Driven Health Plan reporting introduced
    
    
    3rd Qtr, 2007
4th Qtr, 2007
    
    
    
    10/31
1/31L.
    
    Changes in Governance and Status
    
    
    Ongoing
    
    
    
    (3
    )
 (1)
    
    Due date included with information request; typically
first week in August.(2)
    
    Extension up to June 1 only with prior
agreement of BCBSA.(3)
    
    Within 30 days of receipt of notice.(4)
    
    Controlled Affiliates may be required to respond to a BCBSA Controlled Affiliate Licensure
Information Request on an annual basis.
 
 92




---



##### 



Attachment VII  To Guidelines To Administer The Controlled Affiliate Standards
 Definition of Local Net Revenue & Combined Local Net Revenue, National Net Revenue, Combined
National Net Revenue, and Combined National Enrollment Page 1 of 4
 I. Local Revenues
  Local Net Revenue for Risk Assuming entities is defined as:
 The sum of
Branded and
Unbranded:
    
    
    
    Revenue for all Health Insurance Premiums for all lines of business as listed in the BCBSA Quarterly Financial Report
    
    Revenue from delivery of hospital services
    
    Revenue from the sale of health care products
    
    Revenue from delivery of medical (professional) services
    
    Administrative Service Contract (ASC) Premium Equivalents
    
    Administrative Service Only (ASO) Premium Equivalents
    
    Ceded health premium under reinsurance agreements
    
    All other health revenue, as listed in the BCBSA Quarterly Financial ReportLess:
    
    
    
    Revenue for out-of-service-area national account contracts
    
    Revenue for out-of-service-area FEP contracts
    
    Assumed health premium under reinsurance arrangementsAdjusted for:
    
    
    
    Inter-company eliminations
 93




---



##### 



Attachment VII
To Guidelines To Administer The Controlled Affiliate Standards
 Definition of Local Net Revenue & Combined Local Net Revenue, National Net
Revenue, Combined National Net Revenue, and Combined National Enrollment
Page 2 of 4
 Local Net Revenue for Non-Risk Assuming entities is defined as:
 The sum of
Branded and
Unbranded:
    
    
    
    Administrative Service Only (ASO) premium equivalents
    
    Administrative Service Contract (ASC) Premium Equivalents
    
    All other health revenue, as listed in the BCBSA Quarterly Financial ReportAdjusted for:
    
    
    
    Inter-company eliminations
 Combined Local Net Revenue is defined as:
 1 2
 
 1
    
    Excludes revenue from Medicare, Medicaid, and CHAMPUS fiscal intermediary
contracts and from CHAMPUS risk contracts where the Plan demonstrates to the satisfaction
of BCBSA that government regulations practically prevent the use of the Marks.2
    
    The term hospital services shall be interpreted broadly and shall include,
without limitation, any services or products provided by a hospital. Hospital means (A)
an institution that is engaged in providing, by or under the supervision of physicians, to
inpatients, (i) diagnostic services and therapeutic services for medical diagnosis,
treatment, and care of injured, disabled, or sick persons, or (ii) rehabilitation services
for the rehabilitation of injured, disabled, or sick persons; or (B) any facility or
institution engaged in the delivery of health care services that is located within or
adjacent to, or is a controlled affiliate of, an institution described in (A). The term
health care products shall be interpreted broadly and shall include, without limitation,
tangible health-related goods, other than health care services, for which a Plan provides
or administers reimbursement on behalf of subscribers, including but not limited to,
pharmaceuticals, biologics, and medical equipment or devices. The term medical
(professional) services shall be interpreted broadly and shall include, without
limitation, services provided by a physician or other professional healthcare provider to
identify and treat a members illness or injury, which are consistent with the symptoms,
diagnosis, and treatment of the members condition, in accordance with the standards of
good medical practice. 94




---



##### 



Attachment VII
To Guidelines To Administer The Controlled Affiliate Standards
 Definition of Local Net Revenue, Combined Local Net Revenue, National Net Revenue, Combined
National Net Revenue, and Combined National Enrollment Page 3 of 4
 II. National Revenues and/or National Enrollment
  National Net Revenue for Risk Assuming entities is defined as:
 The sum of
Branded and
Unbranded:
    
    
    
    Revenue for all Health Insurance Premiums for all lines of business as listed in the BCBSA Quarterly Financial Report
    
    Revenue from delivery of hospital services
    
    Revenue from the sale of health care products
    
    Revenue from delivery of medical (professional) services
    
    Administrative Service Contract (ASC) Premium Equivalents
    
    Administrative Service Only (ASO) Premium Equivalents
    
    Ceded health premium under reinsurance agreements
    
    All other health revenue as listed in the BCBSA Quarterly Financial ReportLess:
    
    
    
    Assumed health premium under reinsurance arrangementsAdjusted for:
    
    
    
    Inter-company eliminations
 National Net Revenue for Non-Risk Assuming entities is defined as:
 The sum of
Branded and
Unbranded:
    
    
    
    Administrative Service Only (ASO) Premium Equivalents
    
    Administrative Service Contract (ASC) Premium Equivalents
    
    All other health revenue as listed in the BCBSA Quarterly Financial ReportAdjusted for:
    
    
    
    Inter-company eliminations
 95




---



##### 



ATTACHMENT VII
 Definition of Local Net Revenue, Combined Local Net Revenue, National Net Revenue, Combined
National Net Revenue, and Combined National Enrollment Page 4 of 4
 Combined National Net Revenue is defined as:
 1 2
 Combined National Enrollment
 The sum of
Branded and
Unbranded:
    
    
    
    Administrative Service Only (ASO) Members
    
    Administrative Service Contract (ASC) Members
    
    All other health membership as listed in the BCBSA Quarterly Enrollment Report.
  
 1
    
    Excludes revenue from Medicare, Medicaid and CHAMPUS fiscal intermediary
contracts and from CHAMPUS risk contracts where the Plan demonstrates to the satisfaction of
BCBSA that government regulations practically prevent the use of the Marks.2
    
    The term Hospital Services shall be interpreted broadly and shall include, without
limitation, any services or products provided by a hospital. Hospital means (A) an
institution that is engaged in providing, by or under the supervision of physicians, to
inpatients, (i) diagnostic services and therapeutic services for medical diagnosis, treatment,
and care of injured, disabled, or sick persons, or (ii) rehabilitation services for the
rehabilitation of injured, disabled, or sick persons; or (B) any facility or institution
engaged in the delivery of health care services that is located within or adjacent to, or is
an Affiliate*** of, an institution described in (A). The term health care products shall be
interpreted broadly and shall include, without limitation, tangible health-related goods,
other than health care services, for which a Plan provides or administers reimbursement on
behalf of subscribers, including but not limited to, pharmaceuticals, biologics, and medical
equipment or devices. The term medical (professional) services shall be interpreted broadly
and shall include, without limitation, services provided by a physician or other professional
healthcare provider to identify and treat a members illness or injury, which are
consistent with the symptoms, diagnosis, and treatment of the members condition, in
accordance with the standards of good medical practice. 96




---



##### 



Attachment VIII  Required Performance Reports and Certifications Schedule For  Controlled Affiliates Whose Primary Business is Government Non-Risk
 PERIOD
    DUE DATEA. BCBSA Affiliate Licensure Information Request
    
    
    Triennial (4)
    
    
    (1)B. Risk-Based Capital Workpapers, if applicable
    
    
    Annual
    
    
    5/1 (2)C. Annual Certified Audit Report
    
    
    Annual
    
    
    5/1 (2)D. Annual Statement filed with State Insurance Department, if applicable
    
    
    Annual
    
    
    5/1 (2)E. Insurance Department Examination Reports, if applicable
    
    
    As Applicable
    
    
    Within 30 daysof ControlledAffiliate receiptof final reportF. Changes in Governance and Status
    
    
    Ongoing
    
    
    (3)
 (1)
    
    Due date included with information request; typically first week in
August.(2)
    
    Extension up to June 1 only with prior agreement of BCBSA.(3)
    
    Within 30 days of receipt of notice; include red-lined version.(4)
    
    Controlled Affiliates may be required to respond to a BCBSA Controlled Affiliate Licensure
Information Request on an annual basis. 
 97




---



##### 



Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees
 BUSINESS ASSOCIATE AGREEMENT
FOR BLUE CROSS AND BLUE SHIELD LICENSEES
      98




---



##### 



Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 2 of 22
 A.
    
    Privacy and Security of Protected Health Information.
 1. Permitted Uses and Disclosures
 Party as Business Associate
 Party as Subcontractor
 99




---



##### 



Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 3 of 22
  2. Other Permitted Uses and Disclosures.
 Partys Operations
 100




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 4 of 22
   Data Aggregation
 Disclosure to Subcontractors and Agents
 3. Information Safeguards.
 4. Security Incident Reporting.
 5. Subcontractors
 101




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 5 of 22
 B. Protected Health Information Access, Amendment and Disclosure Accounting.
 1. Access.
 2. Amendment.
 3. Disclosure Accounting.
 4. Inspection of Books and Records.
 C. Breach of Obligations.
 1. Reporting.
 102




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 6 of 22
  2. Dispute Resolution.
 D. Termination of Agreement.
 1. Right to Terminate a Scheduled Agreement.
 103




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 7 of 22
 2.
Termination of this Agreement.
   3.
Termination of this Agreement with Respect to a Scheduled
Agreement.
 4.
Obligations upon Termination of a Scheduled Agreement.
 5.
Continuing and Security Privacy Obligation.
 104




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 8 of 22
 E. Indemnification.
 1.
General.
  2.
Basic Principles.
   105




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 9 of 22
  3.
Notice of Claim.
 4.
Cooperation.
 5.
Right to Tender or Undertake Defense.
 Undertaking of Defense by Indemnitor
 106




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 10 of 22
 Undertaking of Defense by Indemnitee
 Resolution of Claims
 6.
Disputes.
 7.
Delivery of Notices.
 107




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 11 of 22
 F. Compliance with Standard Transactions.
 1.
Compliance Date.
 2.
Requirement of Compliance.
 3.
Trading Partner Provisions.
     108




---



##### 



Attachment IX
Business Associate Agreement For Blue Cross and Blue Shield Licensees
Page 12 of 22
 G.
Gramm-Leach-Bliley Compliance.
 H. General Provisions.
 1.
Amendment to Agreement.
 2.
Conflicts.
 3.
State Privacy Law Requirements.
 4.
No Third-Party Beneficiaries.
 5.
Interpretation.
 6.
Notices.
 109




---



##### 



Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 13 of 22
 SCHEDULE A
   1.
    
    All Blue Cross License Agreements Between BCBSA and Primary Licensees2.
    
    All Blue Cross Controlled Affiliate License Agreements Between BCBSA and Controlled
Affiliates of Primary Licensees3.
    
    All Blue Shield License Agreements Between BCBSA and Primary Licensees4.
    
    All Blue Shield Controlled Affiliate License Agreements Between BCBSA and Controlled
Affiliates of Primary Licensees5.
    
    All ITS License Agreements Between BCBSA and Licensees6.
    
    All Blue Quality Centers for Transplant Plan Participation Agreements Between BCBSA
and Licensees7.
    
    All Data Center Inter-Plan Operating Agreements Among Licensees for the Medicare
Program8.
    
    Data Processing Inter-Plan Operating Agreements Among Licensees for the Medicare
Program9.
    
    All Away From Home Care Guest Membership Agreements Between BCBSA and Licensees10.
    
    All Government Business Services Contracts Between BCBSA and Licensees11.
    
    All Service Benefit Plan (FEP) Participation Agreements Between BCBSA and Licensees12.
    
    BlueCard Worldwide Contract Between BCBSA and Blue Cross and Blue Shield of South Carolina13.
    
    All National Account Servicing Agreements Between Blue Cross and Blue Shield of Louisiana
and Other Licensees
 110




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##### 



Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 14 of 22
 14.
    
    Identification Card Production Agreement Between Blue Cross and Blue Shield of Vermont and
Associated Hospital Service of Maine d/b/a Blue Cross and Blue Shield of Maine15.
    
    The Following Agreements Between Blue Cross and Blue Shield of Kansas City and Other
Licensees:
 (i)
    
    Cost Reimbursement Agreement with Triple-S, Inc.(ii)
    
    National Account Servicing Plan Agreement with Blue Cross and Blue Shield of Kansas(iii)
    
    Custom Arrangements for BlueCard National Accounts with Empire Blue Cross Blue Shield(iv)
    
    All Alternate Control Licensee Designation Forms and Similar Agreements with Other
Licensees(v)
    
    All Participation Request Agreements and Similar Agreements with Other Licensees for
Servicing Dairy Farmers of America, Inc.(vi)
    
    Participating/Servicing Plan Master Agreement (NASCO) for National Accounts with Blue
Cross and Blue Shield of Michigan(vii)
    
    Servicing/Participating Plan Agreement (NASCO) and National Account HMO Participation
Agreement with Community Insurance Company d/b/a Anthem Blue Cross and Blue Shield(viii)
    
    National Accounts Lead Agreement (NASCO) and Notification of National Account
BlueCard Sale with Blue Cross and Blue Shield of Massachusetts(ix)
    
    Participating Plan Agreement for National Accounts (NASCO) with CareFirst of Maryland,
Inc.(x)
    
    All National Account ITS/BlueCard Custom Arrangements with Other Licensees(xi)
    
    All Administrative Services Agreements with Other Licensees(xii)
    
    Network Access and Joint Operating Agreement with Premier Health, Inc. and Blue Cross
and Blue Shield of Kansas, Inc.(xiii)
    
    Participating Payor Transaction Submission Agreement with Administrative Services of
Kansas, Inc.
 16.
    
    All National Account Servicing Agreements Between Blue Cross & Blue Shield of Wisconsin and
Other Licensees17.
    
    All Alternate Control Licensee Designation Agreements and Similar Agreements Between Blue
Cross & Blue Shield of Wisconsin and Other Licensees
 111




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##### 



Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 15 of 22
 18.
    
    Information Systems Services Agreement between Blue Cross Blue Shield of South Carolina and
Blue Cross & Blue Shield of Wisconsin, dated as of August 23, 199619.
    
    All National Account Servicing Agreements Between Horizon Blue Cross and Blue Shield of New
Jersey and Other Licensees20.
    
    Reciprocal Dental Network Agreement Between Blue Cross and Blue Shield of Rhode Island and
Blue Cross and Blue Shield of Massachusetts, Inc.21.
    
    [Intentionally Omitted.]22.
    
    [Intentionally Omitted.]23.
    
    [Intentionally Omitted.]24.
    
    Complementary Insurance Agreement Regarding Data Transfer Between Blue Cross and Blue
Shield of Vermont and Anthem Health Plans of New Hampshire, Inc.25.
    
    Administrative Services Agreement for the New England Managed Care Initiative Between
Anthem Health Plans of Maine, Inc., Anthem Health Plans of New Hampshire, Inc., Anthem Health
Plans, Inc., Blue Cross and Blue Shield of Massachusetts, Blue Cross and Blue Shield of
Vermont, and Blue Cross and Blue Shield of Rhode Island26.
    
    All National Account Servicing Agreements Between Empire Blue Cross Blue Shield and Other
Licensees27.
    
    Joint Operating Agreement Between the Pennsylvania Blue Shield, Capital Blue Cross dated
January 1, 1976; All Addenda and Amendments Thereto (the JOA); and All Agreements Between the
Parties Relating to Termination of the Joint Business Under the JOA28.
    
    January 1, 1984 Agreement Between Pennsylvania Blue Shield, Capital Blue Cross and Blue
Cross of Northeastern Pennsylvania for the Establishment of the Comp I Center, and All
Amendments Thereto29.
    
    Administrative Services Agreement for Medicare Crossover Data Between Capital Blue Cross
and Pennsylvania Blue Shield Dated January 23, 199530.
    
    Service Agreement Between Health Benefits Management, Inc., Pennsylvania Blue Shield,
Capital Blue Cross and the Shared Services Center, Dated September 15, 198731.
    
    Administrative Services Agreement Regarding POS Programs Among Synertech Health Systems
Solutions, Inc., Capital Blue Cross and Highmark, Effective January 1, 199732.
    
    Agreement Between
Highmark and NCAS Pennsylvania (undated)
 112




---



##### 



Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 16 of 22
 33.
    
    Electronic Coordination of Medicare Benefits Agreement Between Highmark, Inc. d/b/a Veritus
Medicare Services and Capital Blue Cross, Dated October 26, 1999, Together With Amendatory
Rider Effective April 1, 200234.
    
    Electronic Coordination of Medicare Benefits Agreement Between Highmark, Inc. d/b/a
HGSAdministrator and Capital Blue Cross dated May 23, 200235.
    
    Members Agreement Between Pennsylvania Blue Shield, Capital Blue Cross and The Caring
Foundation of Pennsylvania, Dated August 13, 199336.
    
    Amendment of Purchase Service Agreement Between Capital Blue Cross and Blue Cross of
Western Pennsylvania, Effective October 1, 198537.
    
    Agreement for Precertification Program, Between Capital Blue Cross and Health Benefits
Management, Inc., d/b/a the Precertification Center, Effective January 1, 1994, Together With
Amendatory Rider Effective January 1, 199738.
    
    Medicare+Choice Administrative Services Agreement Between Capital Blue Cross and Keystone
Health Plan Central Effective as of January 1, 199939.
    
    Hospital and Related Health Care Benefits For Keystone Health Plan, Inc. Dated January 1,
198740.
    
    Amended Administrative Services Agreement Between Capital Advantage Insurance Company and
Trans-General Casualty Insurance Company, Inc., Effective January 1, 199641.
    
    Profit Sharing Agreement Between Capital Advantage Insurance Company and Trans-General
Casualty Insurance Company, Inc., Effective as of January 1, 1986 and Amended as of January 1,
199842.
    
    Agreement Between Trans-General Life Insurance Company and Consolidated Benefits, Inc.
Dated as of January 1, 199943.
    
    Confidentiality and Indemnification Agreement in Favor of Capital Blue Cross,
Pennsylvania Blue Shield and Capital Advantage Insurance Company Executed by the Highmark
Life & Casualty Group Inc. and Dated March 3, 200044.
    
    Dental Agency Agreement Between United Concordia Companies, Inc., United Concordia Life and
Health Insurance Company and United Concordia
Dental Plan of Pennsylvania Inc., on the one hand, and Capital Blue Cross, on the other, Dated
June 1, 199845.
    
    License Agreement for the Shared Automated Major Medical System, Among Capital Blue Cross,
Blue Cross of Northeastern Pennsylvania, Blue Cross of Western Pennsylvania, and PBS, Effective
July 1, 1983
 113




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Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 17 of 22
 46.
    
    Guaranty Agreement between Capital Blue Cross, Hospital Services Association of
Northeastern Pennsylvania (d/b/a Blue Cross of Northeastern Pennsylvania), Independence Blue
Cross and Highmark, Inc. Dated October 2, 200047.
    
    All Custom Blue Card Arrangements Between Blue Cross Blue Shield of Michigan and Other
Licensees48.
    
    All Participating Plan Agreements Between Blue Cross Blue Shield of Michigan and Other
Licensees49.
    
    All National Accounts Servicing/Participating Plan Agreements Between Blue Cross and Blue
Shield of Minnesota and Other Licensees50.
    
    All National Account Servicing Plan Agreements Between Blue Cross and Blue Shield of
Arizona, Inc. and Other Licensees51.
    
    All Agreements Related to Medicare Supplemental Claims Payments and Medicare Crossover
Services Between CareFirst Blue Cross Blue Shield and Other Licensees52.
    
    Co-Branding Agreement Between CareFirst Blue Cross Blue Shield and CareFirst of Maryland,
Inc.53.
    
    All Par Plan Agreements between Independence Blue Cross (and all of its applicable
subsidiaries) and Other Licensees54.
    
    All Control Plan Agreements between Independence Blue Cross (and all of its applicable
subsidiaries) and Other Licensees55.
    
    The Joint Operating Agreement between Pennsylvania Blue Shield and Independence Blue Cross
Dated January 1, 197656.
    
    The Independence Blue Cross and Pennsylvania Blue Shield System Use Agreement effective
January 1, 200057.
    
    The Independence Blue Cross and Pennsylvania Blue Shield 1999 Agreement for Electronic
Coordination of Medicare Benefits58.
    
    The Independence Blue Cross and Pennsylvania Blue Shield Consulting Services Agreement
Dated May 7, 200259.
    
    The Independence Blue Cross and Pennsylvania Blue Shield Major Medical Claims Processing
Agreement Dated October 1, 199560.
    
    All National Account Servicing Agreements Between Blue
Cross and Blue Shield of Alabama and other Licensees61.
    
    All Participating Plan Agreements Between Blue Cross and Blue Shield of Alabama and Other
Licensees
 114




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Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 18 of 22
 62.
    
    All Custom Blue Card Arrangements Between Blue Cross and Blue Shield of Alabama and Other
Licensees63.
    
    All Custom National Account Arrangements Between Blue Cross and Blue Shield of Alabama and
Other Licensees64.
    
    All Control Plan Agreements Between Blue Cross and Blue Shield of Alabama and Other
Licensees65.
    
    All Service Agreements between Blue Cross and Blue Shield of Alabama or its affiliates, and
Other Licensees with respect to the Medicare Program66.
    
    Trading Partner Medicare Part A Service Agreement between Capital Blue Cross and Blue Cross
and Blue Shield of Florida, Inc.67.
    
    All Custom ITS Arrangements Between Wellmark, Inc. (and/or all its applicable subsidiaries)
and Other Licensees68.
    
    Highmark Inter-Plan Network Management Information System License Agreement between
Highmark, Inc. and Anthem Insurance Companies, Inc.69.
    
    All NASCO Par Plan Servicing Agreements Between Blue Cross and Blue Shield of Alabama and
Other Licensees70.
    
    Master Software Maintenance Agreement Between Inter-Data Business Systems and Blue Cross of
Minnesota71.
    
    Cost Reimbursement Agreement Between Blue Cross of Minnesota and Triple-S, Inc.72.
    
    Master Software Maintenance Agreement for Inter-Data Business Systems (IBS) Between
WellChoice, Inc.(and/or all of its applicable subsidiaries) and Participating Licensees73.
    
    All Alternate Control Licensee Designation Agreements and Similar Agreements Between
WellChoice, Inc. (and/or all of its applicable subsidiaries) and Other Licensees74.
    
    All Participating Plan Agreements for National Accounts Between WellChoice, Inc. (and/or
all of its applicable subsidiaries) and Other Licensees75.
    
    All Par Plan Agreements Between WellChoice, Inc. (and/or all of its applicable
subsidiaries) and Other Licensees76.
    
    All Control Plan Agreements Between WellChoice, Inc. (and/or all of its applicable
subsidiaries) and Other Licensees77.
    
    All Custom Blue Card Arrangements Between WellChoice, Inc. (and/or all of its applicable
subsidiaries) and Other Licensees
 115




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Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 19 of 22
 78.
    
    All Agreements Related to Medicare Supplemental Claims Payments and Medicare Crossover
Services Between WellChoice, Inc.(and/or all of its applicable subsidiaries) and Other
Licensees79.
    
    All Custom ITS Arrangements Between WellChoice, Inc. (and/or all of its applicable
subsidiaries) and Other Licensees80.
    
    All Custom ITS and Custom BlueCard Arrangements Between Highmark and Other Licensees81.
    
    All National Account Servicing Agreements Between Highmark and Other Licensees82.
    
    All Alternate Control Licensee Designation Agreements and Similar Agreements Between
Highmark and Other Licensees83.
    
    All Administrative Service Agreements Between Highmark and Other Licensees84.
    
    All Information Systems Services Agreements Between Highmark and Other Licensees85.
    
    All System Use Agreements Between Highmark and Other Licensees86.
    
    All Joint Operating Agreements Between Highmark and Other Licensees87.
    
    All Government Business Service Agreements Between Highmark and Other Licensees88.
    
    All Consulting/Training Services Agreements Between Highmark and Other Licensees89.
    
    All Inter-Plan Network Management Information System License Agreements Between Highmark
and Other Licensees90.
    
    All Service Agreements Between Highmark and Mountain State Blue Cross Blue Shield91.
    
    All Electronic Media/Claims Processing Agreements Between Highmark and Other Licensees92.
    
    The Crossover Service Agreement Between Noridian Mutual Insurance Company and Blue Cross
and Blue Shield of Arizona, Inc.93.
    
    All custom Blue Card Agreements or Participating Agreements Between Blue Cross and Blue
Shield of Nebraska and Other Licensees94.
    
    All Custom Blue Card Arrangements Between HealthNow New York, Inc. d/b/a BlueCross
BlueShield of Western New York and BlueShield of Northeastern New York, and Other Licensees
 116




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Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 20 of 22
 95.
    
    All Participating Plan Agreements Between HealthNow New York, Inc. d/b/a BlueCross
BlueShield of Western New York and BlueShield of Northeastern New York, and Other Licensees96.
    
    All Control Plan Agreements Between HealthNow New York, Inc. d/b/a BlueCross BlueShield of
Western New York and BlueShield of Northeastern New York, and Other Licensees97.
    
    All Agreements Related to Medicare Supplemental Claims Payment and Medicare Crossover
Services Between HealthNow New York, Inc. d/b/a BlueCross BlueShield of Western New York and
BlueShield of Northeastern New York, and Other Licensees98.
    
    Participating Service Plan Master Agreement (NASCO) for National Accounts Blue Cross and
Blue Shield of Michigan and HealthNow New York, Inc.99.
    
    All Account Specific Agreements Between Blue Cross Blue Shield of Michigan and Other
Licensees100.
    
    All National Account Servicing Agreements Between Blue Cross and Blue Shield of Florida
and Other Licensees101.
    
    Custom ITS Point of Service Agreements Between Blue Cross and Blue Shield of Illinois and
Other Licensees102.
    
    Local Area Processing Point of Service Agreements Between Blue Cross and Blue Shield of
Illinois and Other Licensees103.
    
    Pharmacy Benefits Management Agreement Between The Regence Group, Regence Blue Shield of
Idaho, Blue Cross Blue Shield of Michigan and Blue Care Network of Michigan104.
    
    All Control Plan Agreements Between Blue Cross Blue Shield of Delaware, Inc. and Other
Licensees.105.
    
    All Par Plan Agreements Between Blue Cross Blue Shield of Delaware, Inc. and Other
Licensees106.
    
    All Agreements Related to Medicare Supplement Claims Payment and Medicare Crossover
Services Between Blue Cross Blue Shield of Delaware, Inc. and Other Licensees107.
    
    All National Account ITS/BlueCard Arrangements Between Blue Cross Blue Shield of Delaware,
Inc. and Other Licensees108.
    
    All National Account/ITS Custom BlueCard Arrangements Between Blue Cross Blue Shield of
Delaware, Inc. and Other Licensees
 117




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Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 21 of 22
 109.
    
    All Non-Blue Card Arrangements Between Blue Cross Blue Shield of Delaware, Inc. and Other
Licensees for the Administration and Servicing of Specific Multi-State Accounts Including, but
not limited to, MBNA and Nemours110.
    
    Participating/Servicing Plan Agreement for National Accounts (NASCO) with CareFirst of
Maryland, Inc., Blue Cross and Blue Shield of Michigan and any Other Applicable Licensees111.
    
    All Agreements for National Account HMO Participation Between Blue Cross Blue Shield of
Delaware, Inc., and Other Licensees112.
    
    All Par Plan Agreements Between WellPoint, Inc. (and all of its applicable subsidiaries)
and Other Licensees113.
    
    All Control Plan Agreements Between WellPoint, Inc. (and all of its applicable
subsidiaries) and Other Licensees114.
    
    All Agreements for National Accounts Between WellPoint, Inc. (and all of its applicable
subsidiaries) and Other Licensees
 118




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Attachment IX  Business Associate Agreement For Blue Cross and Blue Shield Licensees  Page 22 of 22
 Schedule B
 Security Incidents
 The Security Rule defines a Security Incident as an attempted or successful unauthorized access,
use, disclosure, modification or destruction of information or interference with system operations
in an information system, involving electronic Protected Health Information (e-PHI) that is
created, received maintained or transmitted by or on behalf of a Party.Since the Security Rule includes attempted unauthorized access, use, etc., each Party needs to have
notice of attempts to bypass electronic security mechanisms. The Parties recognize and agree that
the significant number of meaningless attempts to, without authorization, access, use, disclose,
modify or destroy e-PHI will make a real-time reporting requirement formidable for all the Parties.
Therefore, the Parties agree to the following reporting procedures for Security Incidents that
result in unauthorized access, use, disclosure, modification or destruction of information or
interference with system operations (Successful Security Incidents) and for Security Incidents
that do not so result (Unsuccessful Security Incidents).For Unsuccessful Security Incidents, each Party agrees that this Schedule B constitutes notice from
all other Parties of such Unsuccessful Security Incidents. By way of example, the Parties consider
the following to be illustrative of Unsuccessful Security Incidents when they do not result in
unauthorized access, use, disclosure, modification, or destruction of e-PHI or interference with an
information system:
 1.
    
    Pings on a Partys firewall,2.
    
    Port scans,3.
    
    Attempts to log on to a system or enter a database with an invalid password or
username, and4.
    
    Denial-of-service attacks that do not result in a server being taken off-line.5.
    
    Malware (e.g., worms, viruses)
  119