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PENNSYLVANIA DENTAL ASSOCIATION v. COMMONWEALTH PENNSYLVANIA INSURANCE DEPARTMENT AND MEDICAL SERVICE ASSOCIATION PENNSYLVANIA D/B/A PENNSYLVANIA BLUE SHIELD (10/22/86)

decided: October 22, 1986.

PENNSYLVANIA DENTAL ASSOCIATION, APPELLANT,
v.
COMMONWEALTH OF PENNSYLVANIA INSURANCE DEPARTMENT AND MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA D/B/A PENNSYLVANIA BLUE SHIELD, APPELLEES



Appeal from the Order of Commonwealth Court Dated September 24, 1985, at No. 1284 C.D. 1984, 92 Pa. Commonwealth Ct. 77, Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Hutchinson and Zappala, JJ., concur in the result. Larsen, J., files a dissenting opinion.

Author: Papadakos

[ 512 Pa. Page 220]

Opinion OF THE COURT

Appellant, Pennsylvania Dental Association, is a nonprofit corporation existing under the laws of the Commonwealth of Pennsylvania. Its membership is comprised of over six thousand dentists located throughout Pennsylvania, and constitutes a substantial majority of the dentists licensed and practicing in the Commonwealth. Of this membership, approximately four thousand five hundred dentists are participants who have registered with Appellee, Medical Service Association of Pennsylvania, d/b/a Pennsylvania Blue Shield (hereinafter "Blue Shield").

Blue Shield, of course, is a professional health service corporation, organized and existing under Pennsylvania law. As such, it is regulated by the Professional Health Service Plan Corporations Act, 40 Pa.C.S. §§ 6301, et seq., which is administered by Appellee, the Pennsylvania Insurance Department (hereinafter the "Department" or the "Insurance Department").

On December 21, 1983, Blue Shield submitted Filing No. 10-W-1983 to the Insurance Department. This filing essentially was composed of a letter requesting the Department's approval, pursuant to 40 Pa.C.S. § 6329, of a proposed adjustment to the "profiles" by which Blue Shield calculates payments to participants who render services to Blue Shield subscribers (patients). The filing specifically requested that the Department review and approve an increase of 5.5

[ 512 Pa. Page 221]

    per cent in total Blue Shield payments to participants based on the proposed adjustment to the "profiles."

On January 7, 1984, the Department published a notice of the filing and of opportunity to submit comments in the Pennsylvania Bulletin, pursuant to 40 Pa.C.S. § 6329(b) (relating to procedures for Department approval or refusal of payment applications). § 6329(b), in turn, incorporates procedural requirements set forth at 40 Pa.C.S. § 6102, subsections (c) through (f). Inter alia, subsection (e) requires a "reasonable opportunity for hearing, which shall be public." Subsection (f) generally makes Department orders with respect to such applications subject to judicial review. Under the relevant Insurance Department rules, set forth at 31 Pa. Code, and specifically, 31 Pa. Code § 56.1, the Department hearing scheduled and held in this case was governed by the General Rules of Administrative Practice and Procedure, 1 Pa. Code Part II (with certain exceptions not here relevant).

On behalf of its members who are dentists, Appellant initially sought the opportunity to review and study the statistical basis, if any, for Blue Shield's proposed payment revisions, and only thereafter, to be given the opportunity to submit its comments to the Department. Appellant was unable to do this, however, because the only information provided to it by the Department and Blue Shield was that which was contained in Blue Shield's relatively short application of December 21, 1983.

In a letter to the Department dated February 3, 1984, Appellant (sometimes referring to itself in the letter as "PDA") stated as follows:

In its application to the Department, . . . [Blue Shield] asserts that it is seeking approval of a proposed increase in the rates of payment for services performed by doctors for its subscribers because of a need to ensure that a sufficient number of doctors participate with Blue Shield. As . . . a nonprofit corporation which counts several thousand Blue Shield participating doctors among its members, PDA has a considerable interest in seeing that the

[ 512 Pa. Page 222]

    action proposed by Blue Shield is in fact an increase in its rates of payment to doctors, and, if so, is adequate . . . .

Unfortunately, Blue Shield's application does not include information sufficient to make a determination as to these matters. . . . Blue Shield . . . regularly generates documents which set forth the underlying rationale for actions such as the one it is presently proposing. It seems impossible for the Department to make a reasoned determination on . . . [Blue Shield's request] or for PDA to participate meaningfully in this proceeding unless Blue Shield is required to supplement its application by including these documents.

Accordingly, on PDA's behalf we . . . [request] that the Department . . . require Blue Shield to so supplement its application and to produce for inspection by both the Department and . . . [PDA] all documents . . . relevant to Filing No. 10-W-1983.

(R. 18a-19a.) (Emphasis added.)

Appellant's letter of February 3, 1984, was accompanied by submission of a written Petition to Intervene in the administrative hearing scheduled for February 7, 1984. The Petition appears to have complied with the relevant rules governing intervention, 1 Pa. Code §§ 35.27-35.32. Appellant sought to intervene both to protect the interests of its member dentists and to protect its own interest as a purchaser of a Blue Shield plan for its employees. Appellant expressed concern as to whether the proposed rate increases were adequate and whether a proposed "freezing" technique used in Blue Shield's "profile" calculations was appropriate for dentists. Appellant claimed that it had the right, under the due process clauses of the United States and Pennsylvania Constitutions,*fn1 to insist that Blue Shield submit its underlying data to the Department, and that Appellant had the right to review such data before commenting on the proposed rate increases. At the public hearing held on Blue Shield's request, on February 7, 1984,

[ 512 Pa. Page 223]

Appellant, in a prepared statement, reiterated its two-fold objection concerning the need to have Blue Shield's underlying data submitted. While expressly taking no substantive position on the Blue Shield filing, Appellant orally repeated its request to intervene. The Department, through its Deputy Insurance Commissioner, who was presiding at the hearing, orally rejected Appellant's request to intervene on the theory that the hearing was informal in nature rather than being a formal one (R. 51a). By rejecting the petition to intervene, the Deputy Insurance Commissioner implicitly rejected Appellant's complaint that it had been given insufficient information in order to be able to file meaningful comments. The Deputy Commissioner also orally responded to the objection that the Department had obtained insufficient information to perform rationally its own duty to approve or disapprove the requested rate increase pursuant to 40 Pa.C.S. § 6329(b):

(R. 51a-52a.)

At the hearing, representatives of the Department directed questions to Blue Shield representatives concerning the filing, and also entertained comments from other interested persons. When its petition to intervene was rejected, Appellant took no further part in the proceedings, although it could have done so.

On March 7, 1984, the Department, having delivered no further information to Appellant, approved Blue Shield's initial letter filing by allegedly rubber-stamping a copy of it with the Department's seal. Appellant was not immediately notified of this action approving the proposed rates. No written decision was issued. The payment ...


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