Opinion ID: 1923285
Heading Depth: 1
Heading Rank: 4

Heading: Nature of Challenged Contract.

Text: Footnotes, supra, record certain charges and list certain suppliers of services excluded under the Blue Cross-Blue Shield plans (footnotes 1 and 2) and record certain charges and list certain suppliers of services included under the Extended Benefits Endorsement (footnote 3). It is demonstrated that the indemnity supplied by the Endorsement covers charges of and services supplied by non-participants in the basic Blue Cross and Blue Shield contracts as well as extending by cash indemnity certain of the basic benefits,and unrelated to the presence of surplus funds after the discharge of AHS obligation under the Blue Cross and Blue Shield contracts. Is this Extended Benefits Endorsement a contract of insurance? The authorities are substantially agreed that insurance may be defined as an agreement by which one person for a consideration promises to pay money or its equivalent,    to another on the destruction, death, loss, or injury of someone or something by specified perils. 29 Am.Jur., Insurance § 3. Our 24 M.R.S.A. § 1 defines a contract of insurance as:    an agreement by which one party for a consideration promises to pay money or its equivalent or to do some act of value to the assured upon the destruction or injury of something in which the other party has an interest. In simpler terms the court in Re Hilpert's Estate, 165 Misc. 430, 300 N.Y.S. 886 (1937) defined insurance as: [A] simple contract whereby the insurer in return for a stated consideration agreed, upon the happening of a specified event to pay the insured a fixed or ascertainable sum of money. A reiterative definition, also in simple terms is given in Epmeier v. United States, 199 F.2d 508 [1], 509 (7 CCA 1952) where the court said: Insurance,    involves a contract, whereby, for an adequate consideration, one party undertakes to indemnify another against loss arising from certain specified contingencies or perils. Fundamentally and shortly, it is contractual security against possible anticipated loss. Risk is essential and, equally so, a shifting of its incidence from one to another. Although it might be contended, that such definitions encompass the Blue Cross-Blue Shield plans as well as the extended benefits, the intervenors state that they challenge only the extended benefits phase of plaintiff's operation and we confine our consideration to that point. Plaintiff, in discussing its operations, assiduously refrains from speaking of its programs in insurance terms, (membership or subscriber's fees, rather than premiums; service or benefits rather than insurance, operational cost, rather than underwriting expenses) but the program is properly to be categorized, not by what it is called, but by what it in fact does. 29 Am.Jur., Insurance § 5. Plaintiff's contract for extended benefits falls within the definition of insurance. Associated Hospital Service in consideration of the additional charges for this Endorsement obligates itself to pay in dollars to either the subscriber or the provider of service, as it may elect, as indemnities for eligible expenses, stated amounts, and within stated limits. The Extended Benefits contract is one whereby AHS in return for a charge (premium) agrees that not only where the subscriber's hospital and medical expenses, in stated categories, exceeds the charges covered by the basic Blue Cross-Blue Shield Plan, but where expenses are incurred with other then the participants in the basic contracts and for which the subscriber is directly responsible, AHS will indemnify him in dollars for stated expenses and within stated limits. The risk of the subscriber's (assured's) being exposed to certain expenses in excess and independent of the basic coverage is assumed by plaintiff, shifted from the subscriber to AHS. The payments so promised are not contingent upon the existence of adequate surplus in AHS funds after the payment of the basic charges. Associated Hospital Service had to reinsure under the 1957 special law [6] and deposit security under the 1963 special law. The reinsurance phase and the security deposit reflects legislative thinking that the extended benefits phase of plaintiff's operation is insurance. Neither the participating hospitals nor participating doctors assume these risks against which the subscriber is so protected. There is no discernible difference between this contract and the conventional health and accident insurance contract. The title Extended Benefit Endorsement does not change the nature of the obligation. It may properly be classified as insurance and as to this phase of plaintiff's operation it is engaged in the same business as the intervenors,which brings us to the constitutional question raised by them.