OAG 89-3.

Case DateMarch 17, 1989
CourtOregon
Oregon Attorney General Opinions 1989. OAG 89-3. 155OPINION NO. 89-3[46 Or. Op. Atty. Gen. 155]No. 8199March 17, 1989Mr. Theodore R. KulongoskiDirectorDepartment of Insurance and Finance FIRST QUESTION PRESENTEDAre there any purposes for which the Oregon Medical Insurance Pool or its board of directors is a state agency or is otherwise a public or quasi-public agency? Please specifically address the applicability of the Public Records Law (ORS 192.410 to 192.505), the Public Meetings Law (ORS 192.610 to 192.690), and the Administrative Procedure Act (ORS 183.310 to 183.550).ANSWER GIVENThe Pool is fundamentally a private-sector body, under virtually total private control, created by the state to fulfill a public purpose.The Pool is not a state agency or a public body subject to the Administrative Procedure Act (APA) or the Public Records Law. The Pool is neither a state agency nor a public corporation subject to the Public Meetings Law.SECOND QUESTION PRESENTEDAre the Pool and its board of directors required to be represented by the Attorney General? If not, to what extent may the Pool and its board of directors use the services of the Attorney General?ANSWER GIVENThe legal business of the Pool is not within the state's legal affairs. Accordingly, there is no mandatory representation by the Attorney General. It follows that the Attorney General may not provide advice or legal assistance to the Pool or its board of directors. However, at the request of a state officer or agency, the Attorney General may give legal advice concerning the Pool.THIRD QUESTION PRESENTEDMay the board assess members of the Pool for the purpose of covering losses from claims by insureds, in addition to the assessments of members authorized for organizational and initial operating expenses under ORS Laws 1987, chapter 838, section 19, or does that provision limit to $150,000 the total of all assessments that the board may impose?If the board may not require payment of the additional assessments:(1) May the board accept assessments that the members would pay voluntarily? 156 (2) What legislative changes will be needed in Oregon Laws 1987, chapter 838, or otherwise, in order to authorize the board to impose and enforce assessments?(3) Would the status of the Pool as a public or private body need to be changed in order to provide that authority?ANSWER GIVENThe board may not assess members of the Pool for the purpose of covering losses from claims by insureds; it has authority only to assess members $150,000 for start-up costs. The board may accept voluntary contributions.Senate Bill 583 (1987), which originally proposed creation of the Pool, contained provisions for assessments for claims and losses and also for tax offsets by member insurers. These same provisions could be reintroduced in another legislative session to authorize the board to impose and enforce additional assessments.The Pool's status as a private body probably would not need to be changed in order to provide that authority. See discussion.FOURTH QUESTION PRESENTEDWould the state be liable for losses incurred by the Pool that exceed the Pool's assets? If the state is not liable, where does the ultimate liability for such losses lie?ANSWER GIVENThe state would not be liable for those losses. The Pool itself must bear that liability. If the Pool becomes insolvent, no guaranty fund coverage is provided. The Pool's policyholders bear the ultimate risk of the Pool's insolvency, in that there would be no source of funds to pay benefits under their policies.FIFTH QUESTION PRESENTEDIs a health insurer a "member" of the Pool if the health insurer does not transact medical insurance as defined in ORS 735.605(5)?ANSWER GIVENNo. A health insurer is not a member of the Pool unless it transacts medical insurance within the definition of ORS 735.605(5).SIXTH QUESTION PRESENTEDWould interpretations of federal law by federal courts, such as in General Motors v. California Bd. of Equalization, 815 F2d 1305 (9th Cir 1987), now allow the board to require self-insured plans under the federal Employee Retirement Income Security Act (ERISA) to be members of the 157 Pool? If so, may the board assess both ERISA and non-ERISA self-insurers in the same way as other members of the Pool, and enforce the assessment against those who do not pay?ANSWER GIVENNotwithstanding the General Motors case, the board may not require self-insured plans governed by ERISA to be members of the Pool. Because we answer the first part of the question in the negative, we need not address the second part of the question.SEVENTH QUESTION PRESENTEDWhat protection does ORS 735.630 provide to the Pool and its board of directors and its members, to the Director of the Department of Insurance and Finance and to the employes of all such persons concerning any action taken in the performance of the powers and duties under the Act? To the extent that ORS 735.630 does not provide protection, would the Pool, its board of directors or any of the persons designated in ORS 735.630 be covered under the Oregon Tort Claims Act (ORS 30.260 to 30.300)?ANSWER GIVENORS 735.630 grants the Pool, its board, its members and their employes and agents immunity from tort claims. The director and other state employes are covered by the Oregon Tort Claims Act, ORS 30.260 to 30.300. ORS 735.630 also grants immunity from criminal liability or penalty arising from acts committed in carrying out Pool programs.EIGHTH QUESTION PRESENTEDIs the Pool or the board of directors of the Pool subject to federal income tax?ANSWER GIVENNo. DISCUSSION I. The Pool Is Not a Public Body. Before answering the specific questions, we first consider the overall and general nature of the Pool. We do so in order to address potential concerns about the creation, structure and function of the Pool. For instance, if we were to conclude that the Pool is a governmental body, the essentially private control over the Pool would raise serious constitutional questions concerning delegation of governmental power to private entities. On the other hand, a conclusion that the Pool is fundamentally a private-sector body would raise immediate constitutional issues about the legislature's power to create such an entity.158The Pool is an association, membership in which is a requirement of doing medical insurance business in Oregon. The purpose of the Pool is "to provide access to medical insurance coverage to all residents of this state who are denied adequate medical insurance, while at the same time avoiding undue financial impact on the state and on private insurers." ORS 735.600. The Pool was established by legislative act without any specified term of duration; it may be abolished by legislative act. See generally ORS 735.600 to 735.650. The Pool is a "nonprofit entity." ORS 735.610(1). Certain insurers and self-insurance arrangements must be members of the Pool. Id. An insurer's failure to comply with this requirement would be a basis for regulatory sanction by the Director of the Department of Insurance and Finance (department director). See ORS 731.252 (cease and desist orders); 731.402 (issuance or refusal of a certificate of authority); 731.418 (grounds for suspension or revocation of a certificate of authority); 731.988 (civil penalties). The Pool's members select the initial seven-member board of directors, subject to the department director's approval. ORS 735.610(2). If the members fail to select the board, the department director may appoint the initial board and appoint an administering insurer. ORS 735.610(3). (This provision has not been used; the members already have selected the initial board of directors.) The department director is also a member of the Pool, and either he or his designee chairs the board of directors. ORS 735.610(2). That statute designates different interests which are to be represented by four members of the board. The Pool operates pursuant to a plan of operation, formulated by the board of directors and approved by the department director. ORS 735.610(4). The plan establishes the procedures for the selection, replacement, term of office and qualifications for the directors. ORS 735.610(5)(c). If the board of directors fails, within 180 days of its appointment, to submit a suitable plan or fails to adopt suitable amendments, the department director may adopt rules to effectuate the Pool. ORS 735.610(4). We understand that the Pool's board is working toward preparing a plan of operation. The Pool has the general powers and authority granted under Oregon law to insurance companies with a certificate of authority to transact health insurance. ORS 735.610(6); see also ORS 735.650(3). Specifically, the Pool charges premiums and provides major medical expense coverage. See ORS 735.625. The Pool also may enter into contracts; sue and be sued; take legal action; establish rates; issue policies of insurance; appoint from among its members committees to assist with legal, actuarial or other matters; borrow money; and give obligations of indebtedness. See ORS 735.610(6). The Pool selects, upon competitive bid, an insurer or insurers to administer the Pool. ORS 735.620. The Pool offers coverages established by the department director. ORS 735.625(2). The board, in consultation with the department director, shall annually determine adjusted benefits and premiums. ORS 735.625(4)(d). The Pool is exempt from taxation by the State of Oregon. ORS 735.635...

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