Southeastern United Medigroup, Inc. v. Hughes

• Citation: 952 S.W.2d 195
• Decision Date: 04 September 1997
• Docket Number: No. 96-SC-846-DG,96-SC-846-DG
• Parties: SOUTHEASTERN UNITED MEDIGROUP, INC., Appellant, v. Honorable John J. HUGHES, in his official capacity as Hearing Officer of the Kentucky Department of Insurance, Commissioner George Nichols, in his official capacity of Commissioner of the Kentucky Department of Insurance, A.B. Chandler, III, Attorney General and Sheriall A. Cunningham, Appellees.
• Court: United States State Supreme Court (Kentucky)

Page 195

952 S.W.2d 195

SOUTHEASTERN UNITED MEDIGROUP, INC., Appellant, v. Honorable John J. HUGHES, in his official capacity as

Hearing Officer of the Kentucky Department of Insurance,

Commissioner George Nichols, in his official capacity of

Commissioner of the Kentucky Department of Insurance, A.B.

Chandler, III, Attorney General and Sheriall A. Cunningham, Appellees.

No. 96-SC-846-DG.

Supreme Court of Kentucky.

Sept. 4, 1997.

Bruce F. Clark, Robert Michael Connolly, Judith A. Villines, Stites & Harbison, Frankfort, for Appellant.

Barbara R. Hartung, Holland N. McTyeire, V, Vickie Yates Brown, Greenebaum, Doll & McDonald, Louisville, for amicus curiae American Association of Health Plans, Inc., Health Insurance Association of America, Inc., and Health Maintenance Organization Association of Kentucky, Inc.

Suetta W. Dickinson, Anna R. Gwinn, Kentucky Department of Insurance, Frankfort, Patsey Ely Yewell, Fayette County Attorney's Office, Lexington, A.B. Chandler, III, Attorney General, Office of Attorney General, Morgan G. Ransdell, Scott White, Assistant Attorney General, Frankfort, for Appellees.

THOMAS P. LEWIS, Special Justice.

This case presents a matter of first impression under Health Care legislation enacted by the General Assembly in 1994 and 1996, specifically HB 250, 1994 Ky. Acts Chapter 512, and SB 343, 1996 Ky. Acts Chapter 371. Section 16 of SB 343 adds a new section, KRS 304.17A-095, requiring each insurer of any health benefit plan to file its rates with the Commissioner of the Department of Insurance. It establishes time limits within which the Commissioner may approve or disapprove a rate filing, or order a hearing. If a filing contains an average rate increase that exceeds the increase in the medical care consumer price index for the urban South, plus 3%, the Commissioner is directed to hold a hearing within specified time limits. He is further directed in advance of the hearing to notify the Attorney General, who "shall participate as a health insurance consumer intervenor and be considered a party to the hearing."

When Southeastern United Medigroup, Inc. (SUMI) filed rate applications that triggered a mandatory hearing, the Attorney General and Department of Insurance sought extensive additional information from SUMI through prehearing discovery. Claiming that much of the information was of a confidential and proprietary nature, SUMI filed a motion with the hearing officer asking that proprietary information be held confidential by the Attorney General and Department of Insurance, and that the hearing be closed when necessary to protect the information from public disclosure, "including of course, SUMI's competitors." After a hearing on this motion, the hearing officer entered a written order identifying a list of documents that all parties and their attorneys should treat as confidential. In his opinion, the Hearing Officer observed:

... the AG admits that this information in question was previously, that is prior to Senate Bill 343, considered confidential. He argues that the requirement of a public hearing in Senate Bill 343 necessitates the disclosure of the information. Yet, there is no authority cited that changes the terms of KRS 61.878 or KRS 302.2-150(3).

The Attorney General immediately filed a petition for a writ of prohibition and a motion for interlocutory relief in Franklin Circuit Court. Sheriall Cunningham, a policyholder, joined the petition and motion, but was not represented by independent counsel. The court treated the Attorney General's petition and motion in part as a request for a writ of prohibition and in part as a request for a writ of mandamus. Drawing on Tipton v. Commonwealth, Ky.App., 770 S.W.2d 239 (1989), and Foster v. Overstreet, Ky., 905 S.W.2d 504 (1995), the court found that the Attorney General had failed to meet the standards prerequisite to the granting of either extraordinary writ. Specifically, the Court found that petitioners had not shown that they will suffer great injustice or irreparable injury because of the Hearing Officer's Order or its enforcement, and that their remedy of appeal is inadequate.

After an appeal of the Circuit Court's Order, but before plenary consideration by the Court of Appeals, SUMI and the Attorney General each filed a Notice of Position with the Court of Appeals. In its Notice, SUMI said it would seek confidential treatment only of its tax returns, trial balances, and information that relates specifically to its fee schedule for physicians, its hospital contracts, and its cost containment savings. The Attorney General's Notice withdrew any contention that year ending trial balances and tax returns should be disclosed to the Department of Insurance or the public.

The Court of Appeals reversed the Circuit Court's Order and remanded "for issuance of a writ prohibiting the Insurance Commission's hearing officer from denying public access to any information submitted in support of [SUMI's] request for a rate change except as provided herein." The only exceptions recognized by the court were copies of trial balances and tax returns. The Court of Appeals based its ruling on its interpretation of Sections 15 and 16 of Senate Bill 343, and KRS 304.2-150(3). The court found in this legislation a demonstrated determination by the General Assembly to create a "more open process" for modifying insurance rates, saying that "SB 343 in particular sets forth a presumption that materials related to insurance rate increases are subject to disclosure." Accordingly, it ruled that "any exceptions to public disclosure of rate filing information must be justified by findings setting forth compelling reasons for confidentiality." After reviewing the transcript of the hearing, the Court said "we are convinced that the evidence offered by SUMI ... did not overcome the statutory presumption of openness and disclosure."

We granted review to consider the standards and methodology that should apply when a hearing officer determines whether some information submitted by a health care insurer in support of rate filings may be accorded confidential treatment. We note at the outset that all parties and the Court of Appeals agree that not all such information is subject to public disclosure. From our review of governing legislation it is evident that the General Assembly has recognized and provided for the confidential treatment of certain information when submitted by a regulated entity, including regulated health care insurers.

KRS Chapter 13B, enacted in 1994 and amended in part in 1996, governs administrative hearings, with certain exceptions, and applies to Department of Insurance rate hearings. KRS 13B.080(8) provides that an "administrative hearing shall be open to the public unless specifically closed pursuant to a provision of the law." An amendment to Chapter 13B, enacted in 1996 and codified as KRS 13B.090(3), provides:

... To the extent required by due process, the hearing officer may order the inspection of any records excluded from the application of KRS 61.870 and KRS 61.884 under KRS 61.878 that relate to an act, transaction, or event that is a subject of a hearing, and may order their inclusion in the record under seal.

KRS 61.878, part of the Open Records Act, provides;

The following public records are excluded from the application of KRS 61.870 to 61.884 and shall be subject to inspection only upon order of a court of competent jurisdiction....

* * * * * *

(c) 1. Upon and after July 15, 1992, records confidentially disclosed to an agency or required by an agency to be disclosed to it, generally recognized as confidential or proprietary, which if openly disclosed would permit an unfair commercial advantage to competitors of the entity that disclosed the records.

KRS 61.878 is also incorporated by reference in KRS 304.2-150(3), legislation that long predates Health Care Reform legislation. This section provides:

Unless otherwise provided by law, records of the department shall be open to the extent provided by the Kentucky Open Records Act, KRS 61.872 to 61.884:

(a) The following records shall be open:

1. Rate and form filings and information filed in support thereof;....

(b) The following records shall be closed:

1.....

2. Other records as provided by law....

Appellees and the Court of Appeals focus on subsection (a)1., above, as a declarative command isolated from its introductory clause, "to the extent provided by the Kentucky Open Records Act." The Attorney General contends that unless given independent meaning, subsection (a)1. serves no purpose. We might agree that KRS 304.2-150(3), read as an entirety, is awkwardly worded. We find it clearly more natural, however, to read the subsection, preceded by a colon, as qualified by the language that introduces it. Moreover, if subsection (a)1. is read as an unqualified command, and yet all acknowledge that exceptions exist, one may wonder what the source of exceptions might be.

The Court of Appeals determined that protection from disclosure could be provided if "compelling reasons" could be found. The source of this exception is said to be Senate Bill 343, with specific reference to Sections 15 and 16. Section 15 empowers the Commissioner to review insurers' rates in effect between July 15, 1995 and the effective date of the Act. It provides remedies and sanctions for rates found to be excessive. There is a single reference in this section to "a hearing," and that is in relation to the "discontinuance" of an earlier administered suspension of an insurer's certificate of authority. Section 16, as earlier noted, requires "a hearing" if an insurer's rate filing exceeds specified limits. The Attorney General is to be notified in advance of such "a hearing." An unrelated subsection empowers the Commissioner to withdraw approval of rates previously approved if they are found no longer to be reasonable after "a public hearing."

It is fair to suppose, even...