Court Opinion

ID: 9749517
Source: CourtListenerOpinion
Date Created: 2023-08-27 16:48:43.469698+00
Date Added: 2024-06-11T15:19:47.961210
License: Public Domain

*280Dissenting Opinion by
Justice SCOTT.
I do not believe that Medi-Share is in the business of insurance and I further disagree that the Medi-Share contract falls within the ambit of definitional insurance as outlined in KRS 304.1-030. Furthermore, because I believe that the activities of Medi-Share should be sheltered by the Religious Publication Exemption as provided for by the General Assembly in KRS 304.1-120(7), I respectfully dissent from the Court’s opinion.
I. Medi-Share is Not in the Business of Insurance
As noted by the Court of Appeals, the United States Supreme Court has described insurance as, “an arrangement for transferring and distributing risk.” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 211, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979). Additionally, our federal counterpart has identified three criteria that indicate that a company is in the “business of insurance”: (1) whether the practice has the effect of transferring or spreading a policyholder’s risk; (2) whether the practice is an integral part of the policy relationship between the insurer and the insured; and (3) whether the practice is limited to entities within the insurance industry. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 743, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). I interpret these opinions like the Court of Appeals and agree with its view that “[c]en-tral to the United States Supreme Court’s analysis of the ‘business of insurance’ is the distribution of risk between the policy holder and the insurer.” Because the relationship between Medi-Share and its subscribers does not amount to a distribution of risk between the policy holder (the subscribers) and Medi-Share (the conduit to the pool of subscribers), I do not believe Medi-Share to be in the business of insurance as described by the United States Supreme Court. Rather, I believe that the system set up by Medi-Share shifts the risk from one subscriber (the insured) to the pool of subscribers (the insurers) that is controlled and managed by Medi-Share. Thus, while Medi-Share is in the business of promoting and managing a cost-sharing organization, it is not in the business of insurance itself.
The crux of my position is based on the fact that Medi-Share bears no risk when it admits a member to the pool. That risk is carried by the members of the pool — not Medi-Share. This conclusion derives from a plain meaning of the commitment contract submitted by Medi-Share to new members.1 That contract states that Medi-Share takes no responsibility for the payment of the members’ medical bills. And as recognized by the majority, that provision likely shields Medi-Share from any liability for its members’ medical bills. This begs the question: what risk does Medi-Share, as an entity, bear? The an*281swer is clearly none. However, the majority reasons that the contract language alone does not overcome “the fact that through the Medi-Share program the individual members pool resources together to distribute the risk of major medical bills amongst each other.” (emphasis added). I whole-heartedly agree with this statement, but believe that this does not support a legal finding that Medi-Share is in the business of insurance, but rather that Medi-Share is in the business of administrating and managing a cost-sharing organization on behalf of others — in this instance, people of faith. In contrast, a true insurance company takes on risks and the company itself bears those risks, not the individually insured policy holders.
What’s more, I believe that Medi-Share’s contract does not meet the definition of insurance as promulgated by the legislative authority in this Commonwealth. The General Assembly of Kentucky has defined insurance as:
“[A] contract whereby one undertakes to pay or indemnify another as to loss from certain specified contingencies or perils called “risks,” or to pay or grant a specified amount or determinable benefit or annuity in connection with ascertainable risk contingencies, or to act as surety.”
KRS 304.1-030. In order for Medi-Share to fit this definition, it would have to undertake to pay or indemnify another for risks, or to pay or grant a specified amount or to act as a surety. Like the majority opinion of the Court of Appeals, I believe Medi-Share does none of these, but rather, these activities are assumed by the members of the pool, since each of them agrees to pay for the other’s losses in exchange for other members paying for their losses. Had Medi-Share agreed to pay the losses from their funds or pooled the subscribers’ funds into one pool, I would agree that Medi-Share’s contract is in fact definitional insurance. But Medi-Share simply does not do this.
Moreover, I admit that Medi-Share has extraordinary control over the funds and I also acquiesce to the majority’s position that Medi-Share’s decision-making abilities tend to lean toward finding that it is in the business of insurance. But my concerns are resolved by the fact that, at the end of the day, the individual sub-pools of subscribers bear the risks and not Medi-Share. And with regard to the extraordinary control exercised by Medi-Share, I believe it to be no more than a proper delegation of a duty. Such a delegation is necessary so that the subscribers are not overburdened with making administrative decisions (including who gets what and when). Otherwise, the benefits of this cost-sharing organization would likely transform into an administrative encumbrance upon its subscribers. Moreover, as discussed below, I believe this type of management and delegation of authority is contemplated in KRS 304.1-120(7)(c) and that the actions of the Medi-Share administrators comply with the spirit of this rule.
II. If Medi-Share Is An Insurance Company, It Should Fall Under the Religious Publication Exemption As Outlined in KRS 304.1-120(7).
Additionally, I believe that Medi-Share substantially complies with the provisions outlined in KRS 304.1-120(7) and therefore would consider it exempt from state regulation.
Under KRS 304.1-120(7), no provision of [the Kentucky Insurance Code] shall apply to:
(7) A religious publication (as identified in this subsection), or its subscribers, that limit their operations to those activities permitted by this subsection, and:
(a) Is a nonprofit religious organization;
*282(b) Is limited to subscribers who are members of the same denomination or religion;
(c) Acts as an organizational clearinghouse for information between subscribers who have financial, physical, or medical needs and subscribers who choose to assist with those needs, matching subscribers with the present ability to pay with subscribers with a present financial or medical need;
(d) Pays for the subscribers’ financial or medical needs by payments directly from one (1) subscriber to another;
(e) Suggests amounts to give that are voluntary among the subscribers, with no assumption of risk or promise to pay either among the subscribers or between the subscribers and the publication; and
(f) Provides the following verbatim written disclaimer as a separate cover sheet for all documents distributed by or on behalf of the exempt entity, including all applications, guidelines, promotional or informational materials, and all periodic publications:
“This publication is not issued by an insurance company nor is it offered through an insurance company. This publication does not guarantee or promise that your medical bills will be published or assigned to others for payment. Whether anyone chooses to pay your medical bills will be totally voluntary. This publication should never be considered as a substitute for an insurance policy. Whether you receive any payments for medical expenses, and whether or not this publication continues to operate, you will always remain liable for any unpaid bills.”
In denying Medi-Share the protection outlined in KRS 304.1-120(7), the majority makes much of sub-section (d), and particularly the fact that the subscribers of Medi-Share do not make payments directly to and from one another. The majority concludes that because the payments pass through an “intermediary” (Medi-Share), the payments fall short of being direct and thus finds the protections of KRS 304.1-120(7) undeserved. Common sense and the record before this Court demand that I recognize this procedure as a matter of fact. However, contrary to the holding of the majority, that procedure does not force the conclusion that the payments are not directly made from one subscriber to another.
I am of the opinion that the intermediary in this case (Medi-Share) acts in a similar fashion as a trustee, a bank, an attorney, or an agent. Had the subscribers mailed their payments or instructed an agent to make the payment on their behalf, would the Court reach the same conclusion because the payment passed through a third party before reaching the intended beneficiary? I think the answer is clearly no. Thus, my thoughts on the matter are that Medi-Share is a conduit rather than an intermediary. Certainly, this Court would not hold that simply because one acts through an agent or via a trustee that one has not acted in a direct manner. Indeed, under the law controlling the principles of agency in this Commonwealth, we impugn upon the principal the acts of its agents as “if they proceeded directly from the principal.” See Preferred Risk Fire Ins. Co. v. Neet, 262 Ky. 257, 90 S.W.2d 39, 42 (1935) (citing Union Mut. Ins. Co. v. Wilkinson, 80 U.S. 222, 13 Wall. 222, 20 L.Ed. 617 (1871)) (emphasis added). Medi-Share’s function is no different, and the subscriber’s payments are no less direct because they first pass through Medi-Share.
It bears repeating that the extent of control that Medi-Share exercises in this case might set it apart from what is con*283templated in KRS 304.1-120(7). However, I again analogize the actions of Medi-Share to that of an agent to principal relationship, whereby the agent (Medi-Share) is given discretionary authority to act on behalf of its principal (the subscribers). That discretion, however, should not make the actions any less direct. Furthermore, I believe this delegation and discretion is expressly contemplated by KRS 304.1-120(7)(c) which recognizes and allows the administration of these type of cost-sharing organizations to “mateh[ ] subscribers with the present ability to pay with subscribers with a present financial or medical need.” It seems to me that is exactly what we have here.
I am of the opinion that Medi-Share is in substantial compliance with KRS 304.1-120(7) and the spirit of that rule. I would not strip that organization of the protections outlined in KRS 304.1-120(7) simply because payments are made at the direction of Medi-Share after subscribers have delegated this duty to Medi-Share, particularly when Medi-Share already statutorily possesses the authority to function in an administrative capacity.
For the foregoing reasons, I respectfully dissent from the majority’s opinion in this matter.
CUNNINGHAM, J., joins.

. As noted by the majority, Medi-Share employs a type of disclaimer which attempts to negate any connotation that it is an insurance company. However, the majority discards this disclaimer under the guise that Medi-Share’s function overrides the contract language and the Court essentially finds that Medi-Share is an insurance company under a "substance” analysis if not by "form.” However, the General Assembly of Kentucky promulgated and requires this disclaimer when religious institutions attempt to create these cost-sharing organizations. See KRS 304.1-120(7)(f). And while I believe that an insurance company may not disclaim its insurance function simply by employing a disclaimer in its policies, I also recognize that the General Assembly, in passing this statute, considers the disclaimer more pertinent than a normal one used by a non-religious institution. Otherwise, subsection (f) becomes superfluous, and will be read as an irrelevant section of Kentucky law.