Hamm v. Central States Health and Life Co., of Omaha, 22710

• Citation: 357 S.E.2d 5,292 S.C. 408
• Decision Date: 23 March 1987
• Docket Number: No. 22710,22710
• Court: United States State Supreme Court of South Carolina
• Parties: Steven W. HAMM, Consumer Advocate for the State of South Carolina, Appellant, v. CENTRAL STATES HEALTH AND LIFE COMPANY OF OMAHA, John G. Richards, V, Chief Insurance Commissioner, and South Carolina Department of Insurance, Respondents. . Heard

Page 5

357 S.E.2d 5

292 S.C. 408

Steven W. HAMM, Consumer Advocate for the State of South Carolina, Appellant, v. CENTRAL STATES HEALTH AND LIFE COMPANY OF OMAHA, John G Richards, V, Chief Insurance Commissioner, and South Carolina Department of Insurance Respondents.

No. 22710.

Supreme Court of South Carolina.

Heard March 23, 1987.

Decided April 27, 1987.

Steven W. Hamm, Raymon E. Lark, Jr., and Nancy J. Vaughn, S.C. Dept. of Consumer Affairs, Columbia, for appellant.

James C. Gray, Jr., of Nelson, Mullins, Riley & Scarborough, Columbia, for respondent Cent. States Health and Life Co.

Susanne K. Murphy, of S.C. Dept. of Ins., Columbia, for respondents John G. Richards, V, and the South Carolina Dept. of Ins.

HARWELL, Justice:

This is an insurance rate case. The Hearing Officer and Chief Insurance Commissioner allowed the 9% rate increase requested by Central States Health and Life Company of Omaha (Central States). The circuit court affirmed. We affirm in part; reverse in part; and remand.

Central States requested a 9% rate increase for its Major Medical Policy Form 280. The Hearing Officer of the South Carolina Department of Insurance recommended approval of the entire rate increase. The Chief Insurance Commissioner adopted the Hearing Officer's report in its entirety. The Consumer Advocate appealed, contending that the portion of the rate increase attributed to "medical intensity" was not based on substantial evidence. The circuit court found that the order was based on substantial evidence and affirmed the commissioner. We disagree.

The portion of the increase in dispute is based on the development of more effective medical technologies which engender more expensive methods to combat the same medical problems. This "medical intensity" factor is distinguishable from mere inflation which simply renders the same treatment more expensive when combating the same problem years later. In order to justify the portion of its 1985 rate increase request attributable to "medical intensity," Central States introduced the results of a study which was conducted from 1969-1978 and published in 1981. The witness for the Consumer Advocate testified that the development of medical technology had leveled off and this "medical intensity" was no longer a valid factor in determining a rate increase. No substantial evidence was presented by Central States as to the current impact of "medical intensity." ¹

The Hearing Officer stated in his report that, "I cannot say from the evidence whether new medical technologies are developing at the same pace of several years ago...." Nevertheless, he went on to find that "the company's adjustment for intensity is not inappropriate in this proceeding." By the Hearing Officer's own admission, there was no reliable, probative and substantial evidence upon which the portion of the rate increase attributable to "medical intensity" could be based.

Our scope of review in this case is set forth in the Administrative Procedure Act. S.C.Code Ann. § 1-23-380 (1976, as amended). Under this scope of review, the Insurance Department's decision can be set aside if it is unsupported by substantial evidence. Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304 (1980). In the Lark case, we noted that the United States Supreme Court defined substantial evidence as ...