Pennsylvania Dental Ass'n v. Com. Ins. Dept.

• Decision Date: 05 January 1987
• Citation: 516 A.2d 647,512 Pa. 217
• Parties: PENNSYLVANIA DENTAL ASSOCIATION, Appellant, v. COMMONWEALTH of Pennsylvania INSURANCE DEPARTMENT and Medical Service Association of Pennsylvania d/b/a Pennsylvania Blue Shield, Appellees.
• Court: Pennsylvania Supreme Court

Page 647

516 A.2d 647

512 Pa. 217

PENNSYLVANIA DENTAL ASSOCIATION, Appellant, v. COMMONWEALTH of Pennsylvania INSURANCE DEPARTMENT and Medical Service Association of Pennsylvania d/b/a Pennsylvania Blue Shield, Appellees.

Supreme Court of Pennsylvania.

Argued May 15, 1986.

Decided Oct. 22, 1986.

Rearrangement Denied Jan. 5, 1987.

Thomas A. Beckley, Jeffrey W. Davis, John G. Milakovic, Harrisburg, for appellant.

Thomas E. Wood, Harrisburg, for appellee Pa. Blue Shield.

Sam Marshall, Harrisburg, for appellee Com. Ins. Dept.

Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, HUTCHINSON, ZAPPALA and PAPADAKOS, JJ.

OPINION OF THE COURT

PAPADAKOS, Justice.

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 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).

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

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 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 ... [T]he position of the Department as to the detailed statistical information is that it is the duty, but also the prerogative of the Insurance Commissioner, to determine whether or not there is sufficient information in the filing for him to make a judgment on whether or not the filings can be approved....

Pennsylvania Constitutions, ¹ 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. 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 methodology and rates were then implemented by Blue Shield, and are in effect currently.

Appellant's Petition for Review was filed with Commonwealth Court on May 3, 1984, (R. 2a) and invoked both that Court's appellate and original jurisdiction. Appellant sought Commonwealth Court review of the Insurance Department's approval of the rate increase requested by Blue Shield and also brought an original action for a writ of mandamus directing the Department to reverse or rescind its approval of Blue Shield's request for a rate increase, to conduct a "formal" hearing as to Blue Shield's request, and to obtain and consider the additional specific information and data underlying the request. In response, the Department and Blue Shield filed preliminary objections to the action for a writ of mandamus and a motion to quash the appeal.

Commonwealth Court first took up the preliminary objections to Appellant's action in mandamus and noted that a mandamus action was, in its view, an inappropriate vehicle to obtain rescission of a departmental decision, and that such a request was more appropriately addressed to that Court's appellate jurisdiction. Commonwealth Court, nevertheless, decided to consider the request for a writ of mandamus directing the Department to convene a formal hearing at which Appellant would be granted intervener status with concommitant power to request documents and other specific information.

Commonwealth Court reviewed the nature and scope of the mandamus action, considered the nature of Appellant's property With respect to that portion of Appellant's Petition for Review which invoked Commonwealth Court's appellate jurisdiction, the Department and Blue Shield filed a motion to quash for failure to file the appeal within thirty days of the date the filing for the rate increase was approved. Commonwealth Court thought that at the root of the motion to quash for timeliness was the assumption (incorrect, as...