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NATHAN D. APPLE v. COMMONWEALTH PENNSYLVANIA (07/13/81)

decided: July 13, 1981.

NATHAN D. APPLE, D.D.S. ET AL., PETITIONERS
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF INSURANCE AND PENNSYLVANIA DENTAL SERVICE CORPORATION T/D/B/A DELTA DENTAL OF PENNSYLVANIA, RESPONDENTS



Appeal from the Order of the Insurance Commission of the Commonwealth of Pennsylvania in the case of In Re: Nathan D. Apple, D.D.S., John B. Bubeck, D.D.S., Daniel D. Cohen, D.D.S., John I. Gilson, D.D.S., Frederick M. Keiper, D.D.S., Charles M. Ludwig, D.D.S., William F. Marfizo, D.D.S., Ronald W. Niklaus, D.D.S., George M. Shopp, D.D.S., and John T. Ziegler, D.D.S. v. Pennsylvania Dental Service Corporation, alias Delta Dental of Pennsylvania, No. R78-12-11.

COUNSEL

Thomas A. Beckley, with him Bradley S. Gelder, Beckley & Madden, for petitioners.

David T. Kluz, Assistant Attorney General, with him Albert J. Strohecker, III, Assistant Attorney General, and Harvey Bartle, III, Acting Attorney General, for respondent, Commonwealth of Pennsylvania, Department of Insurance.

James H. Stewart, Jr., with him Spencer G. Nauman, Jr., Nauman, Smith, Shissler & Hall, for respondent, Delta Dental of Pennsylvania.

President Judge Crumlish and Judges Blatt and MacPhail, sitting as a panel of three. Opinion by President Judge Crumlish.

Author: Crumlish

[ 60 Pa. Commw. Page 494]

This appeal by ten Pennsylvania dentists, the Pennsylvania Dental Association (DPA), and two of its employees is rooted in an Insurance Commission order dismissing their complaint against the Pennsylvania Dental Service Corporation, a/k/a Delta Dental Association of Pennsylvania (Delta). It held that they lacked standing to litigate alleged violations of the Professional Health Services Plan Corporations Act (PHSPCA) and the Unfair Insurance Practices Act (UIPA).*fn1 We affirm.

Delta operates a certified non-profit dental service plan designed to provide dental care to low-income persons or their dependents without sacrificing the necessities of life. 40 Pa. C.S. ยง 6303. The licensed practicing dentists have no contractual relationship with Delta as qualified dental care providers. Rather, they are classified as "non-participating" dentists who perform dental services for patients holding Delta dental coverage but do not receive payment from Delta for their services. Instead, payment is made directly by Delta to the patients who in turn must pay their non-participating dentists. On the other hand, "participating" dentists have a contractual arrangement with Delta through which they receive direct payment.

[ 60 Pa. Commw. Page 495]

On August 22, 1977, Delta initiated a new payment policy for non-participating dentists, by which coverage is limited to 88% of the customary and reasonable charge for services rendered to participating dentists as distinguished from 100% reimbursement. Delta then publicized this new payment policy and identified "participating" dentists to its subscriber groups. Although implemented, this "two-tier" payment system was not approved by the Insurance Department.*fn2 After initial disapproval, Delta resubmitted a proposal to the Insurance Department allowing for a "two-tier" plan designed to reimburse non-participating dentists at the rate of 88% of the usual, customary and reasonable rate. Delta was informally advised that the Department would not approve the proposal as filed, but continued payment on this basis.

On December 19, 1978, a group of these non-participating dentists filed a complaint with the Department claiming that the 12% payment differential was prohibited by statute. On February 20, 1979, Delta responded with an answer and a motion to dismiss, raising lack of standing and failure to state a cause of action upon which relief could be granted.

Following negotiations between Delta and the Department, a consent order was entered on May 11, 1979, whereby the 100% payment plan was approved and the 88% "two-tier" plan was withdrawn from Department consideration. However, the Department did permit existing service contracts to remain in effect for one year or ...


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