Opinion ID: 871688
Heading Depth: 2
Heading Rank: 3

Heading: Proceedings before the Insurance Commissioner

Text: On October 28, 2008, AlohaCare filed its Petition for Hearing and Declaratory Relief with the Insurance Commissioner of the DCCA. AlohaCare asserted that it was both an interested party and an aggrieved person. [5] The Petition named Jeffrey P. Schmidt, Insurance Commissioner, as the sole respondent. AlohaCare sought, inter alia, an official determination that Ohana is not licensed pursuant to the HMO Act and is therefore not properly licensed to perform the QExA [c]ontract. [6] In AlohaCare's memorandum accompanying its Petition, AlohaCare argued, inter alia, that the work to be conducted under the [QExA] contract is covered only by Hawaii's [HMO] statute and therefore can legally be performed only by entities that hold Hawaii HMO licenses. In support of that proposition, AlohaCare argued that the QExA RFP involved the performance of HMO activities and that  any entity performing HMO activities as described in the HMO Act must have an HMO license. [7] (Emphasis in original). On December 8, 2008, DHS, which had not yet intervened in the proceeding, [8] filed an Amended Motion to Dismiss the Petition in which United and Ohana joined. DHS argued that DHS does not believe that its contracts with Ohana and [United] are contracts relating to the business of insurance[,] and therefore, DHS argued, the Insurance Commissioner does not possess the power to provide the relief AlohaCare requests because it would exceed the statutory authority of the Insurance Commissioner. The Insurance Commissioner denied the motion. United subsequently filed its memorandum in opposition to the Petition, in which it contended that federal law did not require Medicaid managed care organizations to be licensed as HMOs. United further argued that Hawai`i law does not require an HMO license to provide the QExA product because United's provision of the QExA product is not precluded by HRS § 431:10A-205(b) and the QExA program is `managed care,' not an `HMO activity.' (Formatting altered). Ohana filed a memorandum in opposition to the Petition in which it argued, inter alia, that Hawai`i law permits Ohana to provide the services under the QExA contract because the HMO Act does not require Ohana to possess an HMO license to perform such services. Accordingly, Ohana argued that it was permitted under its accident and health insurance license to provide the services under the QExA contract. Ohana also argued that the Insurance Commissioner lacked jurisdiction to review the QExA contract because the contract executed between DHS and Ohana was not a contract of insurance. On March 18, 2009, the Petition was heard and argued before hearings officer Thomas M. Pico, Jr. [9] On April 27, 2009, the hearings officer issued his Recommended Decision. On June 2, 2009, the Insurance Commissioner issued his Decision, relying on the hearings officer's Recommended Decision. The Decision contained Findings of Fact (FOFs) that discussed the terms of the QExA contracts and recounted the RFP process. The Decision also contained the following Conclusions of Law (COLs): 1. Petitioner is an interested party and so had standing to file this Petition for declaratory relief pursuant to [HAR] § 16-201-48. 2. Petitioner is also an aggrieved person within the meaning of HAR § 16-201-2, because Petitioner will be adversely affected by a decision of the Commissioner with respect to the type of license required to offer the QExA plan since a finding by the Commissioner that [United] and/or [Ohana] are properly licensed to perform the services required under the QExA contracts in issue . . . is effectively a finding that those entities can compete against Petitioner for an award of the QExA contract in issue. 3. HAR § 16-201-50(1)[ [10] ] requires that a petition for declaratory relief be denied where [t]he matter is not within the jurisdiction of the authority and where [t]he petition is based on hypothetical or speculative facts of either liability or damages. Cf. Citizens Against Reckless Development v. Zoning Bd. of Appeals, 114 Hawai`i 184, 194-95, 159 P.3d 143, 153-54 (2007) (explaining that an administrative agency has discretion to deny declaratory relief on a ground enumerated in an agency rule). The Petition raised issues of interpretation of the Hawaii Insurance Code that are within the jurisdiction of the Hawaii Insurance Commissioner to interpret. 4. The QExA contracts entered into by DHS with [Ohana] and [United] are not contracts of insurance. HRS § 431:1-201(a) provides that [i]nsurance is a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies. Accordingly, determining the validity of the QExA contracts is not the business of insurance and is outside the jurisdiction of the Commissioner. Except for relief in the form of a declaration that neither [United] nor [Ohana] are properly licensed to perform the services required under the QExA contract, all other claims for relief based upon allegations of the Petition regarding the validity of the contracts entered into by DHS with [Ohana] and [United] are denied as beyond the jurisdiction of the authority. HAR § 16-201-50(1)(C). 5. The Petition also relies upon speculative and hypothetical allegations regarding actions which may (or may not) be taken by the Centers for Medicare & Medicaid Services (CMS). Relief based upon those allegations is denied pursuant to HAR § 16-201-50(1)(D). Cf. Bremner v. City & County of Honolulu, 96 Hawai`i 134, 144, 28 P.3d 350, 360 (App.2001) (speculative nature of concerns regarding how city would administer ordinance and effect of ordinance led court to conclude that matter was not ripe for adjudication). 6. The issue to be decided in this matter is whether a license issued pursuant to the Health Maintenance Organization Act, HRS Chapter 432D (the HMO Act) is required to perform the QExA contract. If so, neither [United] nor [Ohana] are properly licensed to perform the services required under the QExA contracts. 7. The determination of the issue to be decided in this matter involves interpretation of HRS §§ 431:1-201, 431:1-205 and HRS Chapters 432D, 432E, and 431:10A. All of these statutes are within the jurisdiction of the Insurance Commissioner. 8. Insurance is a contract whereby one party undertakes to indemnify another or pay a specified amount upon determinable contingencies[.] HRS § 431:1-201. Under this general definition, there are several classes of insurance, one of which is accident and health and sickness insurance. Accident and health insurance, as defined in HRS § 431:1-205, is insurance against bodily injury, disablement, or death by accident, or accidental means, or the expense thereof; against disablement or expense resulting from sickness; and every insurance appertaining thereto, including health and medical insurance. [Ohana] and [United] are each licensed as risk-bearing entities to provide accident and health or sickness insurance pursuant to HRS Chapter 431:10A but not Chapter 432D, the HMO Act. 9. The QExA plan is also governed by federal law relating to the Medicaid program. The Social Security Act § 1903(m) and federal regulation at 42 C.F.R § 438.116(b)(1) expressly state that a Medicaid managed care organization (MCO) may be either a federally qualified HMO or be licensed or certified by the State as a risk bearing entity. 10. Hawaii law does not support a conclusion that the QExA plan must be provided by an HMO because the QExA program does not require the entity to provide services that can only be provided by an HMO under Hawaii law. 11. HRS § 432E-1 defines a managed care plan to mean any plan, regardless of form, offered or administered by any person or entity, including but not limited to an insurer governed by chapter 431, a mutual benefit society governed by chapter 432, a health maintenance organization governed by chapter 432D, a preferred provider organization, a point of service organization, a health insurance issuer, a fiscal intermediary, a payor, a prepaid health care plan, and any other mixed model, that provides for the financing or delivery of health care services or benefits to enrollees through: (1) Arrangements with selected providers or provider networks to furnish health care services or benefits; and (2) Financial incentives for enrollees to use participating providers and procedures provided by a plan; provided, that for the purposes of this chapter, an employee benefit plan shall not be deemed a managed care plan with respect to any provision of this chapter or to any requirement or rule imposed or permitted by this chapter which is superseded or preempted by federal law. 12. HRS § 432D-1 defines a health maintenance organization to mean any person that undertakes to provide or arrange for the delivery of basic health care services to enrollees on a prepaid basis, except for enrollee responsibility for copayments, deductibles, or both. 13. HRS § 432D-2(a) provides that [n]o person shall establish or operate a health maintenance organization in this State without obtaining a certificate of authority under this chapter. There is no definition of what it means to operate a health maintenance organization in Chapter 432D HRS. Nor is there any definition of HMO activities or HMO product. 14. The term operate a health maintenance organization as used in HRS § 432D-2(a) is thus interpreted to mean engaging in activities which only an HMO is authorized to do. If a risk bearing entity licensed by the Insurance Division under a statute other than HRS Chapter 432D is authorized to engage in the activities it has undertaken by the statute pursuant to which it is licensed, it is not by virtue of its engaging in permitted activities, operat[ing] a health maintenance organization within the prohibition of HRS § 432D-2(a). 15. The definition of a managed care plan in HRS § 432E-1 encompasses all types of plans that provide for the financing or delivery of health care services that meet the criteria of that section, including HMOs licensed under HRS Chapter 432D and risk bearing entities licensed under HRS Chapter 431:10A. 16. There is substantial overlap between the powers granted to health maintenance organizations under HRS Chapter 432D and entities licensed under HRS Chapter 431:10A. The key distinction is that HMOs are the only licensed entities that may furnish health care directly to their members through facilities that it owns or operates and utilizing the services of physicians employed by the HMO and require that coverage is only provided when a member either utilizes its facilities and providers or is specifically authorized by its providers to utilize outside facilities or providers. An entity licensed as an HMO is not limited to furnishing care directly to its members through its owned facilities and employed providers, but it is authorized to do so. That authorization distinguishes entities licensed as HMOs from other risk-bearing entities licensed by the Insurance Commissioner in the State of Hawaii. Conversely, risk bearing entities licensed under HRS Chapter 431:10A are prohibited from requiring that service[s] be rendered by a particular hospital or person. HRS § 431:10A-205(b). For AlohaCare to prevail in this matter, the law would have to define an HMO in terms of having a closed panel. The law simply does not do so. 17. HRS Chapter 393, the Hawai`i Prepaid Health Care Act, confirms that a distinguishing feature of an HMO is its ability to furnish care directly to its members. In defining what constitutes a prepaid health care plan, HRS § 393-3 distinguishes plans which furnish health care from plans which defray or reimburse, in whole or in part, the expenses of health care. The prevalent plan in Hawaii of the type which furnishes health care is the HMO offered by Kaiser Foundation Health Plan, Inc. 18. The rules of statutory interpretation avoiding implied amendment or repeal further support the conclusion that, so long as a risk bearing entity licensed by the Insurance Division under a statute other than HRS Chapter 432D is authorized to engage in the activities it has undertaken by the statute pursuant to which it is licensed, it is not by implication prohibited from doing so by HRS § 432D-2(a). 19. Had the QExA program been designed solely for HMOs, the enrollees would have been limited to health care services furnished directly to QExA enrollees through facilities owned or operated by the HMO, and utilizing the services of physicians employed by the HMO. 20. Both [United] and [Ohana] are licensed as risk-bearing entities pursuant to HRS Chapter 431:10A. There is no prohibition under Hawaii law which prevents an insurer licensed under HRS Chapter 431:10A from offering the closed panel product required by the QExA RFP. 21. HRS § 431:10A-205(b) states that [a]ny group or blanket disability policy may provide that all or any portion of any indemnities provided by the policy on account of hospital, nursing, medical, or surgical services may, at the insurer's option, be paid directly to the hospital or person rendering such services, but the policy may not require that the service be rendered by a particular hospital or person. Payment so made shall discharge the insurer's obligation with respect to the amount so paid. ([Emphasis] added). 22. Insurers licensed pursuant to HRS Chapter 431:10A are not authorized to require that the [covered health care] service be rendered by a particular hospital or person. The plain meaning of the statute prohibits a restriction that limits insureds to receiving care from a particular, or a single, designated hospital or person. 23. Insurers licensed under HRS Chapter 431:10A are not prohibited from offering a closed panel or limited physician group model of care by HRS § 431:10A-205(b) as long as there is a choice of providers and hospitals for its members. 24. There is nothing in the legislative history of HRS § 431:10A-205(b) to support an interpretation of the provision as precluding the offering of a closed panel product such as that required by the QExA program. That provision has remained virtually unchanged since it was enacted in 1955, while Hawaii was still a territory. 25. The statutory language cannot have been intended to prohibit closed panel or limited physician group models of care, as those managed care models have only developed in recent times. Moreover, if the Legislature had intended to prohibit insurers from requiring that services be obtained from a defined network of providers, the statutory language would have used the plural form instead of the singular (particular hospitals or persons). 26. The language used in 1955 was taken from a model law proposed by the National Association of Insurance Commissioners. It is statutory language of differentiation, by which policy designs that would permit the insurer to direct the destiny of the cure through the specific designation of the person or facilities are prohibited. The phrase may not require that the service be rendered by a particular hospital or person distinguishes accident and sickness policy standards from the standards of the Workmens' Compensation Laws common at that time that expressly permitted an employer to select for the treatment of his employee, specific physicians, hospitals and even specific nurses. ( See, Insurance Com'rs v. Mutual Medical Ins., Inc., 251 Ind. 296, 241 N.E.2d 56 (1968)). 27. HRS § 431:10A-205(b) was intended to prevent insurance companies from requiring that their insureds receive their care from a single hospital or physician under contract with the insurer. Based on the plain language and the legislative history of HRS § 431:10A-205(b), there is no reason to conclude the statute was intended to prohibit insurers from offering a closed panel product with the choice of providers required by the QExA. 28. The fact that the QExA RFP provided for reimbursement to qualifying health plans at fully capitated rates did not require that those QExA plans be licensed as HMOs in the State of Hawaii. 29. Petitioner had both the burden of proof and the burden of persuasion. Petitioner has failed to carry its burden of proof and persuasion regarding its allegations. There is no legal basis for concluding that an HMO license is required for [United] and [Ohana] to offer the QExA plan. (Some brackets in original and some added) (record citations omitted) (some formatting altered) (emphasis in original). Based on the Decision's FOFs and COLs, the Insurance Commissioner ordered that: 1. The Amended Motion to Dismiss filed by DHS on December 8, 2008, is denied on the grounds that the Commissioner has jurisdiction; and, 2. An HMO license is not required to offer the QExA managed care plan. The QExA managed care plan may be offered by any risk-bearing entity licensed by the Insurance Division, [DCCA], State of Hawaii; and 3. There is no legal or factual grounds for relief under the Petition, and thus all relief requested in the Petition is denied.