bcprehearingnot

IN RE: APPLICATION OF ASSOCIATED )

HOSPITAL SERVICE OF MAINE, )

d/b/a BLUE CROSS AND BLUE )

SHIELD OF MAINE, TO CONVERT )

TO A STOCK INSURER AND )

VOLUNTARILY LIQUIDATE AND )

DISSOLVE ) NOTICE OF PENDING

) PROCEEDING AND

and ) PREHEARING

) CONFERENCE

APPLICATION OF ANTHEM )

HEALTH PLAN OF MAINE, INC., )

TO ACQUIRE THE ASSETS OF )

ASSOCIATED HOSPITAL SERVICE )

OF MAINE, d/b/a BLUE CROSS AND)

BLUE SHIELD OF MAINE, )

AND RELATED TRANSACTIONS )

)

Consolidated Docket No. INS 99-14 )

I. Pending Proceeding

Pursuant to Bureau of Insurance Rule 350, Section (8)(B), notice is hereby given of the filing of an application by Associated Hospital Service of Maine (d/b/a Blue Cross and Blue Shield of Maine) ("BCBSME"), a Maine non-profit hospital and medical service organization, seeking approval of the following:

its plan of conversion to a domestic stock insurer pursuant to 24 M.R.S.A. §2301(9-D);
its plan to liquidate and dissolve pursuant to 24-A M.R.S.A. § 3484;
its agreement to reinsure its business in force with Anthem Health Plan of Maine, Inc. (d/b/a Anthem Blue Cross Blue Shield of Maine) ("Anthem BCBSME"), a subsidiary of Anthem Insurance Companies, Inc. ("Anthem"), pursuant to 24-A M.R.S.A. § 3483; and the filing by Anthem seeking the approval for:
the establishment of Anthem BCBSME as a Maine domestic stock health insurer and the issuance to it of a Certificate of Authority to transact insurance in this State pursuant to 24-A M.R.S.A. § 404-413; and
the acquisition by Anthem, through Anthem BCBSME, of the business and assets of BCBSME (the "Acquisition"), including the transfer of its licenses and permits and its stock interests in its two HMO subsidiaries, pursuant to 24-A M.R.S.A. § 222 & 3476 and all other applicable law.

Specifically, Anthem will incorporate and seek a Certificate of Authority for a domestic health insurer in Maine, Anthem BCBSME. Anthem BCBSME will be a wholly owned subsidiary of Anthem East, Inc., which, in turn, is a wholly owned stock subsidiary of Anthem. Pursuant to the Asset Purchase Agreement between Anthem and BCBSME dated as of July 13, 1999 (the "Asset Purchase Agreement"), Anthem BCBSME agrees to assume substantially all obligations and liabilities of BCBSME, excluding

any unknown Medicare program liabilities in excess of 3% of the total consideration (after adjustments),
BCBSME taxes, and
certain other exclusions as set forth in the Asset Purchase Agreement.

Pursuant to 5 M.R.S.A. § 194-A(5) and 24 M.R.S.A. § 2301(9-D), BCBSME seeks to convert to a stock insurer. If the conversion is approved, BCBSME will sell and assign, and Anthem BCBSME will purchase and assume, all insurance contracts of BCBSME in force at the Closing, together with all assets of BCBSME, including the stock of its subsidiaries and its investments in affiliates. The Assets to be acquired include BCBSME's ownership of 50% of the common voting stock of each of Maine Partners and Central Maine Partners. Immediately after the Closing, the policy and contract holders of BCBSME will become policy or contract holders of Anthem BCBSME, without any break in continuity of benefits and services. At Closing, Anthem BCBSME will utilize BCBSME's (and, indirectly, Maine Partners' and Central Maine Partners') then-existing network of physicians and other providers.

The Acquisition as proposed does not include the purchase of Patriot Mutual Insurance Company, d/b/a Blue Alliance Mutual Insurance Company ("Patriot Mutual"), and its subsidiary, Patriot Life Insurance Company (together, "Patriot"). However, if requested by Patriot, Anthem BCBSME will continue to provide management and administrative support services to Patriot for at least two (2) years after the closing under the existing agreements between Patriot and BCBSME. In addition, Anthem BCBSME seeks to acquire from Patriot its 43% ownership interest in Machigonne, Inc., a Maine corporation, which, combined with BCBSME's existing 57% ownership interest, would result in Anthem BCBSME's ownership of all of Machigonne, Inc.

Upon the closing of the Acquisition, BCBSME seeks the approval of the Superintendent to liquidate and dissolve. If the plan of liquidation and dissolution is approved then, pursuant to 5 M.R.S.A. § 194-A(5), the net cash proceeds of the asset sale that are paid to BCBSME, after payment of BCBSME's remaining obligations and expenses, will be transferred to an independent charitable trust (the "Trust") to be established by BCBSME in accordance with a charitable trust plan that must be approved by the Superior Court in a proceeding in which the Superintendent has the right to intervene. The anticipated role of the Trust is to fund programs having purposes consistent with 5 M.R.S.A. § 194-A(5)(B)(2).

This proceeding will be conducted according to the provisions of the Maine Administrative Procedure Act, 5 M.R.S.A. chapter 375, subchapter 4; 24-A M.R.S.A § 229-236; and Bureau of Insurance Rule Chapter 350.

II. Commencement of Review

Pursuant to 24 M.R.S.A. §2301 (9-D)(D), the Superintendent is required to commence review of the conversion plan following receipt of the Superior Court's approval or approval with modification of the charitable trust plan. That same provision permits the Superintendent to commence review at an earlier time as he determines necessary. Given the complexity of the various transactions comprising this consolidated proceeding and the desire to conduct a thorough review and to obtain ample public input, the Superintendent determines it is necessary to commence review at this time.

III. Prehearing Conference

Pursuant to Bureau of Insurance Rule 350, Sections (8)(B) and (11)(B), notice is hereby given that the Superintendent will hold a prehearing conference in the above-captioned matter on October 29, 1999, at 9:00 a.m. at the Sheraton Tara Hotel, 363 Maine Mall Road, South Portland, Maine. The general purpose of the prehearing conference is to consider the current procedural status of the applications and the procedures to be utilized in conducting the proceeding. In particular, the Superintendent will address at the prehearing conference the following:

A process and time schedule for further conduct of the proceeding, including any procedural motions the parties have filed (see Part III below);
Any applications for intervention (see Part IV below);
Preliminary discussion of issues to be considered in the proceeding;
Discussion of an appropriate intervention deadline; and
Such other matters as the parties may raise.

IV. Procedural Motions

Any party to the proceeding or any applicant for intervention may make a motion that certain procedures be followed in the administration of this proceeding, as long as such procedures are in accordance with applicable law, as cited above. In order to be considered and ruled on by the Superintendent at the prehearing conference, all such motions must be received by the Superintendent no later than 3:00 p.m. on October 27, 1999.

V. Intervention

At this time, the parties to the proceeding have been identified as BCBSME and Anthem Health Plan of Maine. Persons wishing to intervene as parties in this proceeding shall file their application in writing with the Superintendent of Insurance, Maine Bureau of Insurance, 34 State House Station, Augusta, Maine 04333-0034. Applications for intervention as of right pursuant to 5 M.R.S.A. §9054(1) shall contain a statement explaining how the applicant is or may be a member of a class which is or may be substantially and directly affected by the proceeding or identifying the applicant's status as an agency of federal, state or local government. Applications for permissive intervention pursuant to 5 M.R.S.A. §9054(2) shall contain a statement explaining and substantiating the applicant's interest in the proceeding.

Interested parties who may seek to intervene are strongly encouraged to file their applications in advance of the October 29, 1999 prehearing conference.

Procedural motions and applications for intervention should be:

addressed to:

Alessandro A. Iuppa, Superintendent of Insurance
c/o Lyndy Morgan
Docket No. INS-99-14
Maine Department of Professional and Financial Regulation
Bureau of Insurance
#34 State House Station
Augusta, Maine 04333-0034

hand delivered to the Superintendent at the offices of the Bureau of Insurance, at

124 Northern Avenue
Gardiner, Maine

The Department of Professional and Financial Regulation does not discriminate on the basis of disability in admission to, access to or operation of its programs, services or activities. Individuals in need of auxiliary aid for effective communication in this prehearing conference are invited to make their needs and preference known to the Superintendent sufficiently in advance of the conference so that appropriate arrangements can be made.

DATED: ______________________________ ____________________________________

ALESSANDRO A. IUPPA

Superintendent of Insurance