00-005007 Foundation Health vs. Department Of Insurance Status: Closed DOAH Final Order on Wednesday, February 28, 2001.

Summary: HMO required to authorize surgical removal and radiation treatment of keloids which resulted after teenager had ears pierced. HMO also liable to pay attorney`s fees and costs to Department.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FOUNDATION HEALTH, )

)

Petitioner, )

)

vs. ) Case No. 00-5007

)

DEPARTMENT OF INSURANCE, )

)

Respondent. )

__________________________________)

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case

on January 17, 2001, via video teleconference, with the

Petitioner and the Respondent appearing in Fort Lauderdale,

Florida, before Patricia Hart Malono, the duly-designated

Administrative Law Judge of the Division of Administrative

Hearings, who was present in Tallahassee, Florida.

APPEARANCES

For Petitioner: Mark C. Burton, Esquire

WICKER, SMITH, TUTAN, O'HARA

McCOY, GRAHAM, & FORD, P.A.

1 East Broward Boulevard, Suite 500

Post Office Box 14460

Fort Lauderdale, Florida 33302

For Respondent: William Fred Whitson, Esquire

Department of Insurance

Division of Legal Services

200 East Gaines Street

612 Larson Building

Tallahassee, Florida 32399-0333

STATEMENT OF THE ISSUE

Whether the Petitioner should be required to provide

authorization and coverage for surgery and radiation treatment

for J.C.M., a person covered under the Certificate of HMO

Coverage ("HMO Certificate") between the Petitioner and the

Broward County School Board.

PRELIMINARY STATEMENT

This case arose out of proceedings initiated pursuant to

Section 408.7056, Florida Statute s (2000), which establishes the

Statewide Provider and Subscriber Assistance Program to provide

a procedure for resolving grievances between a subscriber and a

managed care entity. A dispute arose between J.A.M., a

subscriber, and the Foundation Health Plan ("Foundation

Health"), a managed care entity, regarding authorization for the

surgical removal and radiation treatment of keloids on the

earlobes of J.C.M., an eligible dependent of J.A.M. under the

HMO Certificate. Foundation Health denied the requested

authorization, and this decision was appealed to the Statewide

Provider and Subscriber Assistance Panel ("Panel"). In a

document dated August 30, 2000, and entitled "Findings of Fact

and Recommendation," the Panel recommended to the Department of

Insurance ("Department") that Foundation Health be ordered to

authorize the requested surgery and treatment. In a letter

dated November 9, 2000, the Department notified Foundation

Health that it adopted the Panel's Findings of Fact and

Recommendation, which would become the Department's final

determination unless Foundation Health requested review of the

decision.

In accordance with Section 408.7056(14), Florida Statutes

(2000), Foundation Health timely requested a summary hearing

with the Division of Administrative Hearings pursuant to

Section 120.574, Florida Statutes (2000). The Department

transmitted the matter to the Division of Administrative

Hearings for assignment of an administrative law judge. The

case was received by the Division of Administrative Hearings on

December 13, 2000, and, in a telephone conference held on

December 15, 2000, the parties agreed that the final hearing in

this matter should be conducted on January 17, 2001.

At the hearing, Foundation Health presented the testimony

of Andrew Halpern, M.D., and J.A.M., the father of J.C.M. The

Department presented the testimony of J.C.M., Dennis Cookro,

M.D., and J.A.M. Joint Exhibits 1 through 8 were offered and

received into evidence.

The one-volume transcript of the proceedings was filed with

the Division of Administrative Hearings on February 2, 2001, and

the parties timely submitted proposed findings of fact and

conclusions of law, which have been considered in the

preparation of this Final Order.

FINDINGS OF FACT

Based on the oral and documentary evidence presented at the

final hearing and on the entire record of this proceeding, the

following findings of fact are made:

1. At all times material to this dispute, J.A.M. was

insured under a group health maintenance organization contract

between Foundation Health and the Broward County School Board

for the benefit of its employees and their eligible dependents.

2. At all times material to this dispute, J.C.M., J.A.M.'s

son, was a dependent eligible for coverage under the contract.

J.C.M. is currently a 22-year-old college student.

3. When J.C.M. was approximately 13 years old, he suffered

a cut on his arm, and a keloid developed that was surgically

removed.

4. A keloid is a raised, irregular, and enlarging scar

created by an excessive build-up of collagen. When the body

suffers a wound such as a cut, a burn, or a surgical incision,

the body heals the wound by building up tissue over the wound to

close it. A keloid forms when the body does not stop the

development of tissue, so that the tissue continues to

accumulate and eventually forms large, unsightly scars or

growths.

5. Some people are prone to develop keloids, although

keloids do not always develop in these individuals as a result

of every cut or abrasion. It appears that J.C.M. is a person

prone to develop keloids.

6. When he was 16 years old, J.C.M. elected to pierce his

ears so that he could wear earrings, a practice that was,

according to J.C.M., "in style." Ear piercing is not a medical

procedure, although a physician can perform the procedure.

7. After his ears were pierced, J.C.M. wore earrings

continually for a period of time. At some point, J.C.M. noticed

that the back of both of his earlobes itched. As time passed,

it became apparent that keloids were forming on the back of each

earlobe at the point at which his ears were pierced.

8. When J.C.M. first noticed them, the keloids were the

size of pimples, and they formed around the hole made by the

incision piercing his earlobes. The keloids have grown slowly,

and they are now quite large. They cause J.C.M. considerable

discomfort: They turn a dark purplish color when exposed to the

sun, they itch, and they become tender if J.C.M. rubs them or

sleeps on his side.

9. The keloids on the posterior of his earlobes developed

as a result of the incisions created when his earlobes were

pierced.

10. Zoila Alen, M.D., J.C.M.'s primary physician, referred

him to Nestor F. De La Cruz-Munoz, M.D., a surgeon, for

evaluation of the keloids for surgical removal. Dr. De La Cruz,

in turn, referred J.C.M. to Jaime Zusman, M.D., for a

preoperative evaluation of the need for radiation treatment to

prevent new keloids from developing as a result of the surgical

incisions to remove the existing keloids. The physicians

concluded that J.C.M. required surgery and radiation treatment.

11. On March 3, 2000, Dr. Alen submitted a Primary Care

Physician Referral Authorization and Consultation Form to

Foundation Health requesting authorization to refer J.C.M. to

Abelardo Arango, M.D., for surgery to remove the keloids on his

earlobes and for radiation therapy.

12. In a letter dated March 15, 2000, Foundation Health

notified J.A.M. that it was unable to authorize the requested

referral. The basis for Foundation Health's decision was that

the keloids were complications of a non-covered benefit and that

the treatment to remove the keloids was, therefore, not covered.

13. J.A.M. requested a re-evaluation of the request in a

letter dated March 21, 2000.

14. In a letter dated March 23, 2000, Foundation H ealth

notified J.A.M. that it would adhere to its original decision

and deny the requested authorization. Foundation Health

reiterated as the basis for its decision the determination that

the keloids were "complication[s] of a non-covered benefit (ear

piercing)" and that the requested services were not covered by

the HMO Certificate. Foundation Health enclosed with this

letter a copy of page 26 of the Member Handbook explaining

J.A.M.'s coverage under the HMO Certificate, which provides in

pertinent part:

35. Miscellaneous. The following services

and supplies are excluded from coverage:

* * *

· Complications of non-covered services

including the diagnosis and treatment of any

condition which arises as a complication of

a non-covered service (e.g. services or

supplies to treat a complication of cosmetic

surgery, etc.)

15. The HMO Certificate provides in pertinent part:

SECTION IX

EXCLUSIONS AND LIMITATIONS

A. Exclusions . The following services

and/or supplies are specifically excluded

from Coverage and are not Covered Services

under this Agreement:

* * *

8. cosmetic, surgical or non-surgical

procedures which are undertaken primarily to

improve or otherwise modify the Member's

external appearance except reconstructive

surgery necessary to correct or repair a

functional disorder as a result of a

disease, injury or congenital defect or

initial implanted prosthesis and

reconstructive surgery incident to a

mastectomy for cancer of the breast. Also

excluded are surgical excision or

reformation of any sagging skin of any part

of the body, including, but not limited to

the eyelids, face, neck, abdomen, arms, legs

or buttocks; any services performed in

connection with the enlargement, reduction,

implantation or change in appearance of a

portion of the body, including, but not

limited to, the face, lips, jaw, chin, nose,

ears, breast, or genitals; hair

transplantation; chemical face peels or

abrasion of the skin,; electrolysis

depilation; removal of tattooing; or any

other surgical or non-surgical procedures

which are primarily for cosmetic purposes or

to create body symmetry. Additionally, all

medical complications as a result of

cosmetic, surgical or non-surgical

procedures are excluded;

* * *

39. Complications or conditions resulting

from a non-Covered Service.

CONCLUSIONS OF LAW

16. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

the parties thereto pursuant to Section 408.7056(14) and

Section 120.574, Florida Statutes (2000).

17. The extent of coverage for medical services provided

to employees of the Broward County School Board pursuant to the

HMO Certificate is determined by reference to the terms of the

HMO Certificate, which constitutes the insurance contract

between the parties. The issue presented for resolution in this

case is whether the proposed surgical removal of the keloids on

J.C.M.'s earlobes and the radiation treatment to prevent their

recurrence are services that are excluded from coverage under

the HMO Certificate.

18. The rules relating to construction of insurance

contracts in Florida were summarized by the court in Epstein v.

Hartford Casualty Insurance Co. , 566 So. 2d 331 (Fla. 1st DCA

1990), as follows:

When material facts surrounding a

controversy are not in dispute, it is

uniquely within the province of the court to

give a contract its proper construction. If

a contract is ambiguously worded, it is the

responsibility of the court to resolve the

ambiguity as a matter of law. On the other

hand, if the language of a contract is

unambiguous and not subject to conflicting

inferences, it is the court's responsibility

to give the contract its clearly intended

construction. Ellenwood v. Southern Life

Ins. Co. , 373 So. 2d 392 (Fla. 1st DCA

1979).

The dispositive issue presented in this

case is whether the policy exclusion is

ambiguous to the extent that it is

susceptible of two different meanings, with

one allowing coverage and the other

excluding coverage. In addressing a similar

issue under an insurance policy, we recently

said:

Where a term in an insurance

contract is ambiguous, the courts

will construe the policy language

in favor of the insured and

against the insurer. Triano v.

State Farm Mutual Automobile

Insurance Co. , 565 So. 2d 748

(Fla. 3d DCA 1990); Herring v.

First Southern Insurance Co. , 522

So. 2d 1066 (Fla. 1st DCA 1988);

Davis v. Nationwide Life Insurance

Co. , 450 So. 2d 549 (Fla. 5th DCA

1984); Rowland v. National States

Insurance Co. , 295 So. 2d 335

(Fla. 1st DCA 1974). Where the

language is susceptible of two

different interpretations, the

interpretation sustaining coverage

will be adopted.

Herring at 1068. In keeping with this

principle, terms of exclusion are to be

narrowly construed. Triano ; Hartford

Accident and Indemnity Co. , 294 So. 2d 363

(Fla. 1st DCA 1974). Where the provision is

not ambiguous, however, there is no occasion

for employing the rule of construction

against the insurer, and the court simply

applies the plain meaning of the provision.

Home Indemnity Co. v. Alday , 213 So. 2d 13

(Fla. 1st DCA 1968); Quality Imports, Inc.

v. St. Paul Fire & Marine Insurance Co. , 566

So. 2d 293 (Fla. 1st DCA 1990).

See also Auto-Owners Insurance Co. v. Anderson , 756 So. 2d 29

(Fla. 2000); Weldon v. All American Life Insurance Co. , 605

So. 2d 911 (Fla. 2d DCA 1992); and Blue Shield v. Woodlief , 359

So. 2d 883 (Fla. 1st DCA 1978).

HMO Certificate, Section IX, Paragraph 8 .

19. Paragraph 8 of Section IX of the HMO Certificate

provides that "cosmetic, surgical or non-surgical procedures

which are undertaken primarily to improve or otherwise modify

the Member's external appearance" are "excluded from Coverage

and are not Covered Services under this Agreement" and that "all

medical complications as a result of cosmetic, surgical or non-

surgical procedures are excluded." Beyond the description in

paragraph 8, "cosmetic" is not defined in the HMO Certificate.

Therefore, a "cosmetic" procedure is one undertaken to improve

or modify a person's external appearance, the various procedures

identified in paragraph 8 as specifically excluded from coverage

are consistent with this definition in that they all describe

the alteration of a portion of the body by surgical or non-

surgical means in order to improve the appearance of the body.

20. These provisions of paragraph 8 in Section IX of the

HMO Certificate appear to be susceptible of only one

interpretation and, therefore, are not ambiguous. It is,

therefore, necessary only to apply the terms of the HMO

Certificate to the facts in this case to determine if the

requested service is covered or excluded from coverage.

21. Certainly, ear piercing is a procedure whose ultimate

purpose is cosmetic; the procedure creates an incision in the

earlobes through which an earring can be placed, and the earring

is intended to enhance appearance through the adornment of the

body. However, the procedure of making an incision in the

earlobe is not, of itself, intended to improve or modify the

appearance of the body, and ear piercing is not, therefore, a

"cosmetic" procedure as that term is used in paragraph 8 of the

HMO Certificate. It follows, then, that the development of

keloids as a result of ear piercing is not a "medical

complication" of a cosmetic procedure, and coverage for the

surgical removal of the keloids and for radiation treatment is

not excluded by the terms of paragraph 8 of the HMO Certificate.

HMO Certificate, Section IX, Paragraph 39 .

22. Paragraph 39 of Section IX of the HMO Certificate

provides that "[c]omplications or conditions resulting from a

non-Covered Service" are "excluded from Coverage and are not

Covered Services under this Agreement." There is no definition

in the HMO Certificate of "non-Covered Service," and the term is

subject to two different interpretations. 1/ On the one hand,

the term "non-Covered Service" could refer to a service that is

not covered under the HMO Certificate because it is

"specifically excluded from Coverage" in Section IX. Under this

interpretation, ear piercing would not, for the reasons

discussed above, be excluded from coverage under paragraph 8 as

a "cosmetic" procedure, nor does there appear to be any other

specific exclusion for ear piercing in Section IX of the HMO

Certificate. Accordingly, under this interpretation,

authorization and coverage for treatment of J.C.M.'s keloids

could not be denied pursuant to paragraph 39 of Section IX as a

complication or condition arising from a service that is "non-

Covered" because it is not specifically excluded from coverage

under the HMO Certificate.

23. On the other hand, the term "non-Covered Service"

could be interpreted to mean a service that is not listed as a

"Covered Service" under the HMO Certificate. "Covered Services"

are listed in Section VIII of the HMO Certificate, and they are

generally described as services that are "medically necessary"

or that are "preventative health services . . . essential to the

health of a Member," and it is clear that the services and

supplies that are covered by the HMO Certificate are medical and

health-related services. Ear piercing is not identified in the

HMO Certificate as a "Covered Service," most likely because it

is not a medical or health-related service. Accordingly, under

this second interpretation of "non-Covered Service," the removal

and treatment of J.C.M.'s keloids could be denied because the

keloids would be a condition arising from ear piercing, a

procedure that is not identified as a "Covered Service." 2/

24. Because the exclusion set forth in paragraph 39 of

Section IX is subject to two interpretations, it i s ambiguous,

and the rules of construction of an insurance contract recited

above must be applied to determine if the surgical removal and

radiation treatment of J.C.M.'s keloids are excluded from

coverage under the HMO Certificate. In Deni Associates of

Florida, Inc. v. State Farm Fire & Casualty Insurance Company ,

711 So. 2d 1135 (Fla. 1998), the Florida Supreme Court stated:

In State Farm Mutual Automobile Insurance

Co. v. Pridgen , 498 So. 2d 1245 (Fla. 1986),

this Court announced the rule to be followed

in the interpretation of exclusionary

clauses in insurance policies:

[E]xclusionary provisions which are

ambiguous or otherwise susceptible to more

than one meaning must be construed in favor

of the insured, since it is the insurer who

usually drafts the policy. See Excelsior

Insurance Co. v. Pomona Park Bar & Package

Store , 369 So. 2d 938, 942 (Fla. 1979).

25. In accordance with this rule, it is concluded that the

exclusion from coverage set forth in paragraph 39 of Section IX

does not apply to exclude coverage for the surgical removal and

radiation treatment of J.C.M.'s keloids.

26. Because the requested treatment for J.C.M.'s keloids

is not excluded by either paragraph 8 or paragraph 39 of

Section IX of the HMO Certificate covering the employees of the

Broward County School Board and their eligible dependents,

Foundation Health must authorize and provide coverage for this

treatment.

27. Section 408.7056(14), Florida Statutes (2000),

concludes with the following provision: "If the managed care

entity does not prevail at the hearing, the managed care entity

must pay reasonable costs and attorney's fees of the agency or

the department incurred in that proceeding." Inasmuch as

Foundation Health has not prevailed, it must pay such costs and

fees.

CONCLUSION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is ORDERED:

1. The Foundation Health Plan shall immediately provide

authorization for and coverage of the services requested by

Zoila Alen, M.D., for the surgical removal and radiation

treatment of the keloids on the posterior of J.C.M.'s earlobes;

2. No later than 30 days from the date of this order, the

Foundation Health Plan shall promptly pay the reasonable costs

and attorney's fees incurred by the Department of Insurance in

this proceeding. If the parties are unable to agree on the

amount of such costs and fees, no later than 30 days from the

date of this order, the Department of Insurance shall file an

affidavit itemizing all costs and fees to which it claims

entitlement. Ten days after service of such an affidavit, the

Foundation Health Plan shall file a written statement

identifying with particularity each item in the affidavit of the

Department of Insurance to which it has any objection and

stating the basis for each objection. If necessary, a further

hearing will be convened for the purpose of hearing argument or

evidence on any disputed issues regarding the amount of the

costs and attorney's fees.

DONE AND ORDERED this 28th day of February, 2001, in

Tallahassee, Leon County, Florida.

___________________________________

PATRICIA HART MALONO

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of February, 2001.

ENDNOTES

1 / In determining that there are two possible interpretations of

paragraph 39 of Section IX, it is noted that it would be

inappropriate to put a strained or unnatural construction on a

policy to create an uncertainty or ambiguity. See Federated

Mutual Insurance Co. v. Germany , 712 So. 2d 1245, 1248 (Fla. 5th

DCA 1998).

1 / It should also be kept in mind that, in interpreting the

meaning of "non-Covered Service," it is necessary to construe

the meaning of the term in light of all of the terms and

conditions in the HMO Certificate. Section 627.419(1), Florida

Statutes (2000); Ellenwood v. Southern United Life Insurance

Co. , 373 So. 2d 392, 395 (Fla. 1st DCA 1979). Were this

approach to be taken under the facts herein, it could be said

that the scope of the HMO Certificate is limited to medical and

health-related services and that the parties intended the HMO

Certificate to deal only with medical and health-related

service, regardless of whether they are identified as "Covered

Services" or "non-Covered Services." Under such an alternative

interpretation, ear piercing would not be a "non-Covered

Service" because it is not a medical procedure.

COPIES FURNISHED:

Mark C. Burton, Esquire

WICKER, SMITH, TUTAN, O'HARA

McCOY, GRAHAM, & FORD, P.A.

1 East Broward Boulevard, Suite 500

Post Office Box 14460

Fort Lauderdale, Florida 33302

William Fred Whitson, Esquire

Department of Insurance

Division of Legal Services

200 East Gaines Street

612 Larson Building

Tallahassee, Florida 32399-0333

Honorable Tom Gallagher

Department of Insurance

State Treasurer/Insurance Commissioner

The Capitol, Plaza Level 02

Tallahassee, Florida 32399-0300

Mark Casteel, General Counsel

Department of Insurance

The Capitol, Lower Level 26

Tallahassee, Florida 32399-0307

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing one copy of a notice of appeal with the Clerk of the

Division of Administrative Hearings and a second copy,

accompanied by filing fees prescribed by law, with the District

Court of Appeal, First District, or with the District Court of

Appeal in the appellate district where the party resides. The

notice of appeal must be filed within thirty (30) days of

rendition of the order to be reviewed.