01-003135RU United Wisconsin Life Insurance Company vs. Department Of Insurance Status: Closed DOAH Final Order on Tuesday, November 27, 2001.

Summary: Petitioner alleged that the matters contained in the Department`s Administrative Complaint were rules by definition. Held: the statutes alleged are not statements of the agency and therefore are not rules of the agency.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UNITED WISCONSIN LIFE INSURANCE )

COMPANY, )

)

Petitioner, )

)

vs. ) Case No. 01 - 3135RU

)

DEPARTMENT OF INSURANCE, )

)

Respondent. )

)

FINAL ORDER

Notice was provided and a formal hearing was held on

October 3, 2001, in Tallahassee, Florida, and conducted by

Harry L. Hooper, Administrative Law Judge with the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: John Radey, Esqui re

Harry O. Thomas, Esquire

Donna E. Blanton, Esquire

Katz, Kutter, Haigler, Alderman

Bryant & Yon, P.A.

106 East College Street, Suite 1200

Post Office Box 1877

Tallahassee, Florida 32301

For Respondent: Michael H. Davidson, Esquire

Dennis Silverman, Esquire

Department of Insurance

200 East Gaines Street

612 Larson Building

Tallahassee, Florida 32399 - 0333

STATEMENT OF THE ISSUE

Whether the charges contained in the Administrative

Complaint, which is the subject of Case Number 01 - 2 295, reflect

statements of agency policy which should have been adopted as

rules pursuant to Chapter 120, Florida Statutes.

PRELIMINARY STATEMENT

The Department of Insurance (Department) filed an

Administrative Complaint (Complaint) against United Wi sconsin

Life Insurance Company (United), on May 10, 2001. United

answered the Complaint and requested an administrative hearing.

The hearing was set for September 19, 2001. On August 10, 2001,

United filed a Petition Challenging Agency Statements Define d as

Rules. The agency statements, which were challenged, were

contained in the Complaint. The rule challenge was set for

hearing on October 3, 2001, and the hearing addressing the

Complaint was continued.

This case was heard as scheduled on Octob er 3, 2001. At the

hearing United offered 13 exhibits of which 12 were admitted.

United also presented the testimony of Frank Dino, an actuary

employed by the Department. The Department offered one exhibit

which was admitted. A Transcript was filed on October 18, 2001.

Both parties timely filed Proposed Orders which were considered

in the preparation of this order.

References to statutes are to Florida Statutes (2001) unless

otherwise noted.

FINDINGS OF FACT

The Parties

1. United is a foreig n insurer, domiciled in the State of

Wisconsin holding a certificate of authority from the Department

to transact the business of insurance in this state. It is a

wholly - owned subsidiary of American Medical Securities Group,

Inc.

2. The Department, through its agency head, the Treasurer

and Insurance Commissioner, has regulatory jurisdiction over

United in connection with certain matters set forth in the

Complaint.

The regulatory scheme for out - of - state health insurance companies

3. Health insuranc e companies operating pursuant to

in - state regulatory schemes are subject to oversight regulation

of the corporate entity including financial solvency and market

conduct. Rates are required to be filed and approved prior to

being used in the state. The review process involves a review of

the rates to determine if they are reasonable in relation to the

benefits provided. In regard to this, the Department has rules

which it has adopted pursuant to Chapter 120, Florida Statutes,

which it uses to determine the standards and formulae for making

that determination.

4. Certain out - of - state health insurers, such as United,

are not subject to such stringent regulation. No review of

premium rates is conducted by the Department in the case of these

insurers, but it would be incorrect to state that they are not

subject to regulation by the Department at all. Approximately

40 percent of the health insurance market in Florida is written

through out - of - state group arrangements that do not provide

policyholders consu mer protections afforded to policyholders

holding in - state policies regulated by the Department.

5. United is required by Florida law to provide certain

types of coverage. United must also ensure that certificates of

coverage provided to residents of Flo rida contain the following

language:

The benefits of the policy providing your coverage

are governed primarily by the law

of a state other than Florida. Indent

Background

6. At all times pertinent, American Medical Security, Inc.

(AMS), was a Flo rida - licensed administrator authorized to market

and administer United's out - of - state group health insurance plans

in Florida. AMS, like United, is a wholly - owned subsidiary of

American Medical Securities Group, Inc.

7. In May 1993, United, through AMS, filed for approval

with the Department pursuant to Section 627.5515(2), Florida

Statutes (1993), as an out - of - state group health insurer who

would provide policies to be offered through an Alabama entity

called the Prescription For Good Health Trust, which was formed

primarily for the purpose of providing group insurance. The

Department approved this filing.

8. On March 2, 1995, the Department participated by

conference call in a Regulatory Task Force of the National

Association of Insurance C ommissioners. The mission of the task

force was to attempt to address a number of problems facing the

insurance market. One of the problems discussed was rate

protection for consumers when faced with "tier rating" or "tier

blocking." The two terms are s ynonymous and mean, as to group

health insurance, reclassifying insureds subsequent to having

been initially placed in a class. This practice will be

discussed in more detail below.

9. In 1996, United made a filing for the Prescription For

Good Hea lth Trust which proposed tier rating. Sometime during

1996, after the Department objected to the filing, United

withdrew it. The Department had never seen such a filing

previously. United is the only health insurer to assert before

the Department that r eclassification by movement between classes

would be permissible under the Florida Insurance Code.

10. Section 627.6515(1), Florida Statutes, provides that a

group health insurance policy issued or delivered outside this

state under which a resident of Florida is provided coverage,

shall comply with the provisions of Part VII, of Chapter 627,

Florida Statutes, in the same manner as health policies issued

within the state. Part VII of Chapter 627, Florida Statutes,

provides for a comprehensive regulat ory scheme for group health

insurance. Section 627.6515(2), Florida Statutes, however, sets

forth a number of exemptions. Section 627.6515(2), Florida

Statutes, provides an exemption for an insurer like United, which

provides health insurance through an association formed for a

purpose other than that of offering insurance, which provides the

language referred to in paragraph 5, supra , on the face of the

certificate, and which offers the bundle of coverages provided in

Subsection (c). This exemption appl ied to the Prescription For

Good Health Trust.

11. The Department concedes that it has no authority to set

premium rates for out - of - state insurers like United.

12. In November 1996, United through AMS, filed with the

Department, pursuant to Se ction 627.6515(2), Florida Statutes, a

request for approval of an out - of - state group health insurance

policy termed the "MedOne Choice" plan. This plan was to be

offered through an Ohio association called the Taxpayers'

Network, Inc. (TNI). The associati on was formed primarily for

purposes other than providing insurance. In January, 1997, the

filing was accepted by the Department as meeting the requirements

of Section 627.6515(2), Florida Statutes.

13. Chapter 96 - 223, Laws of Florida, created Secti on

627.6425, Florida Statutes, effective May 25, 1996. When

created, the section only addressed the renewability of

individual coverage. Chapter 97 - 179, Laws of Florida,

substantially amended Section 627.6425, Florida Statutes,

effective May 30, 1997. S ubsequent to the amendment, the section

addressed certificates of coverage offered to individuals in the

state as part of a group policy. This statute, along with

Sections 627.6571 and 627.6487, Florida Statutes, implemented the

federal Health Insurance P ortability and Accountability Act

(HIPAA). The basic theory of the HIPAA legislation is that an

insurance company cannot simply cancel a health insurance policy

without providing other options.

14. On or about September 25, 1998, United, through AM S,

notified all Prescription For Good Health Trust certificate

holders that the policy forms through which their coverage had

been provided were being discontinued, effective as of each

certificate holder's 1999 renewal date.

15. Upon discontinuanc e of the Prescription For Good Health

Trust Plans, the only United health insurance plans available in

Florida were the MedOne Choice plans offered through TNI.

16. Membership in TNI was available to anyone upon

submitting an application form and pa ying the membership fee.

Membership in TNI was a prerequisite to continuance of a persons'

health insurance coverage under United's MedOne Choice plan.

United guaranteed each certificate holder, upon joining TNI, that

upon request, they would be issued c overage under the Classic

Benefit Plan (one of the TNI MedOne Choice plans) without regard

to their health status. However, there was no guarantee that

premiums would not rise.

17. Certificate holders were also advised that if they

desired coverage under a MedOne Choice plan other than the

guaranteed issue Classic Benefit plan, they could apply for any

of the other TNI plans. Only if the applicant met the

underwriting guidelines for the plan for which they applied,

would they be issued coverage unde r another MedOne Choice plan.

18. Between October 1998 and early January 1999, United

responded to questions and concerns raised by the Department

about the decision to discontinue the Prescription For Good

Health Trust plan, and whether the plan of discontinuance was in

compliance with Section 627.6425, Florida Statutes.

Specifically, discussions were had concerning the movement of

insureds from the class in which they were originally assigned to

another class at the time of renewal.

19. Unite d entered an agreement with the Department on

January 14, 1999, whereby United would offer to certificate

holders an additional guaranteed issue TNI plan and would cap the

rate for the guaranteed issue plans at no more than twice the

premium then currently being paid for the discontinued

Prescription For Good Health Trust plan. In accordance with this

agreement, United notified certificate holders of the additional

guaranteed issue option available to them.

20. Later in 1999, United discontinued the trust plan in

accordance with their agreement with the Department. During the

process of discontinuance, no certificate holder requested

conversion coverage under Section 627.6675, Florida Statutes.

Section 627.6675, Florida Statutes, provides that an in sured may

assert his or her right to a "converted policy," which provides

for certain health insurance continuation rights.

21. The Department determined that United's rate for the

conversion policy, pursuant to the agreement, was within 200

percent of the standard risk rate and that the notice of the

conversion privilege was contained in the certificate of coverage

issued to Florida residents. Thus, the Department concluded that

United was in compliance with the agreement of January 14, 1999.

2 2. On May 19, 1999, a Department letter informed a

consumer that the discontinuance of her coverage by United did

not mean she was being discriminated against because the policy

had been terminated for all members. The letter further recited

that the Dep artment did not have the ability to regulate United

because it was not domiciled in Florida and her insurance was

being provided to a group, referring to TNI, that was not

registered in Florida.

23. On July 27, 1999, a Department letter informed a

consumer that United had an obligation to offer a replacement

policy but that United had the right to underwrite the policy and

charge additional premium. This statement also referred to TNI.

24. Section 627.6425(1), Florida Statutes, provides that

"except as otherwise provided in this section, an insurer that

provides individual health insurance coverage to an individual

shall renew or continue in force such coverage at the option of

the individual." For the purpose of the aforementioned Section,

t he term "individual health insurance" means health insurance

coverage, as described in Section 627.6561(5)(a)2, Florida

Statutes, offered to an individual in the state, "including

certificates of coverage offered to individuals in the state as

part of a gr oup policy issued to an association outside this

state. . . ."

25. As noted earlier, Section 627.6425, Florida Statutes,

is one of the statutes enacted in Florida which implemented

HIPAA. HIPAA provides for continuation of health insurance of an

in sureds health policy but does not limit the premiums which an

insurer can charge for coverage. Although Section 627.6425,

Florida Statutes, does not have the words "guaranteed renewable"

contained within the statute, the gist of the statute is that if

a p erson has a health policy, the person has the right to

continued coverage. The Department contends that the statute

also means that there can be no reclassification or movement

between classes at the time of renewal.

26. On March 30, 2000, the Depar tment notified United that

it believed the discontinuance of Prescription For Good Health

Trust plan, in accordance with the January 1999 agreement, may

have violated Section 627.6425, Florida Statutes.

27. A Department publication dated January 4, 2001,

entitled, "The Florida Health Insurance Market, Issues and

Possible Market Reform Measures," noted that there are "an

increasing number of carriers attempting to establish HIPAA

eligible individuals as a separate rating class with premium

charges ra nging from 300 to 500 percent of standard rates.

While the Department has found such a rating practice to be in

violation of the Florida Insurance Code, many carriers have

continued to protest this interpretation. Carriers contend the

surcharge practice is both actuarially sound and interpreted as a

HIPAA permissible practice by other states."

28. In the 2001 legislative session, the Department sought

additional regulatory authority concerning out - of - state group

insurers, such as United, along with numerous other changes to

the Florida Insurance Code which are unrelated to the issues

addressed in this Order. The Florida Legislature failed to

approve the requested legislation.

Tier rating

29. When a group health policy is underwritten, the mem bers

of the group may be divided into classes. The classes are based

on risk, which is a function of the probability of claims and the

cost of claims.

30. Classes may be denominated, for example, as preferred,

manual, and substandard. Very health y persons are put in the

preferred class and pay lower premiums relative to other classes.

Average persons are put in the manual class because the

likelihood and cost of claims may be average. Persons who for

actuarial reasons are determined to have an a bove - average

likelihood of claims and whose claims are apt to be costly, are

placed in the substandard class. It, perhaps, goes without

saying that the individuals in the substandard class must pay

higher premiums for the same coverage as others in the gr oup.

31. If the group health policy is guaranteed renewable,

certificate holders may continue their coverage. However,

premiums within a class can be increased. It is general industry

practice to increase the premiums by class when the time for

ren ewal occurs, if the loss experience is such that there is a

requirement to increase premiums. As earlier noted, the

Department asserts that only by raising premiums for an entire

class may premiums be raised. The Department insists that this

requirement is part of the definition of "guaranteed renewable."

32. It became United's practice to move insureds between

classes. Therefore, for instance, if a person in the group who

had been a member of the preferred class experienced the need for

costly med ical services, then that person might be moved to the

manual or substandard class. This would inevitably result in

that person paying an increased premium. On the other hand, a

person in the substandard class, who was subsequently determined

to be a good risk, might be moved to the preferred or manual

class and experience reduced premiums as a result.

33. When a substandard class becomes populated with persons

who cause the payment of costly claims, premiums increase within

that class. Premiums may increase to the point where persons

egress the plan, which leaves the class with fewer and sicker

members. Eventually, under such a plan, there will be no

members, because the premiums will inflate to the point that the

benefits, in relation to the amoun t of the premium, will render

the plan uneconomical. This sequence of events is often referred

to as the health insurance "death spiral."

34. One of the asserted evils which the Department seeks to

combat in the Complaint is the "death spiral."

HI PAA eligibles

35. In 1996, when HIPAA became law and Florida enacted laws

to implement it, a practice sometimes referred to as "rating up"

occurred among some carriers in the industry. As noted earlier,

HIPAA and the state statutes implementing it, guarantee that an

individual, who through no fault of his own, loses his or her

group health insurance coverage has the opportunity to obtain

substitute health insurance. A person in this category is

referred to as HIPAA eligible.

36. Companies pro viding insurance under these laws are

cognizant of the fact that persons in good health generally

decline to purchase this type of insurance but that persons who

are in bad health, and who will, therefore, likely have costly

claims, will purchase it if the y can afford it. This results in

a desire on the part of insurers, to charge higher premiums for

HIPAA eligible persons than they might charge persons in a

comparable, non - HIPAA plan.

37. It is a permissible underwriting practice to take into

cons ideration age, health, and a myriad of other actuarial

considerations when developing premium rates for HIPAA eligibles.

If an insurer factors in the knowledge that unhealthy persons are

more likely than healthy persons to obtain a policy based on

HIPAA a nd charge higher premiums as a result, then "rating up"

occurs. The Department contends in its Complaint that "rating

up" is discriminatory and, therefore, forbidden by the Unfair

Insurance Trade Practices Act (UITPA), Section 626.951, et seq .,

Florida St atutes . United allegedly arrives at rates for HIPAA

eligibles solely based on the fact that the individuals are HIPAA

eligible which if true, would be "rating up."

38. Immediately prior to April 30, 1998, the Department

received a memorandum from the federal Health Care Financing

Administration addressing three general problems with insurance

practices regarding HIPAA eligibles. One of the three problems

addressed in the memorandum was the practice of "rating up."

In response, the Department iss ued Informational Memorandum

98 - 103M on April 30, 1998, addressing the three problems. The

Department announced that it had concerns similar to that of the

Health Care Financing Administration, and would address them in

administrative rules implementing HIPAA and Chapter 97 - 179, Laws

of Florida. However, no rules addressing these concerns have

been adopted.

39. Insurance carriers disagree with the Department as to

whether "rating up" is unfairly discriminatory and therefore a

violation of the UITPA . The Department is addressing these

differences on a case - by - case basis in the course of market

conduct examinations. The evidence adduced at the hearing did

not elucidate exactly what "addressing these differences on a

case - by - case basis in the course of market conduct examinations"

means. Count Three in the Complaint represents the first time an

administrative action has been brought against an insurer

addressing this practice.

The definition of guaranteed renewable

40. Chapter 4 - 149, Florida Ad ministrative Code, is entitled

"Filing of Forms and Rates for Life and Health Insurance."

Rule 4 - 149.006(4)(o)3, Florida Administrative Code, provides for

a definition of "guaranteed renewable." However, Chapter 4 - 149,

Florida Administrative Code, does not address out - of - state group

health insurers, such as United, because the Department has no

authority to require the filing of forms and rates in the case of

out - of - state health insurers like United.

41. A life and health insurance treatise writt en by Black

and Skipper states that the definitions of the categories of

renewable health insurance policies are not uniform among the

states.

42. It is the Department's position that

Section 627.6425, Florida Statutes, applies to out - of - state

trust s, such as United's Prescription For Good Health Trust, even

though the word "trust" is not used in the statute.

43. It is apparent that if there is no limit on the amount

of premium a health insurer can charge at the time of renewal, a

guarantee o f renewal can be meaningless. This fact is

ameliorated by rate - setting in the case of highly regulated

health insurers such as domestic insurers.

44. In the context of this case, it is not the renewability

of a policy that is the gist of the proble m. Rather, it is

whether rates can be increased on persons through the movement of

insureds from one class to another.

The allegations of the Complaint

45. In order to determine which statements are alleged to

be unadopted rules, it is necessary t o refer to Counts Two

through Seven of the Complaint. These counts will be summarized,

in seriatim .

46. Count Two alleges that persons who continued their

participation in TNI were unlawfully and unfairly discriminated

against because some members w ere reclassified based on their

health status present at that time (1999), rather than being

retained in the class in which they resided when the policy was

initially issued. The Petition alleges, inter alia , that this

practice violated Section 626.9541(1 )(g)2., Florida Statutes,

which is a section in the UITPA. This statement is alleged in

the Petition to be a statement of general applicability.

47. Count Three alleges that all of those individuals

formerly covered through the Prescription For Good Health Trust

who were at the time of their discontinuance HIPAA eligible,

were, arbitrarily and without regard to health status, assigned a

premium rate of either three or five times the base rate for TNI

as a whole. Count Three alleges that this assignm ent unfairly

discriminated against the HIPAA eligible individuals who were of

the same actuarially supportable class and essentially the same

hazard. Count Three further alleges, inter alia , that this

violated Section 626.9541(1)(g)2., Florida Statutes. This

statement is alleged in the Petition to be a statement of general

applicability.

48. Count Four alleges that the enactment of Section

627.6425, Florida Statutes, in 1996, as amended in 1997,

statutorily determined that the Prescription For Good Health

Trust plan was "guaranteed renewable" as that term is used and

understood in the insurance industry. It further alleged that

the term "guaranteed renewable” means that once an insurer

classifies an individual as a member of an actuarially

supportab le class for rate and premium applicable to the

specified coverage, that individual may not thereafter be charged

a premium which is different from any other member of the same

class and cannot be moved to another class. The complaint states

that United u nlawfully moved insureds from one class to another.

49. Count Four additionally alleged that when United

discontinued the Prescription For Good Health Trust, the

prerequisite for individuals to obtain renewed health insurance

coverage was reclassifi cation of some of those individuals to

different actuarially supportable classes based on their health

status then pertinent to those individuals. It was further

alleged that higher premiums were charged to approximately

70 percent of those who renewed o r continued, and that premium

increases of 200 percent to 300 percent were experienced. Count

Four asserted that Section 627.6425(3), Florida Statutes,

prohibits such reclassification. Count Four also alleges, inter

alia , that this violated Section 626.9 541(1)(g)2., Florida

Statutes, because such reclassification was discriminatory. This

statement is alleged in the Petition to be a statement of general

applicability.

50. Count Five alleges that on the one year anniversary of

renewal with TNI, Unite d unlawfully reclassified additional

individuals which resulted in a premium increases of up to

60 percent. Count Five alleges, inter alia , that this violated

Section 626.9541(1)(g)2., Florida Statutes, because this action

was discriminatory. This stat ement is alleged in the Petition to

be a statement of general applicability.

51. Count Six alleges that within the tier blocks described

in Count Two, United unlawfully established numerous sub -

classifications based on health related factors pertinen t to each

individual within that class. It is alleged in the Complaint

that these sub - classifications resulted in individuals within the

same class being charged a different premium than are other

members of the class. Count Six alleges, inter alia , that this

violated Section 626.9541(1)(g)2., Florida Statutes, because this

action was discriminatory. This statement is alleged in the

Petition to be a statement of general applicability.

52. Count Seven alleges that United used a point debit

system wh ere an arithmetic number of points are assigned to a

corresponding health hazard. The higher the cumulative debit

score, the higher the premium. United will decline to insure at

all if the cumulative debit score gets sufficiently high. Count

Seven alleg es that the assignment of points with no criteria for

decision - making results in arbitrary and discriminatory point

scores. Count Seven alleges, inter alia , that this violated

Section 626.9541(1)(g)2., Florida Statutes. This statement is

alleged in the P etition to be a statement of general

applicability.

53. In summary, the three statements alleged to be rules

are:

A. Practicing tier rating is discriminatory and violates

the UITPA.

B. Placing HIPAA - eligible individuals in a premium

class ification solely on the basis of their HIPAA eligible status

is discriminatory and violates the UITPA.

C. The term "guaranteed renewable" prohibits the

classification of individuals in a health insurance group at

a time other than at the inception of coverage.

CONCLUSIONS OF LAW

54. United is "substantially affected" by the challenged

agency statements and has standing to bring this proceeding

pursuant to Section 120.56(4), Florida Statutes. The alleged

statements were articulated in a Compla int directed at United

that is pending before the Division of Administrative Hearings.

55. The Petition challenges three Department statements

defined as rules. A Department statement that is the equivalent

of a rule must be adopted according to the rulemaking procedures

in the Florida Administrative Procedure Act, Chapter 120, Florida

Statutes (APA). Environmental Trust, Inc. v. State Department

of Environmental Protection , 714 So. 2d 493 (Fla. 1st DCA 1998)

and Christo v. State Department of Bank ing & Finance , 649 So. 2d

318 (Fla. 1st DCA 1995).

56. In a proceeding pursuant to Section 120.56(4), Florida

Statutes, the issue to be decided is whether the challenged

Department statement "violates s. 120.54(1)(a)." That section

provides in relev ant part:

(a) Rulemaking is not a matter of agency

discretion. Each agency statement defined as a

rule by s. 120.52 shall be adopted by the

rulemaking procedure provided by this section as

soon as feasible and practicable.

57. Section 120.52(15), F lorida Statutes, defines "rule" in

relevant part as follows:

"Rule" means each agency statement of general

applicability that implements, interprets, or

prescribes law or policy or describes the

procedure or practice requirements of an agency

and includes any form which imposes any

requirement or solicits any information not

specifically required by statute or by an existing

rule.

58. Section 626.9521, Florida Statutes, provides as

follows:

UNFAIR METHODS OF COMPETITION AND UNFAIR OR

DECEPTIVE ACTS O R PRACTICES PROHIBITED;

PENALTIES -- .

(1) No person shall engage in this state in

any trade practice which is defined in this

part as, or determined pursuant to s. 626.951

or s. 626.9561 to be, an unfair method of

competition or an unfair or deceptive act or

practice involving the business of insurance.

(2) Any person who violates any provision of

this part shall be subject to a fine in an

amount not greater than $2,500 for each

nonwillful violation and not greater than

$20,000 for each willful violation . Fines

under this subsection may not exceed an

aggregate amount of $10,000 for all

nonwillful violations arising out of the same

action or an aggregate amount of $100,000 for

all willful violations arising out of the

same action. The fines authorized by this

subsection may be imposed in addition to any

other applicable penalty

59. Section 626.9541(1)(a)1, Florida Statutes, provides as

follows:

(1) UNFAIR METHODS OF COMPETITION AND UNFAIR

OR DECEPTIVE ACTS. -- The following are defined

as unfair m ethods of competition and unfair

or deceptive acts or practices:

(a) Misrepresentations and false advertising

of insurance policies . -- Knowingly making,

issuing, circulating, or causing to be made,

issued, or circulated, any estimate,

illustration, circul ar, statement, sales

presentation, omission, or comparison which:

1. Misrepresents the benefits, advantages,

conditions, or terms of any insurance policy.

60. Section 626.9541(1)(g)2., Florida Statutes, provides as

follows:

(1) UNFAIR METHODS OF COMPETITION AND UNFAIR

OR DECEPTIVE ACTS. -- The following are defined

as unfair methods of competition and unfair

or deceptive acts or practices:

* * *

(g) Unfair discrimination. --

* * *

2. Knowingly making or permitting any unfair

discrimination be tween individuals of the

same actuarially supportable class and

essentially the same hazard, in the amount of

premium, policy fees, or rates charged for

any policy or contract of accident,

disability, or health insurance, in the

benefits payable thereunder , in any of the

terms or conditions of such contract, or in

any other manner whatever.

61. The first question to be resolved is whether any of the

three statements challenged by United meet the definition of a

"rule" as that term is defined in Secti on 120.52(15), Florida

Statutes. If the statements alleged to be rules in the Complaint

are not rules, then the inquiry needs to go no further.

62. In determining whether or not these statements amount

to rules by definition, it is important to note as a threshold

matter, that for the purposes of this order, the merit, or lack

thereof, of the Department's position in the Complaint is not at

issue here. In other words, whether the facts asserted in the

complaint can be proven, and if so, whether they are violations

of the Florida Insurance Code, are matters which await decision

on another day.

63. Rulemaking is required only for an agency statement

that is the equivalent of a rule, which is defined in Section

120.52(15), Florida Statutes. Envir onmental Trust, Inc. v. State

Department of Environmental Protection , 714 So. 2d 493, 498 (Fla.

1st DCA 1998).

Are the matters alleged in the Complaint agency statements ?

64. It would be inappropriate to speculate in this Order,

as to whether the Dep artment may have made statements reflecting

generally applicable policies substantially affecting parties

through other media which are similar to the allegations of the

Complaint. What is clear, however, is that the matters alleged

in the Complaint, whic h are the subject of this litigation, are

not agency statements.

65. Sections 626.9541, 626.9541(1)(a)1, and 26.9541(1)(g)2,

Florida Statutes, are, taken together, statutes which prohibit

described conduct. They are penal in nature. Some of the

s ections in the UITPA provide for criminal sanctions. They are

announcements of policy enacted into law by the Florida

Legislature. They represent the policy of the state. Because

the Department is the agency charged with implementing these

statutes, the Department is free to allege facts which might

prove to be violations of these statutes, without resort to

explanatory rules.

66. It seems unlikely that the Florida Legislature intended

that allegations under a prohibitory or penal statute could be

subject to collateral attack through a Section 120.54, Florida

Statutes, rule challenge. Such a procedure could result in two

hearings each time a regulatory action was brought by an agency.

In the pursuit of justice through the administrative process,

s implicity and economy of resources are primary goals.

Permitting collateral challenges in enforcement cases

unreasonably derogate those goals.

67. In any event, the "statements" alleged in the Petition

to be rules by definition, are not statements o f the Department.

They are pleadings pertaining to alleged violations of a Florida

Statute. Therefore they are not rules by definition. It is

further apparent that the proper forum for the resolution of the

matters contained in the Complaint is a procee ding pursuant to

Section 120.57(1), Florida Statutes.

FINAL ORDER

Based upon the Findings of Fact and Conclusions of Law,

it is ORDERED:

That United Wisconsin Life Insurance Company's Petition

Challenging Agency Statements Defined as Rules, is dism issed.

DONE AND ORDERED this 27th day of November, 2001, in

Tallahassee, Leon County, Florida.

___________________________________

HARRY L. HOOPER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

T allahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 27th day of November, 2001.

COPIES FURNISHED :

Michael H. Davidson, Esqu ire

Dennis Silverman, Esquire

Department of Insurance

200 East Gaines Street

612 Larson Building

Tallahassee, Florida 32399 - 0333

John Radey, Esquire

Harry O. Thomas, Esquire

Donna E. Blanton, Esquire

Katz, Kutter, Haigler, Alderman,

Bryant & Yon, P .A.

106 East College Avenue, Suite 1200

Post Office Box 1877

Tallahassee, Florida 32301

Honorable Tom Gallagher

State Treasurer/Insurance Commissioner

Department of Insurance

The Capitol, Plaza Level 02

Tallahassee, Florida 32303 - 4149

Mark Casteel, Gen eral Counsel

Department of Insurance

The Capitol, Plaza 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 fi ling 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 30 days

of rendition of the order to be revie wed.