DC Appleseed Center for Law and Justice, Inc., et al., Petitioners/Intervenors,
District of Columbia Department of Insurance, Securities and Banking, Respondent.
April 17, 2019
Petitions for Review of Orders of the District of Columbia
Department of Insurance, Securities and Banking MIE-19-14 and
Smith, with whom Richard B. Herzog, Marialuisa Gallozzi, Beth
Brinkmann, and Bradley K. Ervin were on the brief, for
petitioner-intervenor DC Appleseed Center for Law and
H. Schertler, with whom David Schertler and Danny C. Onorato
were on the brief, for petitioner-intervenor Group
Hospitalization and Medical Services, Inc.
C. McKay, Jr., with whom Karl A. Racine, Attorney General for
the District of Columbia, Loren L. AliKhan, Solicitor
General, and Caroline Van Zile, Deputy Solicitor General,
were on the brief, for respondent.
Michelle S. Kallen, with whom Toby J. Heytens, Solicitor
General for the Commonwealth of Virginia, and Matthew R.
McGuire, Principal Deputy Solicitor General at the time the
brief was filed, were on the brief, for intervenor Mark
Herring, Attorney General of the Commonwealth of Virginia.
Thompson was on the brief for amicus curiae Mary M. Cheh,
District of Columbia Councilmember, in support of
petitioner-intervenor DC Appleseed Center for Law and
Glickman and McLeese, Associate Judges, and Washington,
MCLEESE, ASSOCIATE JUDGE:
DC Appleseed Center for Law & Justice, Inc. (Appleseed)
and Group Hospitalization and Medical Services, Inc. (GHMSI)
seek review of orders of respondent, the District of Columbia
Department of Insurance, Securities and Banking (DISB),
determining that GHMSI's 2011 surplus was excessive, that
the excess surplus attributable to the District was
approximately $50 million, and that GHMSI was required to
distribute its excess surplus in the form of rebates to
eligible subscribers of GHMSI. We remand for further
Factual and Procedural History
matter has previously been before this court. D.C.
Appleseed Ctr. for Law & Justice, Inc. v. District of
Columbia Dep't of Ins., Sec., & Banking
(Appleseed I), 54 A.3d 1188 (D.C. 2012). The
following background material is taken in significant part
from our prior opinion, supplemented and revised as necessary
to reflect subsequent developments.
is the successor to Group Hospitalization, Inc., a nonprofit
organization created in 1939 by congressional charter to
provide health-care services and medical insurance. Pub. L.
No. 76-395, §§ 3, 8, 53 Stat. 1412, 1413-14 (1939);
Pub. L. No. 98-493, § 1, 98 Stat. 2272 (1984). Organized
as a "charitable and benevolent institution," GHMSI
"shall be conducted for the benefit of [its] certificate
holders." Pub. L. No. 76-395, §§ 3, 8, 53
Stat. 1413-14. GHMSI conducts business in the District,
Maryland, and Virginia.
GHMSI initially was not subject to the statutes regulating
the business of insurance in the District, Congress amended
GHMSI's charter in 1993 to domicile GHMSI in the District
and place GHMSI under the District's regulatory
authority. Pub. L. No. 103-127, § 138, 107 Stat. 1336,
1349 (1993). Such regulatory authority includes review and
approval of GHMSI's proposed health-insurance premium
rates. D.C. Code § 31-3311.01 et seq. (2012 Repl.). D.C.
law also requires GHMSI to maintain certain risk-based
capital levels and to report those levels on an annual basis
to the DISB Commissioner. D.C. Code § 31-3451.01 et seq.
1998, GHMSI affiliated with CareFirst of Maryland, Inc. GHMSI
and CareFirst of Maryland jointly own CareFirst BlueChoice,
Inc. GHMSI is a licensee of the Blue Cross Blue Shield
The Medical Insurance Empowerment Amendment Act
2009, the Council of the District of Columbia enacted the
Medical Insurance Empowerment Amendment Act (MIEAA). D.C. Law
17-369, 56 D.C. Reg. 1346 (Feb. 13, 2009) (codified as
amended at D.C. Code § 31-3501 et seq. (2012 Repl. &
2019 Supp.)). The MIEAA authorizes the Commissioner of DISB
to determine whether a medical-services corporation's
surplus is "excessive" and to order that any excess
surplus be reinvested in "community health." D.C.
Code § 31-3506(e), (g)(1) (2019 Supp.). Specifically,
the MIEAA and subsequent amendments added a new subsection to
D.C. Code § 31-3506, which now states in relevant part:
The Commissioner may, on an annual basis, and shall, on a
basis no less frequently than every 3 years, review the
portion of the surplus of the corporation that is
attributable to the District and may issue a determination as
to whether the surplus is excessive. Any such review shall be
undertaken in coordination with the other jurisdictions in
which the corporation conducts business. The surplus may be
considered excessive only if:
(1)The surplus is greater than the appropriate risk-based
capital requirements as determined by the Commissioner for
the immediately preceding calendar year; and
(2)After a hearing, the Commissioner determines that the
surplus is unreasonably large and inconsistent with the
corporation's obligation under § 31-3505.01.
D.C. Code § 31-3506(e); see also D.C. Law
18-104, 56 D.C. Reg. 9182 (Dec. 4, 2009); D.C. Law 19-171, 59
D.C. Reg. 6190 (June 1, 2012).
Code § 31-3505.01 requires GHMSI and similar entities to
"engage in community health reinvestment to the maximum
feasible extent consistent with financial soundness and
efficiency." The MIEAA also provides that "[i]n
implementing the provisions of the [MIEAA], the Commissioner
shall consider the interests and needs of the jurisdictions
in the corporation's service area." D.C. Code §
31-3506.01(b) (2012 Repl.).
Surplus Requirements and Excess Surplus
is required to maintain a surplus of capital to cover its
projected risk, development costs, and growth. D.C. Code
§ 31-3451.01 et seq. The National Association of
Insurance Commissioners (NAIC) has developed widely accepted
risk-based capital (RBC) formulae to determine the minimum
amount of capital an insurer should hold to support its
business operations. The baseline figure in the RBC formula
is the authorized control level (ACL), which is a reference
value that accounts for the insurer's size, structure,
and volume of risk. The District of Columbia has adopted
statutory minimum requirements for insurance companies'
surplus levels, expressed as an RBC-ACL ratio. D.C. Code
§§ 31-2001 to -2013 (2012 Repl. & 2019 Supp.).
health insurer's RBC-ACL ratio falls under certain
statutory levels, company or regulatory action is authorized
or required. D.C. Code §§ 31-3451.01 to .06. For
example, if an insurer's surplus falls below 200%
RBC-ACL, the insurer must submit a plan to the Commissioner
identifying the conditions that led to that event and
proposing corrective actions to bring the surplus up to a
safer level. D.C. Code §§ 31-3451.01(6), .03. If an
insurer's surplus falls to lower RBC-ACL levels, the
Commissioner is authorized or obligated take increasingly
corrective actions. D.C. Code §§ 31-3451.04 to .06.
Additionally, as a licensee of BCBSA, GHMSI is subject to
contractual RBC-ACL standards set by BCBSA. Specifically,
early-warning monitoring is triggered if a BCBSA
licensee's surplus falls below 375% RBC-ACL, and the
licensee must take certain corrective actions. The
Commissioner is required to consider NAIC's RBC
requirements and BCBSA's capital requirements in
determining whether a medical-services corporation's
surplus is excessive. 26A DCMR § 4601.4 (2019).
promulgated by DISB in 2009 establish further procedures for
the Commissioner's review of medical-services
corporations' surplus. 26A DCMR § 4600 et seq.
(2019). The regulations require medical-services corporations
such as GHMSI to file an annual financial report with DISB
detailing "the company's surplus and examin[ing]
whether the company's surplus is considered excessive
under the [MIEAA]." 26A DCMR § 4601.1. If the
Commissioner preliminarily determines that the company's
surplus is excessive, the regulations require a public
hearing "to determine whether the company's surplus
is excessive and unreasonably large." 26A DCMR §
4601.5. If the Commissioner makes a final determination that
a company's surplus that is attributable to the District
is excessive, the Commissioner must order the company to
submit a plan for dedication of the excess surplus to
community-health reinvestment. D.C. Code §
31-3506(g)(1); 26A DCMR § 4603.1.
DISB's 2008 Surplus Determination and Appleseed
2010, the Commissioner concluded that GHMSI's 2008
year-end surplus was neither unreasonably large nor
excessive. Appleseed, which is a consumer of health
insurance, a subscriber of GHMSI, and an organization with
goals including improving access to healthcare in the
District, challenged the Commissioner's ruling.
Appleseed I, 54 A.3d at 1201, 1210. On review, this
court held, in pertinent part, that the Commissioner's
analysis of GHMSI's 2008 surplus was incomplete, because
that analysis considered whether GHMSI's surplus was
unreasonably large without considering whether the surplus
was inconsistent with GHMSI's statutory obligation to
engage in community-health reinvestment. Id. at
1212-15. We emphasized that the Commissioner, when deciding
whether an insurer's surplus is excessive, must keep in
mind both statutory goals: (A) the insurer's financial
soundness and (B) maximization of community-health
reinvestment. Id. We also concluded that the
Commissioner's order did not adequately explain ...