Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada County. Hon. Kathryn A. Sticklen, District Judge.
The opinion of the court was delivered by: Burdick, Chief Justice
District court opinion affirming the Hearing Officer's findings, reversed and remanded.
Appellant Altrua HealthShare appeals the district court's decision affirming the Idaho Department of Insurance's (Department) determination that Altrua transacted insurance without a certificate of authority in violation of I.C. § 41-305. Altrua argues that both the Department and the Ada County district court erred in finding that Altrua was an insurer because Altrua never assumed the risk of paying its members' medical bills. The Department found, and the district court affirmed, that when members make their predetermined monthly payments into the escrow account Altrua operates, the risk of payment shifts from the individual members to the escrow account, and in turn to Altrua. Altrua also contends that the Department's determination that it is an insurer despite the disclaimers in its membership contract to the contrary is an unconstitutional interference with Altrua's right to contract.
I. FACTUAL AND PROCEDURAL BACKGROUND
Altrua HealthShare is a nonprofit entity that describes itself as "a nationwide faith based membership of individuals who share in each other's medical needs by bearing the burden of others." On January 15, 2010, the Department filed a Notice of Violation and Right to Hearing against Altrua contending that it was operating as a health insurance company in Idaho without a license. Following a hearing on September 1, 2010, the Hearing Officer issued his findings. The Hearing Officer concluded that Altrua's membership contract is an insurance contract because Altrua undertakes some risk of paying its members' claims or losses.
Altrua then filed a Motion for Reconsideration, which the Director of the Department denied. After the Hearing Officer's Amended Preliminary Order became a final order by operation of the law on January 4, 2011, Altrua filed a Notice of Appeal and Petition for Judicial Review. On October 13, 2011, the district court affirmed the Department's decision.
Both the Department's and the district court's decisions focused on Altrua's membership contract. This contract includes the Application for Membership, the Membership Eligibility Manual, and Altrua's Guidelines. The membership application includes a medical history questionnaire, an escrow instruction sheet, and a commitment agreement containing a statement of standards members must follow. Altrua uses the rules contained in the Membership Eligibility Manual to determine whether an applicant may become a member.
The rules contained in this Membership Eligibility Manual are the standard against which an applicant's medical history is measured to determine if the applicant qualifies for the membership, and if so, what membership limitations should apply. The applicant's medical history includes examination reports, hospital records, physician opinions, test results, and symptoms significant enough to mention to a physician that pertain to both resolved and active conditions.
The Membership Eligibility Manual also includes itemized eligibility rules, specific listings for automatic denials based on particular medical conditions and activities such as tobacco or alcohol use, and height and weight guidelines.
On the membership application, potential members indicate their desired level of participation, which along with their age and marital status determines the amount Altrua requires them to pay each month. Altrua provides a detailed chart of this calculation titled "Monthly Contribution Request" in its Membership Eligibility Manual. Altrua describes the monthly contribution as voluntary, but failure to pay the amount designated in the Membership Eligibility Manual renders one's membership inactive and no funds would be paid to the member.
Altrua holds members' monthly payments in an escrow account. The escrow instructions, which members sign as part of their application, require Altrua to first "pay the expenses of operating the membership," then "to pay eligible needs pursuant to the guidelines as modified from time to time by Altrua HealthShare and as interpreted and applied by Altrua HealthShare," and in the event of any surplus upon the termination of the membership, the "remaining funds shall be disbursed to qualified charities as determined by Altrua HealthShare." The membership guidelines give Altrua the sole authority to interpret the guidelines:
CONTRIBUTORS' INSTRUCTION AND CONDITIONS by submitting monthly contributions, the contributor instructs Altrua HealthShare to share escrowed funds in accordance with the membership escrow instructions. Since Altrua HealthShare has nothing to gain or lose financially by determining if a need is eligible or not, the contributor designates Altrua HealthShare as the final authority for the interpretation of these ...