Opinion ID: 2598249
Heading Depth: 1
Heading Rank: 7

Heading: Feared future surplus reductions.

Text: As with her first justification for denial of the subject acquisition, the Commissioner's second ground likewise runs flatly counter to established Kansas law. With respect to the BCBS surplus, the Commissioner found: (a) some will be distributed to policyholders under the acquisition agreement (with which she took no exception) and (b) based upon her expert's further `projection,' an additional part of the surplus would likely be reduced by Anthem after the acquisition. In fact, the expert predicted that the further reduction would lower the BCBS surplus to the range of $90 to $112.5 million. This prediction of the expert was based on the `projections' of what Anthem and other for profit companies `usually do.' Once again, even if one assumes the double and triple inferences of the expert to be factually supported, the argument fails as a matter of law. In K.S.A. 40-2c01 et seq., the Legislature has prescribed the required minimum levels of surplus for insurance companies doing business in Kansas. Even if the Commissioner's worst fears are realized ( i.e., if surplus levels are actually reduced to the lowest levels of the projected range), the surplus will still be above the level declared legally sufficient by our Legislature. Again, the Commissioner has denied this acquisition because she fears Anthem will comply with Kansas law. K.S.A. 40-401, K.S.A. 40-402, and K.S.A. 40-2c01. Although the Commissioner is granted power to supervise insurers and to enforce the Kansas Insurance Code (K.S.A. 40-103), she is not authorized to add or change established legal requirements or take regulatory action based upon anticipated premium rates or levels of surplus that would be either required by or consistent with the law under the aforementioned statutory guidelines and case precedents. See e.g., Mitchell v. Liberty Mut. Ins. Co., 271 Kan. 684[, 24 P.3d 711] (2001); Olathe Community Hospital v. Kansas Corporation Comm'n, 232 Kan. 161[, 652 P.2d 726] (1982); Kansans for Fair Taxation, Inc., v. Miller, 20 Kan. App. 2d 470[, 889 P.2d 154, rev. denied 257 Kan. 1092] (1995). Finally, if more be needed, it is important to observe that all insurance rate increases and all insurance company surplus distributions are required to be first approved by the Commissioner. (K.S.A. 40-2215 sets forth the public policy the Commissioner must enforce regarding insurance rates. K.S.A. 40-3306 governs dividends that may be distributed from insurance company surpluses.) Accordingly, before the future predicted `hazardous or prejudicial' and/or `unfair and unreasonable' rate hikes and surplus reductions could occur, each would first have to be approved and authorized by the Commissioner herself. The Court is unwilling to presume, as a matter of law, that this or any subsequent Commissioner would approve `hazardous or prejudicial' and/or `unfair and unreasonable' rates or dividend distributions. Thus, it is not possible for these `projections' to ever be realized and it is therefore illogical, if not arbitrary and capricious, for the Commissioner to base her denial solely on these `projections.' On June 7, 2002, the district court vacated the Commissioner's order disapproving the acquisition in its entirety and remanded to the Commissioner for further proceedings not inconsistent with its opinion.