Exhibit 10.1
BLUE CROSS LICENSE AGREEMENT
(Includes revisions, if any, adopted by Member Plans through their March 19, 2009 meeting)
This agreement by and between Blue Cross and Blue Shield Association (“BCBSA”) and The Blue
Cross Plan, known as
Triple-S Management Corporation (the “Plan”).
Preamble
WHEREAS, the Plan and/or its predecessor(s) in interest (collectively the “Plan”) had the
right to use the BLUE CROSS and BLUE CROSS Design service marks (collectively the “Licensed
Marks”) for health care plans in its service area, which was essentially local in nature;
WHEREAS, the Plan was desirous of assuring nationwide protection of the Licensed Marks,
maintaining uniform quality controls among Plans, facilitating the provision of cost effective
health care services to the public and otherwise benefiting the public;
WHEREAS, to better attain such ends, the Plan and the predecessor of BCBSA in 1972
simultaneously executed the BCA
License Agreement (s) and the Ownership Agreement; and
WHEREAS, BCBSA and the Plan desire to supercede said Agreement(s) to reflect their current
practices and to assure the continued integrity of the Licensed Marks and of the BLUE CROSS
system;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
Agreement
1. BCBSA hereby grants to the Plan, upon the terms and conditions of this
License Agreement,
the right to use BLUE CROSS in its trade and/or corporate name (the “Licensed Name”), and the
right to use the Licensed Marks, in the sale, marketing and administration of health care plans
and related services in the Service Area set forth and defined in paragraph 5 below. As used
herein, health care plans and related services shall include acting as a nonprofit health care
plan, a for-profit health care plan, or mutual health insurer operating on a not-for-profit or
for-profit basis, under state law; financing access to health care services; when working with a
bank that holds the relevant license to use the Licensed Name and Marks, offering: (i) tax-favored
savings accounts for medical expenses and means for accessing such accounts, such as debit cards
or checks, that are provided solely to support access to such tax-favored savings accounts, all
pursuant to such license, or (ii) prepaid rewards cards that are provided for completion of a
wellness program, all pursuant to such license; providing health care management and
administration; administering, but not underwriting, non-health portions of Worker’s Compensation
insurance; and delivering health care services, except hospital services (as defined in the
Guidelines to Membership Standards Applicable to Regular Members).
2. The Plan may use the Licensed Marks and Name in connection with the offering of: a)
health care plans and related services in the Service Area through Controlled Affiliates, provided
that each such Controlled Affiliate is separately licensed to use the Licensed Marks and Name
under the terms and conditions contained in the Agreement attached as Exhibit 1 hereto (the
“Controlled Affiliate
License Agreement”); and: b) insurance coverages offered by life insurers
under the applicable law in the Service Area, other than those which the Plan may offer in its own
name, provided through Controlled Affiliates, provided that each such Controlled Affiliate is
separately licensed to use the Licensed Marks and Name under the terms and conditions contained in
the Agreement attached as Exhibit 1A hereto (the “Controlled Affiliate
License Agreement
Applicable to Life Insurance Companies”) and further provided that the offering of such services
does not and will not dilute or tarnish the unique value of the Licensed Marks and Name; and c)
administration and underwriting of Workers’ Compensation Insurance Controlled Affiliates, provided
that each such Controlled Affiliate is separately licensed to use the Licensed Marks and Name
under the terms and conditions contained in the Agreement attached as Exhibit 1 hereto (the
“Controlled Affiliate License.”); and d) regional Medicare Advantage PPO products in cooperation
with one or more other Plans through jointly-held Controlled Affiliates, provided that each such
Controlled Affiliate is separately licensed to use the Licensed Marks and Name under the terms and
conditions contained in the Agreement attached as Exhibit 1B hereto (the “Controlled Affiliate
License Agreement Applicable to Regional Medicare Advantage PPO Products”); and e) regional
Medicare Part D Prescription Drug Plan products in cooperation with one or more other Plans
through jointly-held Controlled Affiliates, provided that each such Controlled Affiliate is
separately licensed to use the Licensed Marks and Name under the terms and conditions contained in
the Agreement attached as Exhibit 1C hereto (the “Controlled Affiliate
License Agreement
Applicable to Regional Medicare Part D Prescription Drug Plan Products”). As used herein, a
Controlled Affiliate is defined as an entity organized and operated in such a manner that it is
subject to the bona fide control of a Plan or Plans and, if the entity meets the standards of
subparagraph B but not subparagraph A of this paragraph, the entity, its owners, and persons with
authority to select or appoint members or board members, other than a Plan or Plans, have received
written approval of BCBSA. Absent written approval by BCBSA of an alternative method of control,
bona fide control with respect to the Controlled Affiliate Licenses authorized in clauses a)
through c) of this Paragraph 2 shall mean that a Plan or Plans authorized to use the Licensed
Marks in the Service Area of the Controlled Affiliate pursuant to this
License Agreement(s) with
BCBSA, other than such Controlled Affiliate’s
License Agreement(s), (for purposes of subparagraphs
2.A. and 2.B., the “Controlling Plan(s)”), must have:
Amended as of September 18, 2008
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A. |
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The legal authority, directly or indirectly through wholly-owned subsidiaries:
(a) to select members of the Controlled Affiliate’s governing body having more than
50% voting control thereof; (b) to exercise control over the policy and operations of
the Controlled Affiliate; (c) to prevent any change in the articles of
incorporation, bylaws or other establishing or governing documents of the Controlled
Affiliate with which the Controlling Plan(s) do(es) not concur. In addition, a Plan
or Plans directly or indirectly through wholly-owned subsidiaries shall own more than
50% of any for-profit Controlled Affiliate; or |
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B. |
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The legal authority directly or indirectly through wholly-owned subsidiaries
(a) to select members of the Controlled Affiliate’s governing body having not less
than 50% voting control thereof; (b) to prevent any change in the articles of
incorporation, bylaws or other establishing or governing documents of the Controlled
Affiliate with which the Controlling Plan(s) do(es) not concur; (c) to exercise
control over the policy and operations of the Controlled Affiliate at least equal to
that exercised by persons or entities (jointly or individually) other than the
Controlling Plan(s). Notwithstanding anything to the contrary in (a) through (c)
hereof, the Controlled Affiliate’s establishing or governing documents must also
require written approval by the Controlling Plan(s) before the Controlled Affiliate
can: |
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1. |
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Change its legal and/or trade name; |
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2. |
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Change the geographic area in which it operates; |
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3. |
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Change any of the types of businesses in which it engages; |
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4. |
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Create, or become liable for by way of guarantee, any indebtedness,
other than indebtedness arising in the ordinary course of business; |
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5. |
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Sell any assets, except for sales in the ordinary course of business
or sales of equipment no longer useful or being replaced; |
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6. |
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Make any loans or advances except in the ordinary course of business; |
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7. |
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Enter into any arrangement or agreement with any party directly or
indirectly affiliated with any of the owners of the Controlled Affiliate
or persons or entities with the authority to select or appoint members or
board members of the Controlled Affiliate, other than the Plan or Plans
(excluding owners of stock holdings of under 5% in a publicly traded
Controlled Affiliate); |
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8. |
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Conduct any business other than under the
Licensed Marks and Name; |
Amended as of June 11, 1998
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9. |
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Take any action that any Controlling Plan
or BCBSA reasonably believes will adversely affect the Licensed Marks
or Names. |
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In addition, a Plan or Plans directly or indirectly through wholly owned
subsidiaries shall own at least 50% of any for-profit Controlled Affiliate. With
respect to the Controlled Affiliate License Agreements authorized in clauses d) and
e) of this Paragraph 2, and absent written approval by BCBSA of an alternative
method of control, bona fide control shall mean that the Controlled Affiliate is
organized and operated in such a manner that it meets the following requirements: |
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C. |
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The Controlled Affiliate is owned or controlled by two or more Plans authorized
to use the Licensed Marks pursuant to this License Agreement with BCBSA (for purposes
of this subparagraph 2.C. through subparagraph 2.E., the “Controlling Plans”); |
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D. |
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Each Controlling Plan is authorized pursuant to this Agreement to use the
Licensed Marks in a geographic area in the Region (as that term is defined in such
Controlled Affiliate License Agreements) and every geographic area in the Region is so
licensed to at least one of the Controlling Plans; and |
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E. |
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The Controlling Plans must have the legal authority directly or indirectly
through wholly-owned subsidiaries (a) to select members of the Controlled Affiliate’s
governing body having not less than 100% voting control thereof; (b) to prevent any
change in the articles of incorporation, bylaws or other establishing or governing
documents of the Controlled Affiliate with which the Controlling Plans do not concur;
and (c) to exercise control over the policy and operations of the Controlled Affiliate.
Notwithstanding anything to the contrary in (a) through (c) of this subparagraph E.,
the Controlled Affiliate’s establishing or governing documents must also require
written approval by each of the Controlling Plans before the Controlled Affiliate can: |
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1. |
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Change its legal and/or trade names; |
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2. |
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Change the geographic area in which it operates
(except such approval shall not be required with respect to business of
the Controlled Affiliate conducted under the Licensed Marks within the
Service Area of one of the Controlling Plans pursuant to a separate
controlled affiliate license agreement with BCBSA sponsored by such
Controlling Plan); |
Amended as of March 17, 2005
(The next page is page 3)
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3. |
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Change any of the type(s) of businesses in
which it engages (except such approval shall not be required with
respect to business of the Controlled Affiliate conducted under the
Licensed Marks within the Service Area of one of the Controlling Plans
pursuant to a separate controlled affiliate license agreement with
BCBSA sponsored by such Controlling Plan); |
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4. |
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Take any action that any Controlling Plan or
BCBSA reasonably believes will adversely affect the Licensed Marks and
Name. |
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In addition, the Controlling Plans directly or indirectly through wholly-owned
subsidiaries shall own 100% of any for-profit Controlled Affiliate. |
3. The Plan may engage in activities not required by BCBSA to be directly licensed through
Controlled Affiliates and may indicate its relationship thereto by use of the Licensed Name as a
tag line, provided that the engaging in such activities does not and will not dilute or tarnish
the unique value of the Licensed Marks and Name and further provided that such tag line use is
not in a manner likely to cause confusion or mistake. Consistent with the avoidance of confusion
or mistake, each tag line use of the Plan’s Licensed Name: (a) shall be in the style and manner
specified by BCBSA from time-to-time; (b) shall not include the design service marks; (c) shall
not be in a manner to import more than the Plan’s mere ownership of the Controlled Affiliate; and
(d) shall be restricted to the Service Area. No rights are hereby created in any Controlled
Affiliate to use the Licensed Name in its own name or otherwise. At least annually, the Plan
shall provide BCBSA with representative samples of each such use of its Licensed Name pursuant to
the foregoing conditions.
4. The Plan recognizes the importance of a comprehensive national network of independent
BCBSA licensees which are committed to strengthening the Licensed Marks and Name. The Plan
further recognizes that its actions within its Service Area may affect the value of the Licensed
Marks and Name nationwide. The Plan agrees (a) to maintain in good standing its membership in
BCBSA; (b) promptly to pay its dues to BCBSA, said dues to represent the royalties for this
License Agreement; (c) materially to comply with all applicable laws; (d) to comply with the
Membership Standards Applicable to Regular Members of BCBSA, a current copy of which is attached
as Exhibit 2 hereto; and (e) reasonably to permit BCBSA, upon a written, good faith request and
during reasonable business hours, to inspect the Plan’s books and records necessary to ascertain
compliance herewith. As to other Plans and third parties, BCBSA shall maintain the
confidentiality of all documents and information furnished by the Plan pursuant hereto, or
pursuant to the Membership Standards, and clearly designated by the Plan as containing proprietary
information of the Plan.
Amended as of March 17, 2005
-3-
5. The rights hereby granted are exclusive to the Plan within the geographical area(s) served
by the Plan on June 30, 1972, and/or as to which the Plan has been granted a subsequent license,
which is hereby defined as the “Service Area,” except that BCBSA reserves the right to use the
Licensed Marks in said Service Area, and except to the extent that said Service Area may overlap
areas served by one or more other licensed Blue Cross Plans as of said date or subsequent license,
as to which overlapping areas the rights hereby granted are nonexclusive as to such other Plan or
Plans only.
6. Except as expressly provided by BCBSA with respect to National Accounts, Government
Programs and certain other necessary and collateral uses, the current rules and regulations
governing which are attached as Exhibit 3 and Exhibit 4 hereto, and are contained in other
documents referenced herein, or as expressly provided herein, the Plan may not use the Licensed
Marks and Name outside the Service Area or in connection with other goods and services, nor may
the Plan use the Licensed Marks or Name in a manner which is intended to transfer in the Service
Area the goodwill associated therewith to another xxxx or name. Nothing herein shall be construed
to prevent the Plan from engaging in lawful activity anywhere under other marks and names not
confusingly similar to the Licensed Marks and Name, provided that engaging in such activity does
and will not dilute or tarnish the unique value of the Licensed Marks and Name. In addition to
any and all remedies available hereunder, BCBSA may impose monetary fines on the Plan for the
Plan’s use of the Licensed Marks and Names outside the Service Area, and provided that the
procedure used in imposing a fine is consistent with procedures specifically prescribed by BCBSA
from time to time in regulations of general application. In the case of regional Medicare
Advantage PPO and regional Medicare Part D Prescription Drug Plan products offered by consenting
and participating Plans in a region that includes the Service Areas, or portions thereof, of more
than one Plan, such fine may be imposed jointly on the consenting and participating Plans for use
of the Licensed Marks and Name in any geographic area of the region in which a Plan having
exclusive rights to the Licensed Marks and Name does not consent to and particitpate in such
offering, provided that the basis for imposition of such fine is consistent with rules
specifically prescribed by BCBSA from time to time in regulations of general application.
7. The Plan agrees that it will display the Licensed Marks and Name only in such form, style
and manner as shall be specifically prescribed by BCBSA from time-to-time in regulations of
general application in order to prevent impairment of the distinctiveness of the Licensed Marks
and Name and the goodwill pertaining thereto. The Plan shall cause to appear on all materials on
or in connection with which the Licensed Marks or Name are used such legends, markings and notices
as BCBSA may reasonably request in order to give appropriate notice of service xxxx or other
proprietary rights therein or pertaining thereto.
Amended as of November 16, 2006
-3a-
8. BCBSA agrees that: (a) it will not grant any other license effective during the term of
this License Agreement for the use of the Licensed Marks or Name which is inconsistent with the
rights granted to the Plan hereunder; and (b) it will not itself use the Licensed Marks in
derogation of the rights of the Plan or in a manner to deprive the Plan of the full benefits of
this License Agreement, provided that BCBSA shall have the right to use the Licensed Marks in
conjunction with any national offering under the Federal Employees Health Benefits Program in the
manner set forth in Exhibit 4, Paragraph 4 (including subparagraphs) to this License Agreement.
The Plan agrees that it will not attack the title of BCBSA in and to the Licensed Marks or Name or
attack the validity of the Licensed Marks or of this License Agreement. The Plan further agrees
that all use by it of the Licensed Marks and Name or any similar xxxx or name shall inure to the
benefit of BCBSA, and the Plan shall cooperate with BCBSA in effectuating the assignment to BCBSA
of any service xxxx or trademark registrations of the Licensed Marks or any similar xxxx or name
held by the Plan or a Controlled Affiliate of the Plan, all or any portion of which registration
consists of the Licensed Marks.
9. (a). Should the Plan fail to comply with the provisions of paragraphs 2-4, 6, 7 and/or
12, and not cure such failure within thirty (30) days of receiving written notice thereof (or
commence curing such failure within such thirty day period and continue diligent efforts to
complete the curing of such failure if such curing cannot reasonably be completed within such
thirty day period), BCBSA shall have the right to issue a notice that the Plan is in a state of
noncompliance. Except as to the termination of a Plan’s License Agreement or the merger of two or
more Plans, disputes as to noncompliance, and all other disputes between or among BCBSA, the Plan,
other Plans and/or Controlled Affiliates, shall be submitted promptly to mediation and mandatory
dispute resolution pursuant to the rules and regulations of BCBSA, a current copy of which is
attached as Exhibit 5 hereto, and shall be timely presented and resolved. The mandatory dispute
resolution panel shall have authority to issue orders for specific performance and assess monetary
penalties. If a state of noncompliance as aforesaid is undisputed by the Plan or is found to
exist by a mandatory dispute resolution panel and is uncured as provided above, BCBSA shall have
the right to seek judicial enforcement of the License Agreement. Except, however, as provided in
paragraphs 9(d)(iii), 15(a)(i)-(viii), and 15(a)(x) below, no Plan’s license to use the Licensed
Marks and Name may be finally terminated for any reason without the affirmative vote of
three-fourths of the Plans and three-fourths of the total then current weighted vote of all the
Plans.
Amended as of March 16, 2006
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(b). Notwithstanding any other provision of this License Agreement, a Plan’s license to use
the Licensed Marks and Name may be forthwith terminated by the affirmative vote of three-fourths
of the Plans and three-fourths of the total then current weighted vote of all the Plans at a
special meeting expressly called by BCBSA for the purpose on ten (10) days written notice to the
Plan advising of the specific matters at issue and granting the Plan an opportunity to be heard
and to present its response to Member Plans for: (i) failure to comply with any minimum capital or
liquidity requirement under the Membership Standard on Financial Responsibility; or (ii) impending
financial insolvency; or (iii) the pendency of any action instituted against the Plan seeking its
dissolution or liquidation or its assets or seeking appointment of a trustee, interim trustee,
receiver or other custodian for any of its property or business or seeking the declaration or
establishment of a trust for any of its property of business, unless this License Agreement has
been earlier terminated under paragraph 15(a); or (iv) such other reason as is determined in good
faith immediately and irreparably to threaten the integrity and reputation of BCBSA, the Plans
and/or the Licensed Marks.
(c). To the extent not otherwise provided therein, neither: (i) the Membership Standards
Applicable to Regular Members of BCBSA; nor (ii) the rules and regulations governing Government
Programs and certain other uses; nor (iii) the rules and regulations governing mediation and
mandatory dispute resolution, may be amended unless and until each such amendment is first adopted
by the affirmative vote of three-fourths of the Plans and of three-fourths of the total then
current weighted vote of all the Plans. The rules and regulations governing National Accounts and
other national programs required by the Membership Standards Applicable to Regular Members of
BCBSA (Exhibit 2) are contained, in addition to those set forth in Exhibit 3, in the following
documents, as amended from time to time: (1) the Transfer Program Policies and Provisions; (2) the
Inter-Plan Programs Policies and Provisions; (3) Inter-Plan Medicare Advantage Program Policies
and Provisions. The voting requirements specified in rules and regulations governing such
national programs may not be amended unless and until each such amendment is first adopted by the
affirmative vote of three-fourths of the Plans and of three-fourths of the total then current
weighted vote of all the Plans.
Amended as of November 15, 2007
-4a-
9. (d). The Plan may operate as a for-profit company on the following conditions:
(i) The Plan shall discharge all responsibilities which it has to the Association and to
other Plans by virtue of this Agreement and the Plan’s membership in BCBSA.
(ii) The Plan shall not use the licensed Marks and Name, or any derivative thereof, as part
of its legal name or any symbol used to identify the Plan in any securities market. The Plan
shall use the licensed Marks and Name as part of its trade name within its service area for the
sale, marketing and administration of health care and related services in the service area.
(iii) The Plan’s license to use the Licensed Marks and Name shall automatically terminate
effective: (a) thirty days after the Plan knows, or there is an SEC filing indicating that, any
Institutional Investor, has become the Beneficial Owner of securities representing 10% or more of
the voting power of the Plan (“Excess Institutional Voter”), unless such Excess Institutional
Voter shall cease to be an Excess Institutional Voter prior to such automatic termination becoming
effective; (b) thirty days after the Plan knows, or there is an SEC filing indicating that, any
Noninstitutional Investor has become the Beneficial Owner of securities representing 5% or more of
the voting power of the Plan (“Excess Noninstitutional Voter”) unless such Excess Noninstitutional
Voter shall cease to be an Excess Noninstitutional Voter prior to such automatic termination
becoming effective; (c) thirty days after the Plan knows, or there is an SEC filing indicating
that, any Person has become the Beneficial Owner of 20% or more of the Plan’s then outstanding
common stock or other equity securities which (either by themselves or in combination) represent
an ownership interest of 20% or more pursuant to determinations made under paragraph 9(d)(iv)
below (“Excess Owner”), unless such Excess Owner shall cease to be an Excess Owner prior to such
automatic termination becoming effective; (d) ten business days after individuals who at the time
the Plan went public constituted the Board of Directors of the Plan (together with any new
directors whose election to the Board was approved by a vote of 2/3 of the directors then still in
office who were directors at the time the Plan went public or whose election or nomination was
previously so approved) (the “Continuing Directors”) cease for any reason to constitute a majority
of the Board of Directors; or (e) ten business days after the Plan consolidates with or merges
with or into any person or conveys, assigns, transfers or sells all or substantially all of its
assets to any person other than a merger in which the Plan is the surviving entity and immediately
after which merger, no person is an Excess Institutional Voter, an Excess Noninstitutional Voter
or an Excess Owner: provided that, if requested by the affected Plan in a writing received by
BCBSA prior to such automatic termination becoming effective, the provisions of this paragraph
9(d)(iii) may be waived, in whole or in part,
Amended as of September 17, 1997
-5-
upon the affirmative vote of a majority of the disinterested Plans and a majority of the total
then current weighted vote of the disinterested Plans. Any waiver so granted may be conditioned
upon such additional requirements (including but not limited to imposing new and independent
grounds for termination of this License) as shall be approved by the affirmative vote of a
majority of the disinterested Plans and a majority of the total then current weighted vote of the
disinterested Plans. If a timely waiver request is received, no automatic termination shall
become effective until the later of: (1) the conclusion of the applicable time period specified in
paragraphs 9(d)(iii)(a)-(d) above, or (2) the conclusion of the first Member Plan meeting after
receipt of such a waiver request.
In the event that the Plan’s license to use the Licensed Marks and Name is terminated pursuant to
this Paragraph 9(d)(iii), the license may be reinstated in BCBSA’s sole discretion if, within 30
days of the date of such termination, the Plan demonstrates that the Person referred to in clause
(a), (b) or (c) of the preceding paragraph is no longer an Excess Institutional Voter, an Excess
Noninstitutional Voter or an Excess Owner.
(iv) The Plan shall not issue any class or series of security other than (i) shares of
common stock having identical terms or options or derivatives of such common stock, (ii)
non-voting, non-convertible debt securities or (iii) such other securities as the Plan may
approve, provided that BCBSA receives notice at least thirty days prior to the issuance of such
securities, including a description of the terms for such securities, and BCBSA shall have the
authority to determine how such other securities will be counted in determining whether any Person
is an Excess Institutional Voter, Excess Noninstitutional Voter or an Excess Owner.
(v) For purposes of paragraph 9(d)(iii), the following definitions shall apply:
(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act
of 1934, as amended and in effect on November 17, 1993 (the “Exchange Act”).
(b) A Person shall be deemed the “Beneficial Owner” of and shall be deemed to
“beneficially own” any securities:
(i) which such Person or any of such Person’s Affiliates or Associates beneficially
owns, directly or indirectly;
Amended as of September 17, 1997
-5a-
(ii) which such Person or any of such Person’s Affiliates or Associates has (A) the
right to acquire (whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise; or (B) the right to
vote pursuant to any agreement, arrangement or understanding; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if
the agreement, arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D
under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other Person (or
any Affiliate or Associate thereof) with which such Person (or any of such Person’s
Affiliates or Associates) has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) relating to the acquisition, holding, voting
(except to the extent contemplated by the proviso to (b)(ii)(B) above) or disposing of any
securities of the Plan.
Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the
phrase “then outstanding,” when used with reference to a Person’s Beneficial Ownership of
securities of the Plan, shall mean the number of such securities then issued and
outstanding together with the number of such securities not then actually issued and
outstanding which such Person would be deemed to own beneficially hereunder.
(c) A Person shall be deemed an “Institutional Investor” if (but only if) such Person
(i) is an entity or group identified in the SEC’s Rule 13d-1(b)(1)(ii) as constituted on
June 1, 1997, and (ii) every filing made by such Person with the SEC under Regulation 13D-G
(or any successor Regulation) with respect to such Person’s Beneficial Ownership of Plan
securities shall have contained a certification identical to the one required by item 10 of
SEC Schedule 13G as constituted on June 1, 1997.
(d) “Noninstitutional Investor” means any Person who is not an Institutional Investor.
(e) “Person” shall mean any individual, firm, partnership, corporation, trust,
association, joint venture or other entity, and shall include any successor (by merger or
otherwise) of such entity.
Amended as of September 17, 1997
(The next page is page 6)
-5b-
10. This License Agreement shall remain in effect: (a) until terminated as provided
herein; or (b) until this and all such other License Agreements are terminated by the affirmative
vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of
all the Plans; or (c) until termination of aforesaid Ownership Agreement; or (d) until terminated
by the Plan upon eighteen (18) months written notice to BCBSA or upon a shorter notice period
approved by BCBSA in writing at its sole discretion.
11. Except as otherwise provided in paragraph 15 below or by the affirmative vote of
three-fourths of the Plans and three-fourths of the total then current weighted vote of all the
Plans, or unless this and all such other License Agreements are simultaneously terminated by force
of law, the termination of this License Agreement for any reason whatsoever shall cause the
reversion to BCBSA of all rights in and to the Licensed Marks and Name, and the Plan agrees that
it will promptly discontinue all use of the Licensed Marks and Name, will not use them thereafter,
and will promptly, upon written notice from BCBSA, change its corporate name so as to eliminate
the Licensed Name therefrom.
12. The license hereby granted to Plan to use the Licensed Marks and Name is and shall be
personal to the Plan so licensed and shall not be assignable by any act of the Plan, directly or
indirectly, without the written consent of BCBSA. Said license shall not be assignable by
operation of law, nor shall Plan mortgage or part with possession or control of this license or
any right hereunder, and the Plan shall have no right to grant any sublicense to use the Licensed
Marks and Name.
13. BCBSA shall maintain appropriate service xxxx registrations of the Licensed Marks and
BCBSA shall take such lawful steps and proceedings as may be necessary or proper to prevent use of
the Licensed Marks by any person who is not authorized to use the same. Any actions or
proceedings undertaken by BCBSA under the provisions of this paragraph shall be at BCBSA’s sole
cost and expense. BCBSA shall have the sole right to determine whether or not any legal action
shall be taken on account of unauthorized use of the Licensed Marks, such right not to be
unreasonably exercised. The Plan shall report any unlawful usage of the Licensed Marks to BCBSA
in writing and agrees, free of charge, to cooperate fully with BCBSA’s program of enforcing and
protecting the service xxxx rights, trade name rights and other rights in the Licensed Marks.
14. The Plan hereby agrees to save, defend, indemnify and hold BCBSA and any other Plan(s)
harmless from and against all claims, damages, liabilities and costs of every kind, nature and
description which may arise exclusively and directly as a result of the activities of the Plan.
BCBSA hereby agrees to save, defend, indemnify and hold the Plan and any other Plan(s) harmless
from and against all claims, damages, liabilities and costs of every kind, nature and description
which may arise exclusively and directly as a result of the activities of BCBSA.
Amended as of June 16, 2005
-6-
15. (a). This Agreement shall automatically terminate upon the occurrence of any of the
following events: (i) a voluntary petition shall be filed by the Plan or by BCBSA seeking
bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcy laws
of the United States or any other law governing insolvency or debtor relief, or (ii) an
involuntary petition or proceeding shall be filed against the Plan or BCBSA seeking bankruptcy,
reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United
States or any other law governing insolvency or debtor relief and such petition or proceeding is
consented to or acquiesced in by the Plan or BCBSA or is not dismissed within sixty (60) days of
the date upon which the petition or other document commencing the proceeding is served upon the
Plan or BCBSA respectively, or (iii) an order for relief is entered against the Plan or BCBSA in
any case under the bankruptcy laws of the United States, or the Plan or BCBSA is adjudged bankrupt
or insolvent (as that term is defined in the Uniform Commercial Code as enacted in the state of
Illinois) by any court of competent jurisdiction, or (iv) the Plan or BCBSA makes a general
assignment of its assets for the benefit of creditors, or (v) any government or any government
official, office, agency, branch, or unit assumes control of the Plan or delinquency proceedings
(voluntary or involuntary) are instituted, or (vi) an action is brought by the Plan or BCBSA
seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee,
interim trustee, receiver or other custodian for any of its property or business, or (vii) an
action is instituted by any governmental entity or officer against the Plan or BCBSA seeking its
dissolution or liquidation of its assets or seeking appointment of a trustee, interim trustee,
receiver or other custodian for any of its property or business and such action is consented to or
acquiesced in by the Plan or BCBSA or is not dismissed within one hundred thirty (130) days of the
date upon which the pleading or other document commencing the action is served upon the Plan or
BCBSA respectively, provided that if the action is stayed or its prosecution is enjoined, the one
hundred thirty (130) day period is tolled for the duration of the stay or injunction, and provided
further, that the Association’s Board of Directors may toll or extend the 130 day period at any
time prior to its expiration, or (viii) a trustee, interim trustee, receiver or other custodian
for any of the Plan’s or BCBSA’s property or business is appointed, or the Plan or BCBSA is
ordered dissolved or liquidated, or (ix) the Plan shall fail to pay its dues and shall not cure
such failure within thirty (30) days of receiving written notice thereof, or (x) if, due to
regulatory action, the Plan together with any applicable Controlled Affiliate becomes unable to do
business using the Names and Marks in any State or portion thereof included in its Service Area,
provided that: (i) automatic termination shall not occur prior to the exhaustion by any such Plan
of its rights to appeal or challenge such regulatory action; and (ii) in the event the Plan is
licensed to do business using the Names and Marks in multiple States or portions of States, the
termination of its License Agreement shall be solely limited to the State(s) or portions thereof
in which the regulatory action applies. By not appealing or challenging such regulatory action
within the time prescribed by law or regulation, and in any event no later than 120 days after
such action is taken, a Plan shall be deemed to have exhausted its rights to appeal or challenge,
and automatic termination shall proceed.
-7-
Notwithstanding any other provision of this Agreement, a declaration or a request for declaration
of the existence of a trust over any of the Plan’s or BCBSA’s property or business shall not in
itself be deemed to constitute or seek appointment of a trustee, interim trustee, receiver or
other custodian for purposes of subparagraphs 15(a)(vii) and (viii) of this Agreement.
Amended as of September 14, 2004
-7a-
(b). BCBSA, or the Plans (as provided and in addition to the rights conferred in Paragraph
10(b) above), may terminate this Agreement immediately upon written notice upon the occurrence of
either of the following events: (a) the Plan or BCBSA becomes insolvent (as that term is
defined in the Uniform Commercial Code enacted in the state of
Illinois), or (b) any final
judgment against the Plan or BCBSA remains unsatisfied or unbonded of record for a period of sixty
(60) days or longer.
(c). If this License Agreement is terminated as to BCBSA for any reason stated in
subparagraphs 15(a) and (b) above, the ownership of the Licensed Marks shall revert to each of the
Plans.
(d). Upon termination of this License Agreement or any Controlled Affiliate License Agreement
of a Larger Controlled Affiliate, as defined in Exhibit 1 to this License Agreement, the following
conditions shall apply, except that, in the event of a partial termination of this Agreement
pursuant to Xxxxxxxxx 00 (x)(x)(xx) of this Agreement, the notices, national account listing,
payment and audit right listed below shall be applicable solely with respect to the geographic area
for which the Plan’s license to use the Licensed Names and Marks is terminated:
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(i) |
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The terminated entity shall send a
notice through the U.S. mails, with first class postage affixed,
to all individual and group customers, providers, brokers and
agents of products or services sold, marketed, underwritten or
administered by the terminated entity or its Controlled
Affiliates under the Licensed Marks and Name. The form and
content of the notice shall be specified by BCBSA and shall, at
a minimum, notify the recipient of the termination of the
license, the consequences thereof, and instructions for
obtaining alternate products or services licensed by BCBSA,
subject to any conflicting state law and state regulatory
requirements. This notice shall be mailed within 15 days after
termination or, if termination is pursuant to paragraph 10(d) of
this Agreement, within 15 days after the written notice to BCBSA
described in paragraph 10(d). |
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(ii) |
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The terminated entity shall deliver to
BCBSA within five days of a request by BCBSA a listing of
national accounts in which the terminated entity is involved (in
a Control, Participating or Servicing capacity), identifying the
national account and the terminated entity’s role therein. For
those accounts where the terminated entity is the Control Plan,
the Plan must also indicate the Participating and Servicing
Plans in the national account syndicate. |
Amended as of June 16, 2005
-8-
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(iii) |
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Unless the cause of termination is an
event stated in paragraph 15(a) or (b) above respecting BCBSA,
the Plan and its Licensed Controlled Affiliates shall be jointly
liable for payment to BCBSA of an amount equal to the
Re-Establishment Fee (described below) multiplied by the number
of Licensed Enrollees of the terminated entity and its Licensed
Controlled Affiliates; provided that if any other Plan is
permitted by BCBSA to use marks or names licensed by BCBSA in
the Service Area established by this Agreement, the
Re-Establishment Fee shall be multiplied by a fraction, the
numerator of which is the number of Licensed Enrollees of the
terminated entity and its Licensed Controlled Affiliates and the
denominator of which is the total number of Licensed Enrollees
in the Service Area. The Re-Establishment Fee shall be indexed
to a base fee of $80. The Re-Establishment Fee through December
31, 2005 shall be $80. The Re-Establishment Fee for calendar
years after December 31, 2005 shall be adjusted on January 1 of
each calendar year up to and including January 1, 2010 and shall
be the base fee multiplied by 100% plus the cumulative
percentage increase or decrease in the Plans’ gross
administrative expense (standard BCBSA definition) per Licensed
Enrollee since December 31, 2004. The adjustment shall end on
January 1, 2011, at which time the Re-Establishment Fee shall be
fixed at the then-current amount and no longer automatically
adjusted. For example, if the Plans’ gross administrative
expense per Licensed Enrollee was $278.60, $285.00 and $290.00
for calendar year end 2004, 2005 and 2006, respectively, the
January 1, 2007 Re-Establishment Fee would be $83.27 (100% of
the base fee plus $1.84 for calendar year 2005 and $1.43 for
calendar year 2006). Licensed Enrollee means each and every
person and covered dependent who is enrolled as an individual or
member of a group receiving products or services sold, marketed
or administered under marks or names licensed by BCBSA as
determined at the earlier of (a) the end of the last fiscal year
of the terminated entity which ended prior to termination or (b)
the fiscal year which ended before any transactions causing the
termination began. Notwithstanding the foregoing, the amount
payable pursuant to this subparagraph (d)(iii) shall be due only
to the extent that, in BCBSA’s |
Amended as of June 16, 2005
-8a-
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opinion, it does not cause the net worth of the Plan to fall
below 100% of the Health Risk-Based Capital formula or its
equivalent under any successor formula,
as set forth in the applicable financial responsibility
standards established by BCBSA (provided such equivalent is
approved for purposes of this sub paragraph by the affirmative
vote of three-fourths of the Plans and three-fourths of the
total then current weighted vote of all the Plans), measured
as of the date of termination and adjusted for the value of
any transactions not made in the ordinary course of business.
This payment shall not be due in connection with transactions
exclusively by or among Plan or their affiliates, including
reorganizations, combinations or mergers, where the BCBSA
Board of Directors determines that the license termination
does not result in a material diminution in the number of
Licensed Enrollees or the extent of their coverage.
At least 50% of the Re-Establishment Fee shall be awarded to
the Plan (or Plans) that receive the new license(s) for the
service area(s) at issue; provided, however, that such award
shall not become due or payable until all disputes, if any,
regarding the amount of and BCBSA’s right to such
Re-Establishment Fee have been finally resolved; and provided
further that the award shall be based on the final amount
actually received by BCBSA. The Board of Directors shall
adopt a resolution which it may amend from time to time that
shall govern BCBSA’s use of its portion of the award. In the
event that the terminated entity’s license is reinstated by
BCBSA or is deemed to have remained in effect without
interruption by a court of competent jurisdiction, BCBSA shall
reimburse the
Plan (and/or its Licensed Controlled Affiliates, as the case
may be) for payments made under this subparagraph only to the
extent that such payments exceed the amounts due to BCBSA
pursuant to subparagraph 15(d)(vi) and any costs associated
with reestablishing the Service Area, including any payments
made by BCBSA to a Plan or Plans (or their Licensed Controlled
Affiliates) for purposes of replacing the terminated entity. |
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(iv) |
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The terminated entity shall comply with all
financial settlement procedures set forth in BCBSA’s License
Termination Contingency Plan, as amended from time |
Amended as of June 16, 2005
-8b-
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to time and shall work diligently and in good faith with
BCBSA, any Alternative Control Licensee or Replacement
Licensee and any existing or potential new account for
Blue-branded products and services to minimize the disruption
of termination, and honor, to the fullest extent possible, the
desire of accounts to continue to receive or obtain
Blue-branded products and services through a new Licensee
(“Transition”). Such diligence and good faith on the part of
the terminated entity shall include, but not be limited to:
(a) working cooperatively with BCBSA to protect the Names and
Marks from potential harm; (b) cooperating with BCBSA’s use of
the Names and Marks in the terminated entity’s former service
area during the termination and Transition; (c) transmitting,
upon the request of an existing Blue account or of BCBSA with
consent and on behalf of an existing Blue account, all member
and account-data relating to the Federal Employee Program to
BCBSA, and all member and account data relating to other
programs to an Alternative Control Licensee or Replacement
Licensee; (d) working with BCBSA and the Alternative Control
or Replacement Licensee with respect to potential new Blue
accounts headquartered in the terminated entity’s former
service area; (e) continuing to service Blue accounts during
the Transition; (f) continuing to comply with National
Programs, Federal Employee Program and NASCO policies and
procedures and all voluntary BCBSA programs, policies and
performance standards, such as Away From Home Care, including
being responsible for payment of all penalties for
non-compliance duly levied in conformity with the License
Agreements, Membership Standards, or the Federal Employee
Program agreements, that may arise during the Transition; (g)
maintaining and providing access to its provider networks, as
defined by Federal Employee Program agreements and National
Account Program Policies and Provisions, and Inter-Plan
Programs Policies and Provisions, and making those networks
and discounts available to members and providers who
participate in National Programs and the Federal Employee
Program during the Transition; (h) maintaining its technical
connections and processing capabilities during the Transition;
and (i) working diligently to conclude all financial
settlements and account reconciliations as negotiated in the
termination transition agreement. |
Amended as of November 16, 2006
-8c-
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(v) |
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Notwithstanding any other provision in
this Agreement, BCBSA shall have the right, with the approval of
its Board of Directors, to assess additional fines against the
terminated entity during the Transition in the event it fails to
maintain and provide access to provider networks as defined by
Federal Employee Program agreements, National Account Program
Policies and Provisions, and Inter-Plan Programs Policies and
Provisions, and/or pass on applicable discounts. Such fines
shall be in addition to any other assessments, fees or
liquidated damages payable herein, or under existing policies
and programs and shall be imposed to make whole BCBSA and/or the
Plans. Terminated entity shall pay any such fines to BCBSA no
later than 30 days after they are approved by the Board of
Directors. |
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(vi) |
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BCBSA shall have the right to examine
and audit and/or hire at terminated entity’s expense a
third-party auditor to examine and audit the books and records
of the terminated entity and its Licensed Controlled Affiliates
to verify compliance with the terms and requirements this
paragraph 15(d). |
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(vii) |
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Subsequent to termination of this
Agreement, the terminated entity and its affiliates, agents, and
employees shall have an ongoing and continuing obligation to
protect all BCBSA and Blue Licensee data that was acquired or
accessed during the period this Agreement was in force,
including but not limited to all confidential processes,
pricing, provider, discount and other strategic and
competitively sensitive information (“Blue Information”) from
disclosure, and shall not, either alone or with another entity,
disclose such Blue Information or use it in any manner to
compete without the express written permission of BCBSA. |
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(viii) |
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As to a breach of 15 (d) (i), (ii), (iii), (iv), (vi), or
(vii) the parties agree that the obligations are immediately
enforceable in a court of competent jurisdiction. As to a
breach of 15 (d) (i), (ii), (iv), (vi), or (vii) by the Plan,
the parties agree there is no adequate remedy at law and BCBSA
is entitled to obtain specific performance. |
Amended as of November 16, 2006
-8d-
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(ix) |
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In the event that the terminated
entity’s license is reinstated by BCBSA or is deemed to have
remained in effect without interruption by a court of competent
jurisdiction, the Plan and its Licensed Controlled Affiliates
shall be jointly liable for reimbursing BCBSA the reasonable
costs incurred by BCBSA in connection with the termination and
the reinstatement or court action, and any associated legal
proceedings, including but not limited to: outside legal fees,
consulting fees, public relations fees, advertising costs, and
costs incurred to develop, lease or establish an interim
provider network. Any amount due to BCBSA under this
subparagraph may be waived in whole or in part by the BCBSA
Board of Directors in its sole discretion. |
(e). BCBSA shall be entitled to enjoin the Plan or any related party in a court of competent
jurisdiction from entry into any transaction which would result in a termination of this License
Agreement unless the License Agreement has been terminated pursuant to paragraph 10 (d) of this
Agreement upon the required six (6) month written notice.
(f). BCBSA acknowledges that it is not the owner of assets of the Plan.
Amended as of June 16, 2005
-8e-
16. This Agreement supersedes any and all other agreements between the parties with respect
to the subject matter herein, and contains all of the covenants and agreements of the parties as
to the licensing of the Licensed Marks and Name. This Agreement may be amended only by the
affirmative vote of three-fourths of the Plans and three-fourths of the total then current
weighted vote of all the Plans as officially recorded by the BCBSA Corporate Secretary.
17. If any provision or any part of any provision of this Agreement is judicially declared
unlawful, each and every other provision, or any part of any provision, shall continue in full
force and effect notwithstanding such judicial declaration.
18. No waiver by BCBSA or the Plan of any breach or default in performance on the part of
BCBSA or the Plan or any other licensee of any of the terms, covenants or conditions of this
Agreement shall constitute a waiver of any subsequent breach or default in performance of said
terms, covenants or conditions.
19a. All notices provided for hereunder shall be in writing and shall be sent in duplicate by
regular mail to BCBSA or the Plan at the address currently published for each by BCBSA and shall
be marked respectively to the attention of the President and, if any, the General Counsel, of
BCBSA or the Plan.
Amended as of November 20, 1997
-8f-
19b. Except as provided in paragraphs 9(b), 9(d)(iii), 15(a), and 15(b) above, this Agreement
may be terminated for a breach only upon at least 30 days’ written notice to the Plan advising of
the specific matters at issue and granting the Plan an opportunity to be heard and to present its
response to the Member Plans.
19c. For all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean
all entities licensed under the Blue Cross License Agreement and/or the Blue Shield License
Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For
weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted
votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that
it holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote.
For all questions requiring an affirmative three-fourths weighted vote of the Plans, the
requirement shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52
or more of the Plans (rounded to the nearest whole number, with 0.5 or multiples thereof being
rounded to the next higher whole number) fail to cast weighted votes in favor of the question; or
(ii) three (3) of the Plans fail to cast weighted votes in favor of the question. Notwithstanding
the foregoing provision, if there are thirty-nine (39) Plans, the requirement of an affirmative
three-fourths weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4)
or more Plans fail to cast weighted votes in favor of the question.
Amended as of June 16, 2005
(The next page is page 9)
-8g-
20. Nothing herein contained shall be construed to constitute the parties hereto as partners
or joint venturers, or either as the agent of the other, and Plan shall have no right to bind or
obligate BCBSA in any way, nor shall it represent that it has any right to do so. BCBSA shall
have no liability to third parties with respect to any aspect of the business, activities,
operations, products, or services of the Plan.
21. This Agreement shall be governed, construed and interpreted in accordance with the laws
of the State of
Illinois.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of
the date of last signature written below.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
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By |
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/s/ Xxxxx X. Xxxxxx |
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Xxxxx X. Xxxxxx
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Title |
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President and CEO |
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Date |
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July 1, 2009 |
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Triple-S Management Corporation: |
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By |
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/s/ Xxxxx X. Xxxx Xxxxx |
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Title |
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CEO & President |
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Date |
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June 22, 2009 |
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-9-
EXHIBIT 1
BLUE CROSS
CONTROLLED AFFILIATE LICENSE AGREEMENT
(Includes revisions adopted by Member Plans through their March 19, 2009 meeting)
This Agreement by and among Blue Cross and Blue Shield Association (“BCBSA”) and
(“Controlled Affiliate”), a Controlled Affiliate of the Blue Cross Plan(s), known as
(“Plan”), which is also a Party signatory hereto.
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service marks;
WHEREAS, Plan and Controlled Affiliate desire that the latter be entitled to use the BLUE
CROSS and BLUE CROSS Design service marks (collectively the “Licensed Marks”) as service marks and
be entitled to use the term BLUE CROSS in a trade name (“Licensed Name”);
NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled
Affiliate the right to use the Licensed Marks and Name in connection with, and only in connection
with: (i) health care plans and related services, as defined in BCBSA’s License Agreement with
Plan, and administering the non-health portion of workers’ compensation insurance, and (ii)
underwriting the indemnity portion of workers’ compensation insurance, provided that Controlled
Affiliate’s total premium revenue comprises less than 15 percent of the sponsoring Plan’s net
subscription revenue.
This grant of rights is non-exclusive and is limited to the Service Area served by the Plan.
Controlled Affiliate may use the Licensed Marks and Name in its legal name on the following
conditions: (i) the legal name must be approved in advance, in writing, by BCBSA; (ii) Controlled
Affiliate shall not do business outside the Service Area under any name or xxxx; and (iii)
Controlled Affiliate shall not use the Licensed Marks and Name, or any derivative thereof, as part
of any name or symbol used to identify itself in any securities market. Controlled Affiliate may
use the Licensed Marks and Name in its Trade Name only with the prior, written, consent of BCBSA.
2. QUALITY CONTROL
A. Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the
licensed services and further agrees to be bound by the conditions regarding quality control shown
in attached Exhibit A as they may be amended by BCBSA from time-to-time.
Amended as of November 16, 2000
B. Controlled Affiliate agrees to comply with all applicable federal, state and local laws.
C. Controlled Affiliate agrees that it will provide on an annual basis (or more often if
reasonably required by Plan or by BCBSA) a report or reports to Plan and BCBSA demonstrating
Controlled Affiliate’s compliance with the requirements of this Agreement including but not limited
to the quality control provisions of this paragraph and the attached Exhibit A.
D. Controlled Affiliate agrees that Plan and/or BCBSA may, from time-to-time, upon reasonable
notice, review and inspect the manner and method of Controlled Affiliate’s rendering of service and
use of the Licensed Marks and Name.
E. As used herein, a Controlled Affiliate is defined as an entity organized and operated in
such a manner, that it meets the following requirements:
(1) A Plan or Plans authorized to use the Licensed Marks in the Service Area of the Controlled
Affiliate pursuant to separate License Agreement(s) with BCBSA, other than such Controlled
Affiliate’s License Agreement(s), (the “Controlling Plan(s)”), must have the legal authority
directly or indirectly through wholly-owned subsidiaries to select members of the Controlled
Affiliate’s governing body having not less than 50% voting control thereof and to:
(a) prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not
concur;
(b) exercise control over the policy and operations of the Controlled Affiliate at least equal
to that exercised by persons or entities (jointly or individually) other than the Controlling
Plan(s); and
Notwithstanding anything to the contrary in (a) through (b) hereof, the Controlled Affiliate’s
establishing or governing documents must also require written approval by the Controlling Plan(s)
before the Controlled Affiliate can:
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(i) |
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change its legal and/or trade names; |
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(ii) |
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change the geographic area in which it operates; |
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(iii) |
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change any of the type(s) of businesses in which it engages; |
2
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(iv) |
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create, or become liable for by way of guarantee, any
indebtedness, other than indebtedness arising in the ordinary course of
business; |
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(v) |
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sell any assets, except for sales in the ordinary course of
business or sales of equipment no longer useful or being replaced; |
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(vi) |
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make any loans or advances except in the ordinary course of
business; |
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(vii) |
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enter into any arrangement or agreement with any party
directly or indirectly affiliated with any of the owners or persons or entities
with the authority to select or appoint members or board members of the
Controlled Affiliate, other than the Plan or Plans (excluding owners of stock
holdings of under 5% in a publicly traded Controlled Affiliate); |
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(viii) |
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conduct any business other than under the Licensed Marks and Name; |
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(ix) |
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take any action that any Controlling Plan or BCBSA reasonably
believes will adversely affect the Licensed Marks and Name. |
In addition, a Plan or Plans directly or indirectly through wholly owned subsidiaries shall own at
least 50% of any for-profit Controlled Affiliate.
Or
(2) A Plan or Plans authorized to use the Licensed Marks in the Service Area of the Controlled
Affiliate pursuant to separate License Agreement(s) with BCBSA, other than such Controlled
Affiliate’s License Agreement(s), (the “Controlling Plan(s)”), have the legal authority directly or
indirectly through wholly-owned subsidiaries to select members of the Controlled Affiliate’s
governing body having more than 50% voting control thereof and to:
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(a) |
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prevent any change in the articles of incorporation, bylaws or other
establishing or governing documents of the Controlled Affiliate with which the
Controlling Plan(s) do(es) not concur; |
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(b) |
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exercise control over the policy and operations of the Controlled Affiliate. |
In addition, a Plan or Plans directly or indirectly through wholly-owned subsidiaries shall own
more than 50% of any for-profit Controlled Affiliate.
3
3. SERVICE XXXX USE
A. Controlled Affiliate recognizes the importance of a comprehensive national network of
independent BCBSA licensees which are committed to strengthening the Licensed Marks and Name. The
Controlled Affiliate further recognizes that its actions within its Service Area may affect the
value of the Licensed Marks and Name nationwide.
B. Controlled Affiliate shall at all times make proper service xxxx use of the Licensed Marks
and Name, including but not limited to use of such symbols or words as BCBSA shall specify to
protect the Licensed Marks and Name and shall comply with such rules (generally applicable to
Controlled Affiliates licensed to use the Licensed Marks and Name) relative to service xxxx use, as
are issued from time-to-time by BCBSA. Controlled Affiliate recognizes and agrees that all use of
the Licensed Marks and Name by Controlled Affiliate shall inure to the benefit of BCBSA.
C. Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a
manner that transfers or is intended to transfer in the Service Area the goodwill associated
therewith to another xxxx or name, nor may Controlled Affiliate engage in activity that may dilute
or tarnish the unique value of the Licensed Marks and Name.
D. If Controlled Affiliate meets the standards of 2E(1) but not 2E(2) above and any of
Controlled Affiliate’s advertising or promotional material is reasonably determined by BCBSA and/or
the Plan to be in contravention of rules and regulations governing the use of the Licensed Marks
and Name, Controlled Affiliate shall for ninety (90) days thereafter obtain prior approval from
BCBSA of advertising and promotional efforts using the Licensed Marks and Name, approval or
disapproval thereof to be forthcoming within five (5) business days of receipt of same by BCBSA or
its designee. In all advertising and promotional efforts, Controlled Affiliate shall observe the
Service Area limitations applicable to Plan.
E. Notwithstanding any other provision in the Plan’s License Agreement with BCBSA or in this
Agreement, Controlled Affiliate shall use its best efforts to promote and build the value of the
Licensed Marks and Name.
Amended as of June 16, 2005
4
4. SUBLICENSING AND ASSIGNMENT
Controlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate,
sell, encumber or mortgage, by operation of law or otherwise, the rights granted hereunder and any
such act shall be voidable at the sole option of Plan or BCBSA. This Agreement and all rights and
duties hereunder are personal to Controlled Affiliate.
5. INFRINGEMENT
Controlled Affiliate shall promptly notify Plan and Plan shall promptly notify BCBSA of any
suspected acts of infringement, unfair competition or passing off that may occur in relation to the
Licensed Marks and Name. Controlled Affiliate shall not be entitled to require Plan or BCBSA to
take any actions or institute any proceedings to prevent infringement, unfair competition or
passing off by third parties. Controlled Affiliate agrees to render to Plan and BCBSA, without
charge, all reasonable assistance in connection with any matter pertaining to the protection of the
Licensed Marks and Name by BCBSA.
6. LIABILITY INDEMNIFICATION
Controlled Affiliate and Plan hereby agree to save, defend, indemnify and hold BCBSA harmless
from and against all claims, damages, liabilities and costs of every kind, nature and description
(except those arising solely as a result of BCBSA’s negligence) that may arise as a result of or
related to Controlled Affiliate’s rendering of services under the Licensed Marks and Name.
7. LICENSE TERM
A. Except as otherwise provided herein, the license granted by this Agreement shall remain in
effect for a period of one (1) year and shall be automatically extended for additional one (1) year
periods unless terminated pursuant to the provisions herein.
B. This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately
terminate without any further action by any party or entity in the event that: (i) the Plan ceases
to be authorized to use the Licensed Marks and Name; or (ii) pursuant to Paragraph 15(a)(x) of the
Blue Cross License Agreement the Plan ceases to be authorized to use the Licensed Names and Marks
in the geographic area served by the Controlled Affiliate provided, however, that if the Controlled
Affiliate is serving more than one State or portions thereof, the termination of this Agreement
shall be limited to the State(s) or portions thereof in which the Plan’s license to use the
Licensed Marks and Names is terminated. By not appealing or challenging such regulatory action
within the time prescribed by law or regulation, and in any event no later than 120 days after such
action is taken, a Plan shall be deemed to have exhausted its rights to appeal or challenge, and
automatic termination shall proceed.
Amended as of September 14, 2004
5
C. Notwithstanding any other provision of this Agreement, this license to use the Licensed
Marks and Name may be forthwith terminated by the Plan or the affirmative vote of the majority of
the Board of Directors of BCBSA present and voting at a special meeting expressly called by BCBSA
for the purpose on ten (10) days written notice to the Plan advising of the specific matters at
issue and granting the Plan an opportunity to be heard and to present its response to the Board
for: (1) failure to comply with any applicable minimum capital or liquidity requirement under the
quality control standards of this Agreement; or (2) failure to comply with the “Organization and
Governance” quality control standard of this Agreement; or (3) impending financial insolvency; or
(4) for a Smaller Controlled Affiliate (as defined in Exhibit A), failure to comply with any of the
applicable requirements of Standards 2, 3, 4, 5 or 7 of attached Exhibit A; or (5) the pendency of
any action instituted against the Controlled Affiliate seeking its dissolution or liquidation of
its assets or seeking appointment of a trustee, interim trustee, receiver or other custodian for
any of its property or business or seeking the declaration or establishment of a trust for any of
its property or business, unless this Controlled Affiliate License Agreement has been earlier
terminated under paragraph 7(e); or (6) failure by a Controlled Affiliate that meets the standards
of 2E(1) but not 2E(2) above to obtain BCBSA’s written consent to a change in the identity of any
owner, in the extent of ownership, or in the identity of any person or entity with the authority to
select or appoint members or board members, provided that as to publicly traded Controlled
Affiliates this provision shall apply only if the change affects a person or entity that owns at
least 5% of the Controlled Affiliate’s stock before or after the change; or (7) such other reason
as is determined in good faith immediately and irreparably to threaten the integrity and reputation
of BCBSA, the Plans, any other licensee including Controlled Affiliate and/or the Licensed Marks
and Name.
D. Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, should Controlled
Affiliate fail to comply with the provisions of this Agreement and not cure such failure within
thirty (30) days of receiving written notice thereof (or commence a cure within such thirty day
period and continue diligent efforts to complete the cure if such curing cannot reasonably be
completed within such thirty day period) BCBSA or the Plan shall have the right to issue a notice
that the Controlled Affiliate is in a state of noncompliance. If a state of noncompliance as
aforesaid is undisputed by the Controlled Affiliate or is found to exist by a mandatory dispute
resolution panel and is uncured as provided above, BCBSA shall have the right to seek judicial
enforcement of the Agreement or to issue a notice of termination thereof. Notwithstanding any
other provisions of this Agreement, any disputes as to the termination of this License pursuant to
Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to mediation and mandatory
dispute resolution. All other disputes between BCBSA, the Plan and/or Controlled Affiliate shall
be submitted promptly to mediation and mandatory dispute resolution. The mandatory dispute
resolution panel shall have authority to issue orders for specific performance and assess monetary
penalties. Except, however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this
license to use the Licensed Marks and Name may not be finally terminated for any reason without the
affirmative vote of a majority of the present and voting members of the Board of Directors of
BCBSA.
6
E. This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately
terminate without any further action by any party or entity in the event that:
(1) Controlled Affiliate shall no longer comply with item 2(E) above;
(2) Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to
paragraph 9 hereof, which are the royalties for this License Agreement, are more than sixty (60)
days in arrears to BCBSA; or
(3) Any of the following events occur: (i) a voluntary petition shall be filed by Controlled
Affiliate seeking bankruptcy, reorganization, arrangement with creditors or other relief under the
bankruptcy laws of the United States or any other law governing insolvency or debtor relief, or
(ii) an involuntary petition or proceeding shall be filed against Controlled Affiliate seeking
bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcy laws of
the United States or any other law governing insolvency or debtor relief and such petition or
proceeding is consented to or acquiesced in by Controlled Affiliate or is not dismissed within
sixty (60) days of the date upon which the petition or other document commencing the proceeding is
served upon the Controlled Affiliate, or (iii) an order for relief is entered against Controlled
Affiliate in any case under the bankruptcy laws of the United States, or Controlled Affiliate is
adjudged bankrupt or insolvent as those terms are defined in the Uniform Commercial Code as enacted
in the State of
Illinois by any court of competent jurisdiction, or (iv) Controlled Affiliate makes
a general assignment of its assets for the benefit of creditors, or (v) any government or any
government official, office, agency, branch, or unit assumes control of Controlled Affiliate or
delinquency proceedings (voluntary or involuntary) are instituted, or (vi) an action is brought by
Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the
appointment of a trustee, interim trustee, receiver or other custodian for any of its property or
business, or (vii) an action is instituted by any governmental entity or officer against Controlled
Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a
trustee, interim trustee, receiver or other custodian for any of its property or business and such
action is consented to or acquiesced in by Controlled Affiliate or is not dismissed within one
hundred thirty (130) days of the date upon which the pleading or other document commencing the
action is served upon the Controlled Affiliate, provided that if the action is stayed or its
prosecution is enjoined, the one hundred thirty (130) day period is tolled for the duration of the
stay or injunction, and provided further, that the Association’s Board of Directors may toll or
extend the 130 day period at any time prior to its expiration, or (viii) a trustee, interim
trustee, receiver or other custodian for any of Controlled Affiliate’s property or business is
appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any
other provision of this Agreement, a declaration or a request for declaration of the existence of a
trust over any of the Controlled Affiliate’s property or business shall not in itself be deemed to
constitute or seek appointment of a trustee, interim trustee, receiver or other custodian for
purposes of subparagraphs 7(e)(3)(vii) and (viii) of this Agreement
Amended as of March 18, 2004
7
F. Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that
it shall immediately discontinue all use of the Licensed Marks and Name, including any use in its
trade name.
G. Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of
its customers that it is no longer a licensee of BCBSA and, if directed by the Association’s Board
of Directors, shall provide instruction on how the customer can contact BCBSA or a designated
licensee to obtain further information on securing coverage. The notification required by this
paragraph shall be in writing and in a form approved by BCBSA. The BCBSA shall have the right to
audit the terminated entity’s books and records to verify compliance with this paragraph.
H. In the event this Agreement terminates pursuant to 7(b) hereof, or in the event the
Controlled Affiliate is a Larger Controlled Affiliate (as defined in Exhibit A), upon termination
of this Agreement, the provisions of Paragraph 7.G. shall not apply and the following provisions
shall apply, except that, in the event of a partial termination of this Agreement pursuant to
Paragraph 7(B)(ii) of this Agreement, the notices, national account listing, payment, and audit
right listed below shall be applicable solely with respect to the geographic area for which the
Plan’s license to use the Licensed Names and Marks is terminated:
(1) The Controlled Affiliate shall send a notice through the U.S. mails, with first class
postage affixed, to all individual and group customers, providers, brokers and agents of products
or services sold, marketed, underwritten or administered by the Controlled Affiliate under the
Licensed Marks and Name. The form and content of the notice shall be specified by BCBSA and shall,
at a minimum, notify the recipient of the termination of the license, the consequences thereof, and
instructions for obtaining alternate products or services licensed by BCBSA, subject to any
conflicting state law and state regulatory requirements. This notice shall be mailed within 15
days after termination.
(2) The Controlled Affiliate shall deliver to BCBSA within five days of a request by BCBSA a
listing of national accounts in which the Controlled Affiliate is involved (in a control,
participating or servicing capacity), identifying the national account and the Controlled
Affiliate’s role therein.
(3) Unless the cause of termination is an event respecting BCBSA stated in paragraph 15(a) or
(b) of the Plan’s license agreement with BCBSA to use the Licensed Marks and Name, the Controlled
Affiliate, the Plan, and any other Licensed Controlled Affiliates of the Plan shall be jointly
liable for payment to BCBSA of an amount equal to the Re-Establishment Fee (described below)
multiplied by the number of Licensed Enrollees of the Controlled Affiliate; provided that if any
other Plan is permitted by BCBSA to use marks or names licensed by BCBSA in the Service Area
established by this Agreement, the Re-Establishment Fee shall be multiplied by a fraction, the
numerator of which is the number of Licensed Enrollees of the Controlled Affiliate, the Plan, and
any other Licensed Controlled Affiliates and the denominator of which is the total number of
Licensed Enrollees in the Service Area.
Amended as of June 16, 2005
8
The Re-Establishment Fee shall be indexed to a base fee of $80. The Re-Establishment Fee
through December 31, 2005 shall be $80. The Re-establishment Fee for calendar years after
December 31, 2005 shall be adjusted on January 1 of each calendar year up to and including
January 1, 2010 and shall be the base fee multiplied by 100% plus the cumulative percentage
increase or decrease in the Plans’ gross administrative expense (standard BCBSA definition)
per Licensed Enrollee since December 31, 2004. The adjustment shall end on January 1, 2011,
at which time the Re-Establishment Fee shall be fixed at the then-current amount and no
longer automatically adjusted. For example, if the Plans’ gross administrative expense per
Licensed Enrollee was $278.60, $285.00 and $290.00 for calendar year end 2004, 2005 and
2006, respectively, the January 1, 2007 Re-Establishment Fee would be $83.27 (100% of base
fee plus $1.84 for calendar year 2005 and $1.43 for calendar year 2006). Licensed Enrollee
means each and every person and covered dependent who is enrolled as an individual or member
of a group receiving products or services sold, marketed or administered under marks or
names licensed by BCBSA as determined at the earlier of (i) the end of the last fiscal year
of the terminated entity which ended prior to termination or (ii) the fiscal year which
ended before any transactions causing the termination began. Notwithstanding the foregoing,
the amount payable pursuant to this subparagraph H. (3) shall be due only to the extent
that, in BCBSA’s opinion, it does not cause the net worth of the Controlled Affiliate, the
Plan or any other Licensed Controlled Affiliates of the Plan to fall below 100% of the
Health Risk-Based Capital formula, or its equivalent under any successor formula, as set
forth in the applicable financial responsibility standards established by BCBSA (provided
such equivalent is approved for purposes of this sub paragraph by the affirmative vote of
three-fourths of the Plans and three-fourths of the total then current weighted vote of all
the Plans); measured as of the date of termination, and adjusted for the value of any
transactions not made in the ordinary course of business. This payment shall not be due in
connection with transactions exclusively by or among Plans or their affiliates, including
reorganizations, combinations or mergers, where the BCBSA Board of Directors determines that
the license termination does not result in a material diminution in the number of Licensed
Enrollees or the extent of their coverage. At least 50% of the Re-Establishment Fee shall
be awarded to the Plan (or Plans) that receive the new license(s) for the service area(s) at
issue; provided, however, that such award shall not become due or payable until all
disputes, if any, regarding the amount of and BCBSA’s right to such Re-Establishment Fee
have been finally resolved; and provided further that the award shall be based on the final
amount actually received by BCBSA. The Board of Directors shall adopt a resolution which it
may amend from time to time that shall govern BCBSA’s use of its portion of the award. In
the event that the Controlled Affiliate’s license is reinstated by BCBSA or is deemed to
have remained in effect without interruption by a court of competent jurisdiction, BCBSA
shall reimburse the Controlled Affiliate (and/or the Plan or its other Licensed Controlled
Affiliates, as the case may be) for payments made under this subparagraph 7.H.(3) only to
the extent that such payments exceed the amounts due to BCBSA pursuant to paragraph 7.M. and
Amended as of June 16, 2005
9
any costs associated with reestablishing the Service Area, including payments made by BCBSA
to a Plan or Plans (or their Licensed Controlled Affiliates) for purposes of replacing the
Controlled Affiliate.
(4) BCBSA shall have the right to examine and audit and/or hire at terminated entity’s expense
a third party auditor to examine and audit the books and records of the Controlled Affiliate, the
Plan, and any other Licensed Controlled Affiliates of the Plan to verify compliance with this
paragraph 7.H.
(5) Subsequent to termination of this Agreement, the terminated entity and its affiliates,
agents, and employees shall have an ongoing and continuing obligation to protect all BCBSA and Blue
Licensee data that was acquired or accessed during the period this Agreement was in force,
including but not limited to all confidential processes, pricing, provider, discount and other
strategic and competitively sensitive information (“Blue Information”) from disclosure, and shall
not, either alone or with another entity, disclose such Blue Information or use it in any manner to
compete without the express written permission of BCBSA.
(6) As to a breach of 7.H.(1), (2), (3), (4) or (5) the parties agree that the obligations are
immediately enforceable in a court of competent jurisdiction. As to a breach of 7.H.(1), (2) or
(4) by the Controlled Affiliate, the parties agree there is no adequate remedy at law and BCBSA is
entitled to obtain specific performance.
I. This Agreement shall remain in effect until terminated by the Controlled Affiliate upon not
less than eighteen (18) months written notice to the Association or upon a shorter notice period
approved by BCBSA in writing at its sole discretion, or until terminated as otherwise provided
herein.
J. In the event the Controlled Affiliate is a Smaller Controlled Affiliate (as defined in
Exhibit A), the Controlled Affiliate agrees to be jointly liable for the amount described in H.3.
and M. hereof upon termination of the BCBSA license agreement of any Larger Controlled Affiliate of
the Plan.
K. BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court
of competent jurisdiction from entry into any transaction which would result in a termination of
this Agreement unless the Plan’s license from BCBSA to use the Licensed Marks and Names has been
terminated pursuant to 10(d) of the Plan’s license agreement upon the required 6 month written
notice.
L. BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.
M. In the event that the Plan has more than 50 percent voting control of the Controlled
Affiliate under Paragraph 2(E)(2) above and is a Larger Controlled Affiliate (as defined in Exhibit
A), then the vote called for in Paragraphs 7(C) and 7(D) above shall require the affirmative vote
of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the
Plans.
Amended as of June 16, 2005
10
N. In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed
to have remained in effect without interruption by a court of competent jurisdiction, the
Controlled Affiliate, the Plan, and any other Licensed Controlled Affiliates of the Plan shall be
jointly liable for reimbursing BCBSA the reasonable costs incurred by BCBSA in connection with the
termination and the reinstatement or court action, and any associated legal proceedings, including
but not limited to: outside legal fees, consulting fees, public relations fees, advertising costs,
and costs incurred to develop, lease or establish an interim provider network. Any amount due to
BCBSA under this subparagraph may be waived in whole or in part by the BCBSA Board of Directors in
its sole discretion.
8. DISPUTE RESOLUTION
The parties agree that any disputes between them or between or among either of them and one or
more Plans or Controlled Affiliates of Plans that use in any manner the Blue Cross and Blue Cross
Marks and Name are subject to the Mediation and Mandatory Dispute Resolution process attached to
and made a part of Plan’s License from BCBSA to use the Licensed Marks and Name as Exhibit 5 as
amended from time-to-time, which documents are incorporated herein by reference as though fully set
forth herein.
9. LICENSE FEE
Controlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the
formula(s) set forth in Exhibit B.
10. JOINT VENTURE
Nothing contained in the Agreement shall be construed as creating a joint venture,
partnership, agency or employment relationship between Plan and Controlled Affiliate or between
either and BCBSA.
Amended as of September 20, 2007
11
11. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or termination thereof shall
be in writing and shall be addressed in duplicate to the last known address of each other party,
marked respectively to the attention of its President and, if any, its General Counsel.
12. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties in relation to the subject
matter hereof. This Agreement may only be amended by the affirmative vote of three-fourths of the
Plans and three-fourths of the total then current weighted vote of all the Plans as officially
recorded by the BCBSA Corporate Secretary.
13. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of competent jurisdiction,
such findings shall in no way affect the remaining obligations of the parties hereunder and the
court may substitute a lawful term or condition for any unlawful term or condition so long as the
effect of such substitution is to provide the parties with the benefits of this Agreement.
14. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate
or any other licensee of any of the terms, covenants or conditions of this Agreement shall
constitute a waiver of any subsequent breach or default in performance of said terms, covenants or
conditions.
14A. VOTING
For all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all entities
licensed under the Blue Cross License Agreement and/or the Blue Shield License Agreement, and in
all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of
the Plans, the Plan shall have a number of votes equal to the number of weighted votes (if any)
that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that it holds as a
Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For all
questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall
be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of the
Plans (rounded to the nearest whole number, with 0.5 or multiples thereof being rounded to the
next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3)
of the Plans fail to cast weighted votes in favor of the question. Notwithstanding the foregoing
provision, if there are thirty-nine (39) Plans, the requirement of an affirmative three-fourths
weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or more Plans
fail to cast weighted votes in favor of the question.
Amended as of June 16, 2005
12
THIS PAGE IS INTENTIONALLY BLANK.
13
15. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in accordance with, the
laws of the State of
Illinois.
16. HEADINGS
The headings inserted in this agreement are for convenience only and shall have no bearing on
the interpretation hereof.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and
effective as of the date of last signature written below.
Controlled Affiliate:
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14
EXHIBIT A
CONTROLLED AFFILIATE LICENSE STANDARDS
March 2009
PREAMBLE
The standards for licensing Controlled Affiliates are established by BCBSA and are subject to
change from time-to-time upon the affirmative vote of three-fourths (3/4) of the Plans and
three-fourths (3/4) of the total weighted vote. Each licensed Plan is required to use a standard
Controlled Affiliate license form provided by BCBSA and to cooperate fully in assuring that the
licensed Controlled Affiliate maintains compliance with the license standards.
The Controlled Affiliate License provides a flexible vehicle to accommodate the potential range of
health and workers’ compensation related products and services Plan Controlled Affiliates provide.
The Controlled Affiliate License collapses former health Controlled Affiliate licenses (HCC, HMO,
PPO, TPA, and IDS) into a single license using the following business-based criteria to provide a
framework for license standards:
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Percent of Controlled Affiliate controlled by parent: Greater than 50 percent or 50 percent? |
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Risk assumption: yes or no? |
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Medical care delivery: yes or no? |
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Size of the Controlled Affiliate: If the Controlled Affiliate has health or workers’
compensation administration business, does such business constitute 15 percent or more of the
parent’s and other licensed health subsidiaries’ member enrollment? |
Amended as of September 19, 2002
15
EXHIBIT A (continued)
For purposes of definition:
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A “smaller Controlled Affiliate:” (1) comprises less than fifteen percent (15%) of
Plan’s and its licensed Controlled Affiliates’ total member enrollment (as reported on the
BCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating
an entity seeking licensure as licensed);* or (2) underwrites the indemnity portion of
workers’ compensation insurance and has total premium revenue less than 15 percent of the
sponsoring Plan’s net subscription revenue. |
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A “larger Controlled Affiliate” comprises fifteen percent (15%) or more of Plan’s and its
licensed Controlled Affiliates’ total member enrollment (as reported on the BCBSA Quarterly
Enrollment Report, excluding rider and freestanding coverage, and treating an entity
seeking licensure as licensed.)* |
Changes in Controlled Affiliate status:
If any Controlled Affiliate’s status changes regarding: its Plan ownership level, its risk
acceptance or direct delivery of medical care, the Controlled Affiliate shall notify BCBSA within
thirty (30) days of such occurrence in writing and come into compliance with the applicable
standards within six (6) months.
If a smaller Controlled Affiliate’s health and workers’ compensation administration business
reaches or surpasses fifteen percent (15%) of the total member enrollment of the Plan and licensed
Controlled Affiliates, the Controlled Affiliate shall:
Amended as of September 19, 2002
16
EXHIBIT A (continued)
1. |
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Within thirty (30) days, notify BCBSA of this fact in writing, including evidence that the
Controlled Affiliate meets the minimum liquidity and capital (BCBSA “Health Risk-Based Capital
(HRBC)” as defined by the NAIC and state-established minimum reserve) requirements of the
larger Controlled Affiliate Financial Responsibility standard; and |
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Within six (6) months after reaching or surpassing the fifteen percent (15%) threshold,
demonstrate compliance with all license requirements for a larger Controlled Affiliate. |
If a Controlled Affiliate that underwrites the indemnity portion of workers’ compensation insurance
receives a change in rating or proposed change in rating, the Controlled Affiliate shall notify
BCBSA within 30 days of notification by the external rating agency.
*For purposes of this calculation,
The numerator equals:
Applicant Controlled Affiliate’s member enrollment, as defined in BCBSA’s Quarterly Enrollment
Report (excluding rider and freestanding coverage).
The denominator equals:
Numerator PLUS Plan and all other licensed Controlled Affiliates’ member enrollment, as reported in
BCBSA’s Quarterly Enrollment Report (excluding rider and freestanding coverage).
Amended as of September 19, 2002
17
EXHIBIT A (continued)
STANDARDS FOR LICENSED CONTROLLED AFFILIATES
As described in Preamble section of Exhibit A to the Affiliate License Agreement, each controlled
affiliate seeking licensure must answer four questions. Depending on the controlled affiliate’s
answers, certain standards apply:
1. What percent of the controlled affiliate is controlled by the parent Plan?
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Applicable only if using the names and marks. |
IN ADDITION,
2. Is risk being assumed?
IN ADDITION,
3. Is medical care being directly provided?
IN ADDITION,
4. If the controlled affiliate has health or workers’ compensation administration business, does
such business comprise 15% or more of the total member enrollment of Plan and its licensed
controlled affiliates?
18
EXHIBIT A (continued)
Standard 1 — Organization and Governance
1A.) The Standard for more than 50% Plan control is:
A Controlled Affiliate shall be organized and operated in such a manner that a licensed Plan or
Plans authorized to use the Licensed Marks in the Service Area of the Controlled Affiliate pursuant
to separate License Agreement(s) with BCBSA, other than such Controlled Affiliate’s License
Agreement(s), (the “Controlling Plan(s)”), have the legal authority, directly or indirectly through
wholly-owned subsidiaries: 1) to select members of the Controlled Affiliate’s governing body having
more than 50% voting control thereof; and 2) to prevent any change in the articles of
incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate with
which the Controlling Plan(s) do(es) not concur; and 3) to exercise control over the policy and
operations of the Controlled Affiliate. In addition, a Plan or Plans directly or indirectly through
wholly-owned subsidiaries shall own more than 50% of any for-profit Controlled Affiliate.
1B.) The Standard for 50% Plan control is:
A Controlled Affiliate shall be organized and operated in such a manner that a licensed Plan or
Plans authorized to use the Licensed Marks in the Service Area of the Controlled Affiliate pursuant
to separate License Agreement(s) with BCBSA, other than such Controlled Affiliate’s License
Agreement(s), (the “Controlling Plan(s)”), have the legal authority, directly or indirectly through
wholly-owned subsidiaries:
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to select members of the Controlled Affiliate’s governing body having not less than 50%
voting control thereof; and |
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to prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not
concur; and |
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to exercise control over the policy and operations of the Controlled Affiliate at least equal
to that exercised by persons or entities (jointly or individually) other than the Controlling
Plan(s). |
19
EXHIBIT A (continued)
Notwithstanding anything to the contrary in 1) through 3) hereof, the Controlled Affiliate’s
establishing or governing documents must also require written approval by the Controlling Plan(s)
before the Controlled Affiliate can:
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change the geographic area in which it operates |
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change its legal and/or trade names |
|
|
o |
|
change any of the types of businesses in which it engages |
|
|
o |
|
create, or become liable for by way of guarantee, any indebtedness,
other than indebtedness arising in the ordinary course of business |
|
|
o |
|
sell any assets, except for sales in the ordinary course of business
or sales of equipment no longer useful or being replaced |
|
|
o |
|
make any loans or advances except in the ordinary course of business |
|
|
o |
|
enter into any arrangement or agreement with any party directly or
indirectly affiliated with any of the owners or persons or entities
with the authority to select or appoint members or board members of
the Controlled Affiliate, other than the Plan or Plans (excluding
owners of stock holdings of under 5% in a publicly traded Controlled
Affiliate) |
|
|
o |
|
conduct any business other than under the Licensed Marks and Name |
|
|
o |
|
take any action that any Controlling Plan or BCBSA reasonably believes
will adversely affect the Licensed Marks and Name. |
In addition, a Plan or Plans directly or indirectly through wholly-owned subsidiaries shall own at
least 50% of any for-profit Controlled Affiliate.
20
EXHIBIT A (continued)
Standard 2 — Financial Responsibility
A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers. If a risk-assuming
Controlled Affiliate ceases operations for any reason, Blue Cross and/or Blue Cross Plan coverage
will be offered to all Controlled Affiliate subscribers without exclusions, limitations or
conditions based on health status. If a nonrisk-assuming Controlled Affiliate ceases operations
for any reason, sponsoring Plan(s) will provide for services to its (their) customers. The
requirements of the preceding two sentences shall apply to all lines of business unless a line of
business is specially exempted from the requirement(s) by the BCBSA Board of Directors.
Standard 3 — State Licensure/Certification
|
|
|
3A.) |
|
The Standard for a Controlled Affiliate that employs, owns or contracts on a substantially
exclusive basis for medical services is: |
A Controlled Affiliate shall maintain unimpaired licensure or certification for its medical care
providers to operate under applicable state laws.
|
|
|
3B.) |
|
The Standard for a Controlled Affiliate that does not employ, own or contract on a
substantially exclusive basis for medical services is: |
A Controlled Affiliate shall maintain unimpaired licensure or certification to operate under
applicable state laws.
Standard 4 — Certain Disclosures
A Controlled Affiliate shall make adequate disclosure in contracting with third parties and in
disseminating public statements of 1) the structure of the Blue Cross and Blue Shield System; and
2) the independent nature of every licensee; and 3) the Controlled Affiliate’s financial condition.
Standard 5 — Reports and Records for Certain Smaller Controlled Affiliates
For a smaller Controlled Affiliate that does not underwrite the indemnity portion of workers’
compensation insurance, the Standard is:
Amended as of June 16, 2005
21
EXHIBIT A (continued)
A Controlled Affiliate and/or its licensed Plan(s) shall furnish, on a timely and accurate basis,
reports and records relating to these Standards and the License Agreements between BCBSA and
Controlled Affiliate.
Standard 6 — Other Standards for Larger Controlled Affiliates
Standards 6(A) — (I) that follow apply to larger Controlled Affiliates.
Standard 6(A): Board of Directors
A Controlled Affiliate Governing Board shall act in the interest of its Corporation in providing
cost-effective health care services to its customers. A Controlled Affiliate shall maintain a
governing Board, which shall control the Controlled Affiliate, composed of a majority of persons
other than providers of health care services, who shall be known as public members. A public
member shall not be an employee of or have a financial interest in a health care provider, nor be a
member of a profession which provides health care services.
Standard 6(B): Responsiveness to Customers
A Controlled Affiliate shall be operated in a manner responsive to customer needs and requirements.
Standard 6(C): Participation in National Programs
A Controlled Affiliate shall effectively and efficiently participate in each national program as
from time to time may be adopted by the Member Plans for the purposes of providing portability of
membership between the licensees and ease of claims processing for customers receiving benefits
outside of the Controlled Affiliate’s Service Area.
Such programs are applicable to licensees, and include:
22
EXHIBIT A (continued)
3. |
|
Inter-Plan Teleprocessing System (ITS); |
|
4. |
|
National Account Programs; |
5. |
|
Business Associate Agreement for Blue Cross and Blue Shield Licensees, effective April 14,
2003; and |
|
6. |
|
Inter-Plan Medicare Advantage Program. |
Standard 6(D): Financial Performance Requirements
In addition to requirements under the national programs listed in Standard 6C: Participation in National Programs, a Controlled Affiliate shall take such action as
required to ensure its financial performance in programs and contracts of an inter-licensee nature
or where BCBSA is a party.
Standard 6(E): Cooperation with Plan Performance Response Process
A Controlled Affiliate shall cooperate with BCBSA’s Board of Directors and its Plan Performance and
Financial Standards Committee in the administration of the Plan Performance Response Process and in
addressing Controlled Affiliate performance problems identified thereunder.
Standard 6(F): Independent Financial Rating
A Controlled Affiliate shall obtain a rating of its financial strength from an independent rating
agency approved by BCBSA’s Board of Directors for such purpose.
Standard 6(G): Local and National Best Efforts
Notwithstanding any other provision in the Plan’s License Agreement with BCBSA or in this License
Agreement, during each year, a Controlled Affiliate shall use its best efforts to promote and
build the value of the Blue Xxxxx Xxxx.
Standard 6(H): Financial Responsibility
A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers.
Amended as of November 15, 2007
23
EXHIBIT A (continued)
Standard 6(I): Reports and Records
A Controlled Affiliate shall furnish to BCBSA on a timely and accurate basis reports and records
relating to compliance with these Standards and the License Agreements between BCBSA and Controlled
Affiliate. Such reports and records are the following:
A) |
|
BCBSA Controlled Affiliate Licensure Information Request; and |
|
B) |
|
Biennial trade name and service xxxx usage material, including disclosure material; and |
C) |
|
Changes in the ownership and governance of the Controlled Affiliate, including changes in its
charter, articles of incorporation, or bylaws, changes in a Controlled Affiliate’s Board
composition, or changes in the identity of the Controlled Affiliate’s Principal Officers, and
changes in risk acceptance, contract growth, or direct delivery of medical care; and |
D) |
|
Quarterly Financial Report, Semi-annual “Health Risk-Based Capital (HRBC) Report” as defined
by the NAIC, Annual Financial Forecast, Annual Certified Audit Report, Insurance Department
Examination Report, Annual Statement filed with State Insurance Department (with all
attachments), and |
E) |
|
Quarterly Enrollment Report. |
Amended as of March 14, 2002
24
EXHIBIT A (continued)
Standard 6(J): Control by Unlicensed Entities Prohibited
No Controlled Affiliate shall cause or permit an entity other than a Plan or a Licensed
Controlled Affiliate thereof to obtain control of the Controlled Affiliate or to acquire a
substantial portion of its assets related to licensable services.
Standard 7 — Other Standards for Risk-Assuming Workers’ Compensation Controlled Affiliates
Standards 7(A) — (E) that follow apply to Controlled Affiliates that underwrite the indemnity
portion of workers’ compensation insurance.
Standard 7 (A): Financial Responsibility
A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers.
Standard 7(B): Reports and Records
A Controlled Affiliate shall furnish, on a timely and accurate basis, reports and records
relating to compliance with these Standards and the License Agreements between BCBSA and the
Controlled Affiliate. Such reports and records are the following:
A. |
|
BCBSA Controlled Affiliate Licensure Information Request; and |
B. |
|
Biennial trade name and service xxxx usage materials, including disclosure
materials; and |
C. |
|
Annual Certified Audit Report, Annual Statement as filed with the State Insurance
Department (with all attachments), Annual NAIC’s Risk-Based Capital Worksheets for
Property and Casualty Insurers, Annual Financial Forecast; and |
D. |
|
Quarterly Financial Report, Quarterly Estimated Risk-Based Capital for Property and
Casualty Insurers, Insurance Department Examination Report, Quarterly Enrollment
Report; and |
Amended as of September 19, 2002
25
EXHIBIT A (continued)
E. |
|
Notification of all changes and proposed changes to independent ratings within 30
days of receipt and submission of a copy of all rating reports; and |
F. |
|
Changes in the ownership and governance of the Controlled Affiliate including
changes in its charter, articles of incorporation, or bylaws, changes in a
Controlled Affiliate’s Board composition, Plan control, state license status,
operating area, the Controlled Affiliate’s Principal Officers or direct delivery of
medical care. |
Standard 7(C): Loss Prevention
A Controlled Affiliate shall apply loss prevention protocol to both new and existing
business.
Standard 7(D): Claims Administration
A Controlled Affiliate shall maintain an effective claims administration process that
includes all the necessary functions to assure prompt and proper resolution of medical and
indemnity claims.
Standard 7(E): Disability and Provider Management
A Controlled Affiliate shall arrange for the provision of appropriate and necessary medical
and rehabilitative services to facilitate early intervention by medical professionals and
timely and appropriate return to work.
Amended as of November 16, 2000
26
EXHIBIT A (continued)
Standard 8 — Cooperation with Controlled Affiliate License Performance Response Process Protocol
A Controlled Affiliate and its Sponsoring Plan(s) shall cooperate with BCBSA’s Board of
Directors and its Plan Performance and Financial Standards Committee in the administration
of the Controlled Affiliate License Performance Response Process Protocol (ALPRPP) and in
addressing Controlled Affiliate compliance problems identified thereunder.
Standard 9(A) — Participation in National Programs by Smaller Controlled Affiliates that were
former Primary Licensees
A smaller controlled affiliate that formerly was a Primary Licensee shall effectively and
efficiently participate in certain national programs from time to time as may be adopted by Member
Plans for the purposes of providing ease of claims processing for customers receiving benefits
outside of the Controlled Affiliate’s service area and be subject to certain relevant financial and
reporting requirements.
A. |
|
National program requirements include: |
|
• |
|
BlueCard Program; |
|
|
• |
|
Inter-Plan Teleprocessing System (ITS); |
|
|
• |
|
Transfer Program; |
|
|
• |
|
National Account Programs. |
B. |
|
Financial Requirements include: |
|
• |
|
Standard 6(D): Financial Performance Requirements and Standard 6(H): Financial
Responsibility; or |
|
|
• |
|
A financial guarantee covering the Controlled Affiliate’s Inter-Plan Programs
obligations in a form, and from a guarantor, acceptable to BCBSA. |
Amended as of November 15, 2007
27
EXHIBIT A (continued)
Standard 9(A) — Participation in National Programs by Smaller Controlled Affiliates that were
former Primary Licensees
C. |
|
Reporting requirements include: |
|
• |
|
The Semi-annual Health Risk-Based Capital (HRBC) Report. |
Amended as of June 13, 2002
28
EXHIBIT A (continued)
Standard 9(B) — Participation in National Programs by Smaller Controlled Affiliates
A smaller controlled affiliate that voluntarily elects to participate in national programs
in accordance with BlueCard and other relevant Policies and Provisions shall effectively and
efficiently participate in national programs from time to time as may be adopted by Member
Plans for the purposes of providing ease of claims processing for customers receiving
benefits outside of the controlled affiliate’s service area and be subject to certain
relevant financial and reporting requirements.
A. |
|
National program requirements include: |
|
• |
|
BlueCard Program; |
|
|
• |
|
Inter-Plan Teleprocessing System (ITS); |
|
|
• |
|
National Account Programs. |
B. |
|
Financial Requirements include: |
|
• |
|
Standard 6(D): Financial Performance Requirements and Standard 6(H):
Financial Responsibility; or |
|
|
• |
|
A financial guarantee covering the Controlled Affiliate’s Inter-Plan
Programs obligations in a form, and from a guarantor, acceptable to BCBSA. |
Amended as of November 15, 2007
29
EXHIBIT A (continued)
Standard 10 — Other Standards for Controlled Affiliates Whose Primary Business is Government
Non-Risk
Standards 10(A) — (C) that follow apply to Controlled Affiliates whose primary business is
government non-risk.
Standard 10(A) — Organization and Governance
A Controlled Affiliate shall be organized and operated in such a manner that it is 1) wholly owned
by a licensed Plan or Plans and 2) the sponsoring licensed Plan or Plans have the legal ability to
prevent any change in the articles of incorporation, bylaws or other establishing or governing
documents of the Controlled Affiliate with which it does not concur.
30
EXHIBIT A (continued)
Standard 10(B) — Financial Responsibility
A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers.
Standard 10(C):- Reports and Records
A Controlled Affiliate shall furnish, on a timely and accurate basis, reports and records
relating to compliance with these Standards and the License Agreements between BCBSA and
the Controlled Affiliate. Such reports and records are the following:
A. |
|
BCBSA Affiliate Licensure Information Request; and |
B. |
|
Biennial trade name and service xxxx usage materials, including disclosure
material; and |
C. |
|
Annual Certified Audit Report, Annual Statement (if required) as filed with the
State Insurance Department (with all attachments), Annual NAIC Risk-Based Capital
Worksheets (if required) as filed with the State Insurance Department (with all
attachments), and Insurance Department Examination Report (if applicable)*; and |
D. |
|
Changes in the ownership and governance of the Controlled Affiliate, including
changes in its charter, articles of incorporation, or bylaws, changes in the
Controlled Affiliate’s Board composition, Plan control, state license status,
operating area, the Controlled Affiliate’s Principal Officers or direct delivery of
medical care. |
31
EXHIBIT A (continued)
Standard 11- Participation in Inter-Plan Medicare Advantage Program
A smaller controlled affiliate for which this standard applies pursuant to the Preamble section of
Exhibit A of the Controlled Affiliate License Agreement shall effectively and efficiently
participate in certain national programs from time to time as may be adopted by Member Plans for
the purposes of providing ease of claims processing for customers receiving benefits outside of the
controlled affiliate’s service area.
National program requirements include:
A. |
|
Inter-Plan Medicare Advantage Program. |
Amended as of November 15, 2007
32
EXHIBIT A (continued)
Standard 12: Participation in Master Business Associate Agreement by Smaller Controlled Affiliate
Licensees
Effective April 14, 2003, all smaller controlled affiliates shall comply with the terms of the
Business Associate Agreement for Blue Cross and Blue Shield Licensees to the extent they perform
the functions of a business associate or subcontractor to a business associate, as defined by the
Business Associate Agreement.
Amended as of September 19, 2002
33
EXHIBIT B
ROYALTY FORMULA FOR SECTION 9 OF THE
CONTROLLED AFFILIATE LICENSE AGREEMENT
Controlled Affiliate will pay BCBSA a fee for this license in accordance with the following
formula:
FOR RISK AND GOVERNMENT NON-RISK PRODUCTS:
For Controlled Affiliates not underwriting the indemnity portion of workers’ compensation
insurance:
An amount equal to its pro rata share of each sponsoring Plan’s dues payable to BCBSA
computed with the addition of the Controlled Affiliate’s members using the Marks on health
care plans and related services as reported on the Quarterly Enrollment Report with BCBSA.
The payment by each sponsoring Plan of its dues to BCBSA, including that portion described
in this paragraph, will satisfy the requirement of this paragraph, and no separate payment
will be necessary.
For Controlled Affiliates underwriting the indemnity portion of workers’ compensation
insurance:
An amount equal to 0.35 percent of the gross revenue per annum of Controlled Affiliate
arising from products using the marks; plus, an annual fee of $5,000 per license for a
Controlled Affiliate subject to Standard 7.
For Controlled Affiliates whose primary business is government non-risk:
An amount equal to its pro-rata share of each sponsoring Plan’s dues payable to BCBSA
computed with the addition of the Controlled Affiliate’s government non-risk beneficiaries.
Amended as of June 14, 2007
34
EXHIBIT B (continued)
FOR NONRISK PRODUCTS:
For third-party administrative business, an amount equal to its pro rata share of each
sponsoring Plan’s dues payable to BCBSA computed with the addition of the Controlled
Affiliate’s members using the Marks on health care plans and related services as reported on
the Quarterly Enrollment Report with BCBSA. The payment by each sponsoring Plan of its dues
to BCBSA, including that portion described in this paragraph, will satisfy the requirement
of this paragraph, and no separate payment will be necessary.
For non-third party administrative business (e.g., case management, provider networks,
etc.), an amount equal to 0.24 percent of the gross revenue per annum of Controlled
Affiliate arising from products using the marks; plus:
1) |
|
An annual fee of $5,000 per license for a Controlled Affiliate subject to
Standard 6 D. |
|
2) |
|
An annual fee of $2,000 per license for all other Controlled Affiliates. |
The foregoing shall be reduced by one-half where both a BLUE CROSS® and BLUE SHIELD® License are
issued to the same Controlled Affiliate. In the event that any license period is greater or less
than one (1) year, any amounts due shall be prorated. Royalties under this formula will be
calculated, billed and paid in arrears.
Amended as of June 14, 2007
35
EXHIBIT 1A
CONTROLLED AFFILIATE LICENSE AGREEMENT
APPLICABLE TO LIFE INSURANCE COMPANIES
(Includes revisions adopted by Member Plans through their March 19, 2009 meeting)
This agreement by and among Blue Cross and Blue Shield Association (“BCBSA”)
(“Controlled Affiliate”), a Controlled Affiliate of the Blue
Cross Plan(s), known as
(“Plan”).
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service marks;
WHEREAS, the Plan and the Controlled Affiliate desire that the latter be entitled to use the BLUE
CROSS and BLUE CROSS Design service marks (collectively the “Licensed Marks”) as service marks
and be entitled to use the term BLUE CROSS in a trade name (“Licensed Name”);
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby grants to the Controlled
Affiliate the exclusive right to use the licensed Marks and Names in connection with and only in
connection with those life insurance and related services authorized by applicable state law,
other than health care plans and related services (as defined in the Plan’s License Agreements
with BCBSA) which services are not separately licensed to Controlled Affiliate by BCBSA, in the
Service Area served by the Plan, except that BCBSA reserves the right to use the Licensed Marks
and Name in said Service Area, and except to the extent that said Service Area may overlap the
area or areas served by one or more other licensed Blue Cross Plans as of the date of this
License as to which overlapping areas the rights hereby granted are non-exclusive as to such
other Plan or Plans and their respective Licensed Controlled Affiliates only. Controlled
Affiliate cannot use the Licensed Marks or Name outside the Service Area or in its legal or trade
name; provided, however, that if and only for so long as Controlled Affiliate also holds a Blue
Cross Controlled Affiliate License Agreement applicable to health care plans and related
services, Controlled Affiliate may use the Licensed Marks and Name in its legal and trade name
according to the terms of such license agreement.
Amended as of June 12, 2003
-1-
2. QUALITY CONTROL
A. Controlled Affiliate agrees to use the Licensed Marks and Name only in relation to the
sale, marketing and rendering of authorized products and further agrees to be bound by the
conditions regarding quality control shown in Exhibit A as it may be amended by BCBSA from
time-to-time.
B. Controlled Affiliate agrees that Plan and/or BCBSA may, from time-to-time, upon
reasonable notice, review and inspect the manner and method of Controlled Affiliate’s rendering
of service and use of the Licensed Marks and Name.
C. Controlled Affiliate agrees that it will provide on an annual basis (or more often if
reasonably required by Plan or by BCBSA) a report to Plan and BCBSA demonstrating Controlled
Affiliate’s compliance with the requirements of this Agreement including but not limited to the
quality control provisions of Exhibit A.
D. As used herein, a Controlled Affiliate is defined as an entity organized and operated in
such a manner that it is subject to the bona fide control of a Plan or Plans. Absent written
approval by BCBSA of an alternative method of control, bona fide control shall mean the legal
authority, directly or indirectly through wholly-owned subsidiaries: (a) to select members of the
Controlled Affiliate’s governing body having not less than 51% voting control thereof; (b) to
exercise operational control with respect to the governance thereof; and (c) to prevent any
change in its articles of incorporation, bylaws or other governing documents deemed
inappropriate. In addition, a Plan or Plans shall own at least 51% of any for-profit Controlled
Affiliate. If the Controlled Affiliate is a mutual company, the Plan or its designee(s) shall
have and maintain, in lieu of the requirements of items (a) and (c) above, proxies representing
51% of the votes at any meeting of the policyholders and shall demonstrate that there is no
reason to believe this such proxies shall be revoked by sufficient policyholders to reduce such
percentage below 51%.
3. SERVICE XXXX USE
Controlled Affiliate shall at all times make proper service xxxx use of the Licensed Marks,
including but not limited to use of such symbols or words as BCBSA shall specify to protect the
Licensed Marks, and shall comply with such rules (applicable to all Controlled Affiliates
licensed to use the Marks) relative to service xxxx use, as are issued from time-to-time by
BCBSA. If there is any public reference to the affiliation between the Plan and the Controlled
Affiliate, all of the Controlled Affiliate’s licensed services in the Service Area of the Plan
shall be rendered under the Licensed Marks. Controlled Affiliate recognizes and agrees that all
use of the Licensed Marks by Controlled Affiliate shall inure to the benefit of BCBSA.
-2-
4. SUBLICENSING AND ASSIGNMENT
Controlled Affiliate shall not sublicense, transfer, hypothecate, sell, encumber or
mortgage, by operation of law or otherwise, the rights granted hereunder and any such act shall be voidable at the option of Plan or BCBSA.
This Agreement and all rights and duties hereunder are personal to Controlled Affiliate.
5. INFRINGEMENTS
Controlled Affiliate shall promptly notify Plan and BCBSA of any suspected acts of
infringement, unfair competition or passing off which may occur in relation to the Licensed
Marks. Controlled Affiliate shall not be entitled to require Plan or BCBSA to take any actions
or institute any proceedings to prevent infringement, unfair competition or passing off by third
parties. Controlled Affiliate agrees to render to Plan and BCBSA, free of charge, all reasonable
assistance in connection with any matter pertaining to the protection of the Licensed Marks by
BCBSA.
6. LIABILITY INDEMNIFICATION
Controlled Affiliate hereby agrees to save, defend, indemnify and hold Plan and BCBSA
harmless from and against all claims, damages, liabilities and costs of every kind, nature and
description which may arise as a result of Controlled Affiliate’s rendering of health care
services under the Licensed Marks.
7. LICENSE TERM
The license granted by this Agreement shall remain in effect for a period of one (1) year
and shall be automatically extended for additional one (1) year periods upon evidence
satisfactory to the Plan and BCBSA that Controlled Affiliate meets the then applicable quality
control standards, unless one of the parties hereto notifies the other party of the termination
hereof at least sixty (60) days prior to expiration of any license period.
This Agreement may be terminated by the Plan or by BCBSA for cause at any time provided that
Controlled Affiliate has been given a reasonable opportunity to cure and shall not effect such a
cure within thirty (30) days of receiving written notice of the intent to terminate (or commence
a cure within such thirty day period and continue diligent efforts to complete the cure if such
curing cannot reasonably be completed within such thirty day period). By way of example and not for purposes of limitation, Controlled Affiliate’s failure to abide by
the quality control provisions of Paragraph 2, above, shall be considered a proper ground for
cancellation of this Agreement.
-3-
This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately
terminate without any further action by any party or entity in the event that:
A. Controlled Affiliate shall no longer comply with Standard No. 1 (Organization and
Governance) of Exhibit A or, following an opportunity to cure, with the remaining quality control
provisions of Exhibit A, as it may be amended from time-to-time; or
B. Plan ceases to be authorized to use the Licensed Marks; or
C. Appropriate dues for Controlled Affiliate pursuant to item 8 hereof, which are the
royalties for this License Agreement are more than sixty (60) days in arrears to BCBSA.
Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that
it shall immediately discontinue all use of the Licensed Marks including any use in its trade
name.
In the event of any disagreement between Plan and BCBSA as to whether grounds exist for
termination or as to any other term or condition hereof, the decision of BCBSA shall control,
subject to provisions for mediation or mandatory dispute resolution in effect between the parties.
Upon termination of this Agreement, Licensed Controlled Affiliate shall immediately notify
all of its customers that it is no longer a licensee of the Blue Cross and Blue Shield Association
and provide instruction on how the customer can contact the Blue Cross and Blue Shield Association
or a designated licensee to obtain further information on securing coverage. The written
notification required by this paragraph shall be in writing and in a form approved by the
Association. The Association shall have the right to audit the terminated entity’s books and
records to verify compliance with this paragraph.
-4-
8. DUES
Controlled Affiliate will pay to BCBSA a fee for this license in accordance with the
following formula:
|
• |
|
An annual fee of five thousand dollars ($5,000) per license, plus |
|
|
• |
|
.05% of gross revenue per year from branded group products, plus |
|
|
• |
|
.5% of gross revenue per year from branded individual products plus |
|
|
• |
|
.14% of gross revenue per year from branded individual annuity products. |
The foregoing percentages shall be reduced by one-half where both a BLUE CROSS® and BLUE
SHIELD® license are issued to the same entity. In the event that any License period is
greater or less than one (1) year, any amounts due shall be prorated. Royalties under
this formula will be calculated, billed and paid in arrears.
Plan will promptly and timely transmit to BCBSA all dues owed by Controlled Affiliate as
determined by the above formula and if Plan shall fail to do so, Controlled Affiliate
shall pay such dues directly.
Amended as of November 20, 1997
-4b-
9. JOINT VENTURE
Nothing contained in this Agreement shall be construed as creating a joint venture,
partnership, agency or employment relationship between Plan and Controlled Affiliate or between
either and BCBSA.
9A. VOTING
For all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all
entities licensed under the Blue Cross License Agreement and/or the Blue Shield License Agreement,
and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted
votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes
(if any) that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that it
holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For
all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement
shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of
the Plans (rounded to the nearest whole number, with 0.5 or multiples thereof being rounded to the
next higher whole number) fail to cast weighted votes in favor of the question; or (ii) three (3)
of the Plans fail to cast weighted votes in favor of the question. Notwithstanding the foregoing
provision, if there are thirty-nine (39) Plans, the requirement of an affirmative three-fourths
weighted vote shall be deemed satisfied with a lesser weighted vote unless four (4) or more Plans
fail to cast weighted votes in favor of the question.
10. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or termination thereof shall
be in writing and shall be addressed in duplicate to the last known address of each other party,
marked respectively to the attention of its President and, if any, its General Counsel.
Amended as of June 16, 2005
(The next page is page 5)
-4c-
11. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties in relation to the subject
matter hereof. This Agreement may only be amended by a writing executed by all parties.
12. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of competent jurisdiction,
such finding shall in no way effect the remaining obligations of the parties hereunder and the
court may substitute a lawful term or condition for any unlawful term or condition so long as the
effect of such substitution is to provide the parties with the benefits of this Agreement.
13. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the part of the Controlled
Affiliate or any other licensee of any of the terms, covenants or conditions of this Agreement
shall constitute a waiver of any subsequent breach or default in performance of said terms,
covenants or conditions.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in accordance with, the
laws of the State of
Illinois.
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IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of
the date of last signature written below.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
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-6-
EXHIBIT A
CONTROLLED AFFILIATE LICENSE STANDARDS
LIFE INSURANCE COMPANIES
Page 1 of 2
PREAMBLE
The standards for licensing Life Insurance Companies (Life and Health Insurance companies, as
defined by state statute) are established by BCBSA and are subject to change from time-to-time
upon the affirmative vote of three-fourths (3/4) of the Plans and three-fourths (3/4) of the total
weighted vote of all Plans. Each Licensed Plan is required to use a standard controlled affiliate
license form provided by BCBSA and to cooperate fully in assuring that the licensed Life Insurance
Company maintains compliance with the license standards.
An organization meeting the following standards shall be eligible for a license to use the
Licensed Marks within the service area of its sponsoring Licensed Plan to the extent and the
manner authorized under the Controlled Affiliate License applicable to Life Insurance Companies
and the principal license to the Plan.
Standard 1 — Organization and Governance
The LIC shall be organized and operated in such a manner that it is controlled by a licensed Plan
or Plans which have, directly or indirectly: 1) not less than 51% of the voting control of the
LIC; and 2) the legal ability to prevent any change in the articles of incorporation, bylaws or
other establishing or governing documents of the LIC with which it does not concur; and 3)
operational control of the LIC.
If the LIC is a mutual company, the Plan or its designee(s) shall have and maintain, in lieu of
the requirements of items 1 and 2 above, proxies representing at least 51% of the votes at any
policyholder meeting and shall demonstrate that there is no reason to believe such proxies shall
be revoked by sufficient policyholders to reduce such percentage below 51%.
Standard 2 — State Licensure
The LIC must maintain unimpaired licensure or certificate of authority to operate under applicable
state laws as a life and health insurance company in each state in which the LIC does business.
-1-
EXHIBIT A
CONTROLLED AFFILIATE LICENSE STANDARDS
LIFE INSURANCE COMPANIES
Page 2 of 2
Standard 3 — Records and Examination
The LIC and its sponsoring licensed Plan(s) shall maintain and furnish, on a timely and accurate
basis, such records and reports regarding the LIC as may be required in order to establish
compliance with the license agreement. The LIC and its sponsoring licensed Plan(s) shall permit
BCBSA to examine the affairs of the LIC and shall agree that BCBSA’s board may submit a written
report to the chief executive officer(s) and the board(s) of directors of the sponsoring Plan(s).
Standard 4 — Mediation
The LIC and its sponsoring Plan(s) shall agree to use the then-current BCBSA mediation and
mandatory dispute resolution processes, in lieu of a legal action between or among another
licensed controlled affiliate, a licensed Plan or BCBSA.
Standard 5 — Financial Responsibility
The LIC shall maintain adequate financial resources to protect its customers and meet its business
obligations.
Standard 6 — Cooperation with Affiliate License Performance Response Process Protocol
The LIC and its Sponsoring Plan(s) shall cooperate with BCBSA’s Board of Directors and its
Plan Performance and Financial Standards Committee in the administration of the Affiliate
License Performance Response Process Protocol (ALPRPP) and in addressing LIC compliance
problems identified thereunder.
-2-
Exhibit 1B
BLUE CROSS
CONTROLLED AFFILIATE LICENSE AGREEMENT
APPLICABLE TO REGIONAL MEDICARE ADVANTAGE PPO PRODUCTS
(Adopted by Member Plans at their March 19, 2009 meeting)
This Agreement by and among Blue Cross and Blue Shield Association (“BCBSA”) and
(“Controlled Affiliate”), a Controlled Affiliate of the Blue Cross Plan(s), known as
(“Controlling Plans”), each of which is also a Party signatory hereto.
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service marks;
WHEREAS, under the Medicare Modernization Act, companies may apply to and be awarded a
contract by the Centers for Medicare and Medicaid Services (“CMS”) to offer Medicare Advantage PPO
products in geographic regions designated by CMS (hereafter “regional MAPPO products”).
WHEREAS, some of the CMS-designated regions include the Service Areas, or portions thereof, of
more than one Plan.
WHEREAS, the Controlling Plans and Controlled Affiliate desire that the latter be entitled to
use the BLUE CROSS and BLUE CROSS Design service marks (collectively the “Licensed Marks”) as
service marks and be entitled to use the term BLUE CROSS in a trade name (“Licensed Name”) to offer
regional MAPPO products in a region that includes the Service Areas, or portions thereof, of more
than one Controlling Plan;
NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled
Affiliate the right to use the Licensed Marks and Name in connection with, and only in connection
with the sale, marketing and administration of regional MAPPO products and related services.
This grant of rights is non-exclusive and is limited to the following states:
(the “Region”). Controlled Affiliate may use the Licensed
-1-
Marks and Name in its legal name on the following conditions: (i) the legal name must be approved
in advance, in writing, by BCBSA; (ii) Controlled Affiliate shall not do business outside the
Region under any name or xxxx except business conducted in the Service Area of a Controlling Plan
provided that Controlled Affiliate is separately licensed by BCBSA to use the Licensed Marks and
Name in connection with health care plans and related services in the Service Area of such
Controlling Plan; and (iii) Controlled Affiliate shall not use the Licensed Marks and Name, or any
derivative thereof, as part of any name or symbol used to identify itself in any securities market.
Controlled Affiliate may use the Licensed Marks and Name in its Trade Name only with the prior,
written, consent of BCBSA.
2. QUALITY CONTROL
A. Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the
licensed services and further agrees to be bound by the conditions regarding quality control shown
in attached Exhibit A as they may be amended by BCBSA from time-to-time.
B. Controlled Affiliate agrees to comply with all applicable federal, state and local laws.
C. Controlled Affiliate agrees that it will provide on an annual basis (or more often if
reasonably required by the Controlling Plans or by BCBSA) a report or reports to the Controlling
Plans and BCBSA demonstrating Controlled Affiliate’s compliance with the requirements of this
Agreement including but not limited to the quality control provisions of this paragraph and the
attached Exhibit A.
D. Controlled Affiliate agrees that the Controlling Plans and/or BCBSA may, from time-to-time,
upon reasonable notice, review and inspect the manner and method of Controlled Affiliate’s
rendering of service and use of the Licensed Marks and Name.
E. As used herein, a Controlled Affiliate is defined as an entity organized and operated in
such a manner, that it meets the following requirements:
(1) Controlled Affiliate is owned or controlled by two or more Controlling Plans;
(2) Each Controlling Plan is authorized pursuant to a separate Blue Cross License Agreement to
use the Licensed Marks in a geographic area in the Region and every geographic area in the Region
is so licensed to at least one of the Controlling Plans; and
-2-
(3) The Controlling Plans must have the legal authority directly or indirectly through
wholly-owned subsidiaries:
(a) to select members of the Controlled Affiliate’s governing body having not less than 100%
voting control thereof;
(b) to prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plans do not concur;
(c) to exercise control over the policy and operations of the Controlled Affiliate; and
Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s
establishing or governing documents must also require written approval by each of the Controlling
Plans before the Controlled Affiliate can:
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(i) |
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change its legal and/or trade names; |
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(ii) |
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change the geographic area in which it operates (except such
approval shall not be required with respect to business of the Controlled
Affiliate conducted under the Licensed Marks within the Service Area of one of
the Controlling Plans pursuant to a separate controlled affiliate license
agreement with BCBSA sponsored by such Controlling Plan); |
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(iii) |
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change any of the type(s) of businesses in which it engages
(except such approval shall not be required with respect to business of the
Controlled Affiliate conducted under the Licensed Marks within the Service
Area of one of the Controlling Plans pursuant to a separate controlled
affiliate license agreement with BCBSA sponsored by such Controlling Plan); |
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(iv) |
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take any action that any Controlling Plan or BCBSA reasonably
believes will adversely affect the Licensed Marks and Name. |
In addition, the Controlling Plans directly or indirectly through wholly owned subsidiaries shall
own 100% of any for-profit Controlled Affiliate.
-3-
3. SERVICE XXXX USE
A. Controlled Affiliate recognizes the importance of a comprehensive national network of
independent BCBSA licensees which are committed to strengthening the Licensed Marks and Name. The
Controlled Affiliate further recognizes that its actions within the Region may affect the value of
the Licensed Marks and Name nationwide.
B. Controlled Affiliate shall at all times make proper service xxxx use of the Licensed Marks
and Name, including but not limited to use of such symbols or words as BCBSA shall specify to
protect the Licensed Marks and Name and shall comply with such rules (generally applicable to
Controlled Affiliates licensed to use the Licensed Marks and Name) relative to service xxxx use, as
are issued from time-to-time by BCBSA. Controlled Affiliate recognizes and agrees that all use of
the Licensed Marks and Name by Controlled Affiliate shall inure to the benefit of BCBSA.
C. Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a
manner that transfers or is intended to transfer in the Region the goodwill associated therewith to
another xxxx or name, nor may Controlled Affiliate engage in activity that may dilute or tarnish
the unique value of the Licensed Marks and Name.
D. Controlled Affiliate shall use its best efforts to promote and build the value of the
Licensed Marks and Name in connection with the sale, marketing and administration of regional MAPPO
products and related services.
4. SUBLICENSING AND ASSIGNMENT
Controlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate,
sell, encumber or mortgage, by operation of law or otherwise, the rights granted hereunder and any
such act shall be voidable at the sole option of any Controlling Plan or BCBSA. This Agreement and
all rights and duties hereunder are personal to Controlled Affiliate.
-4-
5. INFRINGEMENT
Controlled Affiliate shall promptly notify the Controlling Plans and the Controlling Plans
shall promptly notify BCBSA of any suspected acts of infringement, unfair competition or passing
off that may occur in relation to the Licensed Marks and Name. Controlled Affiliate shall not be
entitled to require the Controlling Plans or BCBSA to take any actions or institute any proceedings
to prevent infringement, unfair competition or passing off by third parties. Controlled Affiliate
agrees to render to the Controlling Plans and BCBSA, without charge, all reasonable assistance in
connection with any matter pertaining to the protection of the Licensed Marks and Name by BCBSA.
6. LIABILITY INDEMNIFICATION
Controlled Affiliate and the Controlling Plans hereby agree to save, defend, indemnify and
hold BCBSA harmless from and against all claims, damages, liabilities and costs of every kind,
nature and description (except those arising solely as a result of BCBSA’s negligence) that may
arise as a result of or related to Controlled Affiliate’s rendering of services under the Licensed
Marks and Name.
7. LICENSE TERM
A. Except as otherwise provided herein, the license granted by this Agreement shall remain in
effect for a period of one (1) year and shall be automatically extended for additional one (1) year
periods unless terminated pursuant to the provisions herein.
B. This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately
terminate without any further action by any party or entity in the event that: (i) any one of the
Controlling Plans ceases to be authorized to use the Licensed Marks and Name; or (ii) pursuant to
Paragraph 15(a)(x) of the Blue Cross License Agreement any one of the Controlling Plans ceases to
be authorized to use the Licensed Names and Marks in the Region.
C. Notwithstanding any other provision of this Agreement, this license to use the Licensed
Marks and Name may be forthwith terminated by the Controlling Plans or the affirmative vote of the
majority of the Board of Directors of BCBSA present and voting at a special meeting expressly
called by BCBSA for the purpose on ten (10) days written notice to the Controlling Plans advising
of the specific matters at issue and granting the Controlling Plans an opportunity to be heard and
to present their response to the Board for: (1) failure to comply with any applicable minimum
capital or liquidity requirement under the quality control standards of this
-5-
Agreement; or (2) failure to comply with the “Organization and Governance” quality control standard
of this Agreement; or (3) impending financial insolvency; or
(4) failure to comply with any of the applicable requirements of Standards 2, 3, 4, or 5 of
attached Exhibit A; or (5) the pendency of any action instituted against the Controlled Affiliate
seeking its dissolution or liquidation of its assets or seeking appointment of a trustee, interim
trustee, receiver or other custodian for any of its property or business or seeking the declaration
or establishment of a trust for any of its property or business, unless this Controlled Affiliate
License Agreement has been earlier terminated under paragraph 7(E); or (6) such other reason as is
determined in good faith immediately and irreparably to threaten the integrity and reputation of
BCBSA, the Plans (including the Controlling Plans), any other licensee including Controlled
Affiliate and/or the Licensed Marks and Name.
D. Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, should Controlled
Affiliate fail to comply with the provisions of this Agreement and not cure such failure within
thirty (30) days of receiving written notice thereof (or commence a cure within such thirty day
period and continue diligent efforts to complete the cure if such curing cannot reasonably be
completed within such thirty day period) BCBSA or the Controlling Plans shall have the right to
issue a notice that the Controlled Affiliate is in a state of noncompliance. If a state of
noncompliance as aforesaid is undisputed by the Controlled Affiliate or is found to exist by a
mandatory dispute resolution panel and is uncured as provided above, BCBSA shall have the right to
seek judicial enforcement of the Agreement or to issue a notice of termination thereof.
Notwithstanding any other provisions of this Agreement, any disputes as to the termination of this
License pursuant to Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to
mediation and mandatory dispute resolution. All other disputes between or among BCBSA, any of the
Controlling Plans and/or Controlled Affiliate shall be submitted promptly to mediation and
mandatory dispute resolution. The mandatory dispute resolution panel shall have authority to issue
orders for specific performance and assess monetary penalties. Except, however, as provided in
Paragraphs 7(B) and 7(E) of this Agreement, this license to use the Licensed Marks and Name may not
be finally terminated for any reason without the affirmative vote of a majority of the present and
voting members of the Board of Directors of BCBSA.
E. This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately
terminate without any further action by any party or entity in the event that:
(1) Controlled Affiliate shall no longer comply with item 2(E) above;
(2) Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to
paragraph 9 hereof, which are the royalties for this License Agreement, are more than sixty (60)
days in arrears to BCBSA; or
-6-
(3) Any of the following events occur: (i) a voluntary petition shall be filed by Controlled
Affiliate seeking bankruptcy, reorganization, arrangement with creditors or other relief under the
bankruptcy laws of the United States or any other law governing insolvency or debtor relief, or
(ii) an involuntary petition or proceeding shall be filed against Controlled Affiliate seeking
bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcy laws of
the United States or any other law governing insolvency or debtor relief and such petition or
proceeding is consented to or acquiesced in by Controlled Affiliate or is not dismissed within
sixty (60) days of the date upon which the petition or other document commencing the proceeding is
served upon the Controlled Affiliate, or (iii) an order for relief is entered against Controlled
Affiliate in any case under the bankruptcy laws of the United States, or Controlled Affiliate is
adjudged bankrupt or insolvent as those terms are defined in the Uniform Commercial Code as enacted
in the State of
Illinois by any court of competent jurisdiction, or (iv) Controlled Affiliate makes
a general assignment of its assets for the benefit of creditors, or (v) any government or any
government official, office, agency, branch, or unit assumes control of Controlled Affiliate or
delinquency proceedings (voluntary or involuntary) are instituted, or (vi) an action is brought by
Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the
appointment of a trustee, interim trustee, receiver or other custodian for any of its property or
business, or (vii) an action is instituted by any governmental entity or officer against Controlled
Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a
trustee, interim trustee, receiver or other custodian for any of its property or business and such
action is consented to or acquiesced in by Controlled Affiliate or is not dismissed within one
hundred thirty (130) days of the date upon which the pleading or other document commencing the
action is served upon the Controlled Affiliate, provided that if the action is stayed or its
prosecution is enjoined, the one hundred thirty (130) day period is tolled for the duration of the
stay or injunction, and provided further, that the Association’s Board of Directors may toll or
extend the 130 day period at any time prior to its expiration, or (viii) a trustee, interim
trustee, receiver or other custodian for any of Controlled Affiliate’s property or business is
appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any
other provision of this Agreement, a declaration or a request for declaration of the existence of a
trust over any of the Controlled Affiliate’s property or business shall not in itself be deemed to
constitute or seek appointment of a trustee, interim trustee, receiver or other custodian for
purposes of subparagraphs 7(E)(3)(vii) and (viii) of this Agreement.
F. Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that
it shall immediately discontinue all use of the Licensed Marks and Name, including any use in its
trade name, except to the extent that it continues to be authorized to use the Licensed Marks
within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliate
license agreement with BCBSA sponsored by such Controlling Plan.
-7-
G. Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of
its customers to whom it provides products or services under the Licensed Marks pursuant to this
Agreement that it is no longer a licensee of BCBSA and, if directed by the Association’s Board of
Directors, shall provide instruction on how the customer can contact BCBSA or a designated licensee
to obtain further information on securing coverage. The notification required by this paragraph
shall be in writing and in a form approved by BCBSA. The BCBSA shall have the right to audit the
terminated entity’s books and records to verify compliance with this paragraph.
H. In the event this Agreement terminates pursuant to 7(B) hereof, upon termination of this
Agreement the provisions of Paragraph 7(G) shall not apply and the following provisions shall
apply, except that, in the event that Controlled Affiliate is separately licensed by BCBSA to use
the Licensed Marks in the Service Area of a Controlling Plan and termination of this Agreement is
due to a partial termination of such Controlling Plan’s license pursuant to Paragraph 15(a)(x)(ii)
of the Blue Cross License Agreement, the notices, national account listing, payment, and audit
right listed below shall be applicable solely with respect to the Region and the geographic area
for which the Controlling Plan’s license to use the Licensed Names and Marks is terminated:
(1) The Controlled Affiliate shall send a notice through the U.S. mails, with first class
postage affixed, to all individual and group customers, providers, brokers and agents of products
or services sold, marketed, underwritten or administered by the Controlled Affiliate under the
Licensed Marks and Name. The form and content of the notice shall be specified by BCBSA and shall,
at a minimum, notify the recipient of the termination of the license, the consequences thereof, and
instructions for obtaining alternate products or services licensed by BCBSA. This notice shall be
mailed within 15 days after termination.
(2) The Controlled Affiliate shall deliver to BCBSA within five days of a request by BCBSA a
listing of national accounts in which the Controlled Affiliate is involved (in a control,
participating or servicing capacity), identifying the national account and the Controlled
Affiliate’s role therein.
(3) Unless the cause of termination is an event respecting BCBSA stated in paragraph 15(a) or
(b) of the Plan’s license agreement with BCBSA to use the Licensed Marks and Name, the Controlled
Affiliate, the Controlling Plans, and any other Licensed Controlled Affiliates of the Controlling
Plans shall be jointly liable for payment to BCBSA of an amount equal to $25 multiplied by the
number of Licensed Enrollees of the Controlled Affiliate; provided that if any Plan other than a
Controlling Plan is permitted by BCBSA to use marks or names licensed by BCBSA in a geographic area
in the Region, the payment for Licensed Enrollees in such
-8-
geographic area shall be multiplied by a fraction, the numerator of which is the number of Licensed
Enrollees of the Controlled Affiliate, the Controlling Plans, and any other Licensed Controlled
Affiliates of the Controlling Plans in such geographic area and the denominator of which is the
total number of Licensed Enrollees in such geographic area. Licensed Enrollee means each and every
person and covered dependent who is enrolled as an individual or member of a group receiving
products or services sold, marketed or administered under marks or names licensed by BCBSA as
determined at the earlier of (i) the end of the last fiscal year of the terminated entity which
ended prior to termination or (ii) the fiscal year which ended before any transactions causing the
termination began. Notwithstanding the foregoing, the amount payable pursuant to this subparagraph
H. (3) shall be due only to the extent that, in BCBSA’s opinion, it does not cause the net worth of
the Controlled Affiliate, the Controlling Plans or any other Licensed Controlled Affiliates of the
Controlling Plans to fall below 100% of the Health Risk-Based Capital formula, or its equivalent
under any successor formula, as set forth in the applicable financial responsibility standards
established by BCBSA (provided such equivalent is approved for purposes of this subparagraph by the
affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted
vote of all the Plans); measured as of the date of termination, and adjusted for the value of any
transactions not made in the ordinary course of business. This payment shall not be due in
connection with transactions exclusively by or among Plans (including the Controlling Plans) or
their affiliates, including reorganizations, combinations or mergers, where the BCBSA Board of
Directors determines that the license termination does not result in a material diminution in the
number of Licensed Enrollees or the extent of their coverage. In the event that the Controlled
Affiliate’s license is reinstated by BCBSA or is deemed to have remained in effect without
interruption by a court of competent jurisdiction, BCBSA shall reimburse the Controlled Affiliate
(and/or the Controlling Plans or their other Licensed Controlled Affiliates, as the case may be)
for payments made under this subparagraph 7.H.(3) only to the extent that such payments exceed the
amounts due to BCBSA pursuant to paragraph 7.K. and any costs associated with reestablishing the
terminated Controlling Plan’s Service Area or the Region, including any payments made by BCBSA to a
Plan or Plans (including the other Controlling Plans), or their Licensed Controlled Affiliates, for
purposes of replacing the Controlled Affiliate.
(4) BCBSA shall have the right to audit the books and records of the Controlled Affiliate, the
Controlling Plans, and any other Licensed Controlled Affiliates of the Controlling Plans to verify
compliance with this paragraph 7.H.
(5) As to a breach of 7.H.(1), (2), (3) or (4), the parties agree that the obligations are
immediately enforceable in a court of competent jurisdiction. As to a breach of 7.H.(1), (2) or
(4) by the Controlled Affiliate, the parties agree there is no adequate remedy at law and BCBSA is
entitled to obtain specific performance.
-9-
I. BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court
of competent jurisdiction from entry into any transaction which would result in a termination of
this Agreement unless a Controlling Plan’s license from BCBSA to use the Licensed Marks and Names
has been terminated pursuant to 10(d) of such Controlling Plan’s license agreement upon the
required 6 month written notice.
J. BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.
K. In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed
to have remained in effect without interruption by a court of competent jurisdiction, the
Controlled Affiliate, the Controlling Plans, and any other Licensed Controlled Affiliates of the
Controlling Plans shall be jointly liable for reimbursing BCBSA the reasonable costs incurred by
BCBSA in connection with the termination and the reinstatement or court action, and any associated
legal proceedings, including but not limited to: outside legal fees, consulting fees, public
relations fees, advertising costs, and costs incurred to develop, lease or establish an interim
provider network. Any amount due to BCBSA under this subparagraph may be waived in whole or in
part by the BCBSA Board of Directors in its sole discretion.
8. DISPUTE RESOLUTION
The parties agree that any disputes between or among them or between or among any of them and
one or more Plans or Controlled Affiliates of Plans that use in any manner the Blue Cross and Blue
Cross Marks and Name are subject to the Mediation and Mandatory Dispute Resolution process attached
to and made a part of each Controlling Plan’s License from BCBSA to use the Licensed Marks and Name
as Exhibit 5 as amended from time-to-time, which documents are incorporated herein by reference as
though fully set forth herein.
9. LICENSE FEE
Controlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the
formula(s) set forth in Exhibit B.
10. JOINT VENTURE
Nothing contained in this Agreement shall be construed as creating a joint venture,
partnership, agency or employment relationship between the Controlling Plans and Controlled
Affiliate or between either and BCBSA.
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11. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or termination thereof shall
be in writing and shall be addressed in duplicate to the last known address of each other party,
marked respectively to the attention of its President and, if any, its General Counsel.
12. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties in relation to the subject
matter hereof. This Agreement may only be amended by the affirmative vote of three-fourths of the
Plans and three-fourths of the total then current weighted vote of all the Plans as officially
recorded by the BCBSA Corporate Secretary.
13. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of competent jurisdiction,
such findings shall in no way affect the remaining obligations of the parties hereunder and the
court may substitute a lawful term or condition for any unlawful term or condition so long as the
effect of such substitution is to provide the parties with the benefits of this Agreement.
14. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate
or any other licensee of any of the terms, covenants or conditions of this Agreement shall
constitute a waiver of any subsequent breach or default in performance of said terms, covenants or
conditions.
14A. VOTING
For all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all
entities licensed under the Blue Cross License Agreement and/or the Blue Shield License Agreement,
and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted
votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes
(if any) that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that it
holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For
all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement
shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of
the Plans (rounded to the nearest whole number, with
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0.5 or multiples thereof being rounded to the next higher whole number) fail to cast
weighted votes in favor of the question; or (ii) three (3) of the Plans fail to cast weighted
votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty-nine
(39) Plans, the requirement of an affirmative three-fourths weighted vote shall be deemed
satisfied with a lesser weighted vote unless four (4) or more Plans fail to cast weighted votes in
favor of the question.
15. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in accordance with, the
laws of the State of
Illinois.
16. HEADINGS
The headings inserted in this agreement are for convenience only and shall have no bearing on
the interpretation hereof.
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IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as
of the date of last signature written below.
Controlled Affiliate:
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EXHIBIT A
CONTROLLED AFFILIATE LICENSE STANDARDS
APPLICABLE TO REGIONAL MEDICARE
ADVANTAGE PPO PRODUCTS
March 2009
PREAMBLE
The standards for licensing Controlled Affiliates for Medicare Advantage PPO Products are
established by BCBSA and are subject to change from time-to-time upon the affirmative vote of
three-fourths (3/4) of the Plans and three-fourths (3/4) of the total weighted vote. Each
Controlling Plan is required to use a standard Controlled Affiliate license form provided by BCBSA
and to cooperate fully in assuring that the licensed Controlled Affiliate maintains compliance with
the license standards.
Standard 1 — Organization and Governance
A Controlled Affiliate is defined as an entity organized and operated in such a manner, that it
meets the following requirements:
(1) Controlled Affiliate is owned or controlled by two or more Controlling Plans;
(2) Each Controlling Plan is authorized pursuant to a separate Blue Cross License Agreement to
use the Licensed Marks in a geographic area in the Region and every geographic area in the Region
is so licensed to at least one of the Controlling Plans; and
(3) The Controlling Plans must have the legal authority directly or indirectly through
wholly-owned subsidiaries:
(a) to select members of the Controlled Affiliate’s governing body having not less than 100%
voting control thereof;
(b) prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plans do not concur;
(c) exercise control over the policy and operations of the Controlled Affiliate; and
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EXHIBIT A (continued)
Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s
establishing or governing documents must also require written approval by each of the Controlling
Plans before the Controlled Affiliate can:
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change its legal and/or trade names; |
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change the geographic area in which it operates (except such
approval shall not be required with respect to business of the Controlled
Affiliate conducted under the Licensed Marks within the Service Area of one of
the Controlling Plans pursuant to a separate controlled affiliate license
agreement with BCBSA sponsored by such Controlling Plan); |
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(iii) |
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change any of the type(s) of businesses in which it engages
(except such approval shall not be required with respect to business of the
Controlled Affiliate conducted under the Licensed Marks within the Service
Area of one of the Controlling Plans pursuant to a separate controlled
affiliate license agreement with BCBSA sponsored by such Controlling Plan); |
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take any action that any Controlling Plan or BCBSA reasonably
believes will adversely affect the Licensed Marks and Name. |
In addition, the Controlling Plans directly or indirectly through wholly owned subsidiaries shall
own 100% of any for-profit Controlled Affiliate.
Standard 2 — Financial Responsibility
A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers.
Standard 3 — State Licensure/Certification
A Controlled Affiliate shall maintain appropriate and unimpaired licensure and certifications.
-15-
EXHIBIT A (continued)
Standard 4 — Certain Disclosures
A Controlled Affiliate shall make adequate disclosure in contracting with third parties and in
disseminating public statements of:
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the structure of the Blue Cross and Blue Shield System; and
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the independent nature of every licensee. |
Standard 5 — Reports and Records for Controlled Affiliates
A Controlled Affiliate and/or its Controlling Plans shall furnish, on a timely and accurate basis,
reports and records relating to these Standards and the License Agreements between BCBSA and
Controlled Affiliate.
Standard 6 — Best Efforts
During each year, a Controlled Affiliate shall use its best efforts to promote and build the value
of the Blue Cross Marks.
Standard 7 — Participation in Certain National Programs
A Controlled Affiliate shall effectively and efficiently participate in certain national programs
from time to time as may be adopted by Member Plans for the purposes of providing ease of claims
processing for customers receiving benefits outside of the Controlled Affiliate’s service area.
National program requirements include:
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Inter-Plan Teleprocessing System (ITS); and |
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Inter-Plan Medicare Advantage Program. |
Standard 8 — Participation in Master Business Associate Agreement
Controlled Affiliates shall comply with the terms of the Business Associate Agreement for Blue
Cross and Blue Shield Licensees to the extent they perform the functions of a business associate or
subcontractor to a business associate, as defined by the Business Associate Agreement.
Amended as of November 15, 2007
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EXHIBIT B
ROYALTY FORMULA FOR SECTION 9 OF THE
CONTROLLED AFFILIATE LICENSE AGREEMENTS
APPLICABLE TO REGIONAL MEDICARE ADVANTAGE PPO PRODUCTS
Controlled Affiliate will pay BCBSA a fee for this license in accordance with the following
formula:
An amount equal to its pro rata share of each Controlling Plan dues payable to BCBSA
computed with the addition of the Controlled Affiliate’s members using the Marks on regional
MAPPO products and related services as reported on the Quarterly Enrollment Report with
BCBSA. The payment by each Controlling Plan of its dues to BCBSA, including that portion
described in this paragraph, will satisfy the requirement of this paragraph, and no separate
payment will be necessary.
Amended as of June 14, 2007
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Exhibit 1C
BLUE CROSS
CONTROLLED AFFILIATE LICENSE AGREEMENT
APPLICABLE TO REGIONAL MEDICARE PART D PRESCRIPTION DRUG PLAN PRODUCTS
(Adopted by Member Plans at their March 19, 2009 meeting)
This Agreement by and among Blue Cross and Blue Shield Association (“BCBSA”) and
(“Controlled Affiliate”), a Controlled Affiliate of the Blue Cross Plan(s), known as
(“Controlling Plans”), each of which is also a Party signatory hereto.
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service marks;
WHEREAS, under the Medicare Modernization Act, companies may apply to and be awarded a
contract by the Centers for Medicare and Medicaid Services (“CMS”) to offer Medicare Part D
Prescription Drug Plan products in geographic regions designated by CMS (hereafter “regional PDP
products).”
WHEREAS, some of the CMS-designated regions include the Service Areas, or portions thereof, of
more than one Plan.
WHEREAS, the Controlling Plans and Controlled Affiliate desire that the latter be entitled to
use the BLUE CROSS and BLUE CROSS Design service marks (collectively the “Licensed Marks”) as
service marks and be entitled to use the term BLUE CROSS in a trade name (“Licensed Name”) to offer
regional PDP products in a region that includes the Service Areas, or portions thereof, of more
than one Controlling Plan;
NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled
Affiliate the right to use the Licensed Marks and Name in connection with, and only in connection
with the sale, marketing and administration of regional PDP products and related services.
This grant of rights is non-exclusive and is limited to the following states:
(the “Region”). Controlled Affiliate may use the Licensed
-1-
Marks and Name in its legal name on the following conditions: (i) the legal name must be approved
in advance, in writing, by BCBSA; (ii) Controlled Affiliate shall not do business outside the
Region under any name or xxxx except business conducted in the Service Area of a Controlling Plan
provided that Controlled Affiliate is separately licensed by BCBSA to use the Licensed Marks and
Name in connection with health care plans and related services in the Service Area of such
Controlling Plan; and (iii) Controlled Affiliate shall not use the Licensed Marks and Name, or any
derivative thereof, as part of any name or symbol used to identify itself in any securities market.
Controlled Affiliate may use the Licensed Marks and Name in its Trade Name only with the prior,
written, consent of BCBSA.
2. QUALITY CONTROL
A. Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the
licensed services and further agrees to be bound by the conditions regarding quality control shown
in attached Exhibit A as they may be amended by BCBSA from time-to-time.
B. Controlled Affiliate agrees to comply with all applicable federal, state and local laws.
C. Controlled Affiliate agrees that it will provide on an annual basis (or more often if
reasonably required by the Controlling Plans or by BCBSA) a report or reports to the Controlling
Plans and BCBSA demonstrating Controlled Affiliate’s compliance with the requirements of this
Agreement including but not limited to the quality control provisions of this paragraph and the
attached Exhibit A.
D. Controlled Affiliate agrees that the Controlling Plans and/or BCBSA may, from time-to-time,
upon reasonable notice, review and inspect the manner and method of Controlled Affiliate’s
rendering of service and use of the Licensed Marks and Name.
E. As used herein, a Controlled Affiliate is defined as an entity organized and operated in
such a manner, that it meets the following requirements:
(1) Controlled Affiliate is owned or controlled by two or more Controlling Plans;
(2) Each Controlling Plan is authorized pursuant to a separate Blue Cross License Agreement to
use the Licensed Marks in a geographic area in the Region and every geographic area in the Region
is so licensed to at least one of the Controlling Plans; and
-2-
(3) The Controlling Plans must have the legal authority directly or indirectly through
wholly-owned subsidiaries:
(a) to select members of the Controlled Affiliate’s governing body having not less than 100%
voting control thereof;
(b) to prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plans do not concur;
(c) to exercise control over the policy and operations of the Controlled Affiliate; and
Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s
establishing or governing documents must also require written approval by each of the Controlling
Plans before the Controlled Affiliate can:
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change its legal and/or trade names; |
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change the geographic area in which it operates (except such
approval shall not be required with respect to business of the Controlled
Affiliate conducted under the Licensed Marks within the Service Area of one of
the Controlling Plans pursuant to a separate controlled affiliate license
agreement with BCBSA sponsored by such Controlling Plan); |
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change any of the type(s) of businesses in which it engages
(except such approval shall not be required with respect to business of the
Controlled Affiliate conducted under the Licensed Marks within the Service
Area of one of the Controlling Plans pursuant to a separate controlled
affiliate license agreement with BCBSA sponsored by such Controlling Plan); |
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take any action that any Controlling Plan or BCBSA reasonably
believes will adversely affect the Licensed Marks and Name. |
In addition, the Controlling Plans directly or indirectly through wholly-owned subsidiaries shall
own 100% of any for-profit Controlled Affiliate.
-3-
3. SERVICE XXXX USE
A. Controlled Affiliate recognizes the importance of a comprehensive national network of
independent BCBSA licensees which are committed to strengthening the Licensed Marks and Name. The
Controlled Affiliate further recognizes that its actions within the Region may affect the value of
the Licensed Marks and Name nationwide.
B. Controlled Affiliate shall at all times make proper service xxxx use of the Licensed Marks
and Name, including but not limited to use of such symbols or words as BCBSA shall specify to
protect the Licensed Marks and Name and shall comply with such rules (generally applicable to
Controlled Affiliates licensed to use the Licensed Marks and Name) relative to service xxxx use, as
are issued from time-to-time by BCBSA. Controlled Affiliate recognizes and agrees that all use of
the Licensed Marks and Name by Controlled Affiliate shall inure to the benefit of BCBSA.
C. Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a
manner that transfers or is intended to transfer in the Region the goodwill associated therewith to
another xxxx or name, nor may Controlled Affiliate engage in activity that may dilute or tarnish
the unique value of the Licensed Marks and Name.
D. Controlled Affiliate shall use its best efforts to promote and build the value of the
Licensed Marks and Name in connection with the sale, marketing and administration of regional PDP
products and related services.
4. SUBLICENSING AND ASSIGNMENT
Controlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate,
sell, encumber or mortgage, by operation of law or otherwise, the rights granted hereunder and any
such act shall be voidable at the sole option of any Controlling Plan or BCBSA. This Agreement and
all rights and duties hereunder are personal to Controlled Affiliate.
-4-
5. INFRINGEMENT
Controlled Affiliate shall promptly notify the Controlling Plans and the Controlling Plans
shall promptly notify BCBSA of any suspected acts of infringement, unfair competition or passing
off that may occur in relation to the Licensed Marks and Name. Controlled Affiliate shall not be
entitled to require the Controlling Plans or BCBSA to take any actions or institute any proceedings
to prevent infringement, unfair competition or passing off by third parties. Controlled Affiliate
agrees to render to the Controlling Plans and BCBSA, without charge, all reasonable assistance in
connection with any matter pertaining to the protection of the Licensed Marks and Name by BCBSA.
6. LIABILITY INDEMNIFICATION
Controlled Affiliate and the Controlling Plans hereby agree to save, defend, indemnify and
hold BCBSA harmless from and against all claims, damages, liabilities and costs of every kind,
nature and description (except those arising solely as a result of BCBSA’s negligence) that may
arise as a result of or related to Controlled Affiliate’s rendering of services under the Licensed
Marks and Name.
7. LICENSE TERM
A. Except as otherwise provided herein, the license granted by this Agreement shall remain in
effect for a period of one (1) year and shall be automatically extended for additional one (1) year
periods unless terminated pursuant to the provisions herein.
B. This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately
terminate without any further action by any party or entity in the event that: (i) any one of the
Controlling Plans ceases to be authorized to use the Licensed Marks and Name; or (ii) pursuant to
Paragraph 15(a)(x) of the Blue Cross License Agreement any one of the Controlling Plans ceases to
be authorized to use the Licensed Names and Marks in the Region.
C. Notwithstanding any other provision of this Agreement, this license to use the Licensed
Marks and Name may be forthwith terminated by the Controlling Plans or the affirmative vote of the
majority of the Board of Directors of BCBSA present and voting at a special meeting expressly
called by BCBSA for the purpose on ten (10) days written notice to the Controlling Plans advising
of the specific matters at issue and granting the Controlling Plans an opportunity to be heard and
to present their response to the Board for: (1) failure to comply with any applicable minimum
capital or liquidity requirement under the quality control standards of this
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Agreement; or (2) failure to comply with the “Organization and Governance” quality control standard
of this Agreement; or (3) impending financial insolvency; or
(4) failure to comply with any of the applicable requirements of Standards 2, 3, 4, or 5 of
attached Exhibit A; or (5) the pendency of any action instituted against the Controlled Affiliate
seeking its dissolution or liquidation of its assets or seeking appointment of a trustee, interim
trustee, receiver or other custodian for any of its property or business or seeking the declaration
or establishment of a trust for any of its property or business, unless this Controlled Affiliate
License Agreement has been earlier terminated under paragraph 7(E); or (6) such other reason as is
determined in good faith immediately and irreparably to threaten the integrity and reputation of
BCBSA, the Plans (including the Controlling Plans), any other licensee including Controlled
Affiliate and/or the Licensed Marks and Name.
D. Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, should Controlled
Affiliate fail to comply with the provisions of this Agreement and not cure such failure within
thirty (30) days of receiving written notice thereof (or commence a cure within such thirty day
period and continue diligent efforts to complete the cure if such curing cannot reasonably be
completed within such thirty day period) BCBSA or the Controlling Plans shall have the right to
issue a notice that the Controlled Affiliate is in a state of noncompliance. If a state of
noncompliance as aforesaid is undisputed by the Controlled Affiliate or is found to exist by a
mandatory dispute resolution panel and is uncured as provided above, BCBSA shall have the right to
seek judicial enforcement of the Agreement or to issue a notice of termination thereof.
Notwithstanding any other provisions of this Agreement, any disputes as to the termination of this
License pursuant to Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to
mediation and mandatory dispute resolution. All other disputes between or among BCBSA, any of the
Controlling Plans and/or Controlled Affiliate shall be submitted promptly to mediation and
mandatory dispute resolution. The mandatory dispute resolution panel shall have authority to issue
orders for specific performance and assess monetary penalties. Except, however, as provided in
Paragraphs 7(B) and 7(E) of this Agreement, this license to use the Licensed Marks and Name may not
be finally terminated for any reason without the affirmative vote of a majority of the present and
voting members of the Board of Directors of BCBSA.
E. This Agreement and all of Controlled Affiliate’s rights hereunder shall immediately
terminate without any further action by any party or entity in the event that:
(1) Controlled Affiliate shall no longer comply with item 2(E) above;
(2) Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to
paragraph 9 hereof, which are the royalties for this License Agreement, are more than sixty (60)
days in arrears to BCBSA; or
-6-
(3) Any of the following events occur: (i) a voluntary petition shall be filed by Controlled
Affiliate seeking bankruptcy, reorganization, arrangement with creditors or other relief under the
bankruptcy laws of the United States or any other law governing insolvency or debtor relief, or
(ii) an involuntary petition or proceeding shall be filed against Controlled Affiliate seeking
bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcy laws of
the United States or any other law governing insolvency or debtor relief and such petition or
proceeding is consented to or acquiesced in by Controlled Affiliate or is not dismissed within
sixty (60) days of the date upon which the petition or other document commencing the proceeding is
served upon the Controlled Affiliate, or (iii) an order for relief is entered against Controlled
Affiliate in any case under the bankruptcy laws of the United States, or Controlled Affiliate is
adjudged bankrupt or insolvent as those terms are defined in the Uniform Commercial Code as enacted
in the State of
Illinois by any court of competent jurisdiction, or (iv) Controlled Affiliate makes
a general assignment of its assets for the benefit of creditors, or (v) any government or any
government official, office, agency, branch, or unit assumes control of Controlled Affiliate or
delinquency proceedings (voluntary or involuntary) are instituted, or (vi) an action is brought by
Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the
appointment of a trustee, interim trustee, receiver or other custodian for any of its property or
business, or (vii) an action is instituted by any governmental entity or officer against Controlled
Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a
trustee, interim trustee, receiver or other custodian for any of its property or business and such
action is consented to or acquiesced in by Controlled Affiliate or is not dismissed within one
hundred thirty (130) days of the date upon which the pleading or other document commencing the
action is served upon the Controlled Affiliate, provided that if the action is stayed or its
prosecution is enjoined, the one hundred thirty (130) day period is tolled for the duration of the
stay or injunction, and provided further, that the Association’s Board of Directors may toll or
extend the 130 day period at any time prior to its expiration, or (viii) a trustee, interim
trustee, receiver or other custodian for any of Controlled Affiliate’s property or business is
appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any
other provision of this Agreement, a declaration or a request for declaration of the existence of a
trust over any of the Controlled Affiliate’s property or business shall not in itself be deemed to
constitute or seek appointment of a trustee, interim trustee, receiver or other custodian for
purposes of subparagraphs 7(E)(3)(vii) and (viii) of this Agreement.
F. Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that
it shall immediately discontinue all use of the Licensed Marks and Name, including any use in its
trade name, except to the extent that it continues to be authorized to use the Licensed Marks
within the Service Area of one of the Controlling Plans pursuant to a separate controlled affiliate
license agreement with BCBSA sponsored by such Controlling Plan.
-7-
G. Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of
its customers to whom it provides products or services under the Licensed Marks pursuant to this
Agreement that it is no longer a licensee of BCBSA and, if directed by the Association’s Board of
Directors, shall provide instruction on how the customer can contact BCBSA or a designated licensee
to obtain further information on securing coverage. The notification required by this paragraph
shall be in writing and in a form approved by BCBSA. The BCBSA shall have the right to audit the
terminated entity’s books and records to verify compliance with this paragraph.
H. In the event this Agreement terminates pursuant to 7(B) hereof, upon termination of this
Agreement the provisions of Paragraph 7(G) shall not apply and the following provisions shall
apply, except that, in the event that Controlled Affiliate is separately licensed by BCBSA to use
the Licensed Marks in the Service Area of a Controlling Plan and termination of this Agreement is
due to a partial termination of such Controlling Plan’s license pursuant to Paragraph 15(a)(x)(ii)
of the Blue Cross License Agreement, the notices, national account listing, payment, and audit
right listed below shall be applicable solely with respect to the Region and the geographic area
for which the Controlling Plan’s license to use the Licensed Names and Marks is terminated:
(1) The Controlled Affiliate shall send a notice through the U.S. mails, with first class
postage affixed, to all individual and group customers, providers, brokers and agents of products
or services sold, marketed, underwritten or administered by the Controlled Affiliate under the
Licensed Marks and Name. The form and content of the notice shall be specified by BCBSA and shall,
at a minimum, notify the recipient of the termination of the license, the consequences thereof, and
instructions for obtaining alternate products or services licensed by BCBSA. This notice shall be
mailed within 15 days after termination.
(2) The Controlled Affiliate shall deliver to BCBSA within five days of a request by BCBSA a
listing of national accounts in which the Controlled Affiliate is involved (in a control,
participating or servicing capacity), identifying the national account and the Controlled
Affiliate’s role therein.
(3) Unless the cause of termination is an event respecting BCBSA stated in paragraph 15(a) or
(b) of the Plan’s license agreement with BCBSA to use the Licensed Marks and Name, the Controlled
Affiliate, the Controlling Plans, and any other Licensed Controlled Affiliates of the Controlling
Plans shall be jointly liable for payment to BCBSA of an amount equal to $25 multiplied by the
number of Licensed Enrollees of the Controlled Affiliate; provided that if any Plan other than a
Controlling Plan is permitted by BCBSA to use marks or names licensed by BCBSA in a geographic area
in the Region, the payment for Licensed Enrollees in such
-8-
geographic area shall be multiplied by a fraction, the numerator of which is the number of Licensed
Enrollees of the Controlled Affiliate, the Controlling Plans, and any other Licensed Controlled
Affiliates of the Controlling Plans in such geographic area and the denominator of which is the
total number of Licensed Enrollees in such geographic area. Licensed Enrollee means each and every
person and covered dependent who is enrolled as an individual or member of a group receiving
products or services sold, marketed or administered under marks or names licensed by BCBSA as
determined at the earlier of (i) the end of the last fiscal year of the terminated entity which
ended prior to termination or (ii) the fiscal year which ended before any transactions causing the
termination began. Notwithstanding the foregoing, the amount payable pursuant to this subparagraph
H. (3) shall be due only to the extent that, in BCBSA’s opinion, it does not cause the net worth of
the Controlled Affiliate, the Controlling Plans or any other Licensed Controlled Affiliates of the
Controlling Plans to fall below 100% of the Health Risk-Based Capital formula, or its equivalent
under any successor formula, as set forth in the applicable financial responsibility standards
established by BCBSA (provided such equivalent is approved for purposes of this subparagraph by the
affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted
vote of all the Plans); measured as of the date of termination, and adjusted for the value of any
transactions not made in the ordinary course of business. This payment shall not be due in
connection with transactions exclusively by or among Plans (including the Controlling Plans) or
their affiliates, including reorganizations, combinations or mergers, where the BCBSA Board of
Directors determines that the license termination does not result in a material diminution in the
number of Licensed Enrollees or the extent of their coverage. In the event that the Controlled
Affiliate’s license is reinstated by BCBSA or is deemed to have remained in effect without
interruption by a court of competent jurisdiction, BCBSA shall reimburse the Controlled Affiliate
(and/or the Controlling Plans or their other Licensed Controlled Affiliates, as the case may be)
for payments made under this subparagraph 7.H.(3) only to the extent that such payments exceed the
amounts due to BCBSA pursuant to paragraph 7.K. and any costs associated with reestablishing the
terminated Controlling Plan’s Service Area or the Region, including any payments made by BCBSA to a
Plan or Plans (including the other Controlling Plans), or their Licensed Controlled Affiliates, for
purposes of replacing the Controlled Affiliate.
(4) BCBSA shall have the right to audit the books and records of the Controlled Affiliate, the
Controlling Plans, and any other Licensed Controlled Affiliates of the Controlling Plans to verify
compliance with this paragraph 7.H.
(5) As to a breach of 7.H.(1), (2), (3) or (4), the parties agree that the obligations are
immediately enforceable in a court of competent jurisdiction. As to a breach of 7.H.(1), (2) or
(4) by the Controlled Affiliate, the parties agree there is no adequate remedy at law and BCBSA is
entitled to obtain specific performance.
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I. BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court
of competent jurisdiction from entry into any transaction which would result in a termination of
this Agreement unless a Controlling Plan’s license from BCBSA to use the Licensed Marks and Names
has been terminated pursuant to 10(d) of such Controlling Plan’s license agreement upon the
required 6 month written notice.
J. BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.
K. In the event this Agreement terminates and is subsequently reinstated by BCBSA or is deemed
to have remained in effect without interruption by a court of competent jurisdiction, the
Controlled Affiliate, the Controlling Plans, and any other Licensed Controlled Affiliates of the
Controlling Plans shall be jointly liable for reimbursing BCBSA the reasonable costs incurred by
BCBSA in connection with the termination and the reinstatement or court action, and any associated
legal proceedings, including but not limited to: outside legal fees, consulting fees, public
relations fees, advertising costs, and costs incurred to develop, lease or establish an interim
provider network. Any amount due to BCBSA under this subparagraph may be waived in whole or in
part by the BCBSA Board of Directors in its sole discretion.
8. DISPUTE RESOLUTION
The parties agree that any disputes between or among them or between or among any of them and
one or more Plans or Controlled Affiliates of Plans that use in any manner the Blue Cross and Blue
Cross Marks and Name are subject to the Mediation and Mandatory Dispute Resolution process attached
to and made a part of each Controlling Plan’s License from BCBSA to use the Licensed Marks and Name
as Exhibit 5 as amended from time-to-time, which documents are incorporated herein by reference as
though fully set forth herein.
9. LICENSE FEE
Controlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the
formula(s) set forth in Exhibit B.
10. JOINT VENTURE
Nothing contained in this Agreement shall be construed as creating a joint venture,
partnership, agency or employment relationship between the Controlling Plans and Controlled
Affiliate or between either and BCBSA.
-10-
11. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or termination thereof shall
be in writing and shall be addressed in duplicate to the last known address of each other party,
marked respectively to the attention of its President and, if any, its General Counsel.
12. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties in relation to the subject
matter hereof. This Agreement may only be amended by the affirmative vote of three-fourths of the
Plans and three-fourths of the total then current weighted vote of all the Plans as officially
recorded by the BCBSA Corporate Secretary.
13. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of competent jurisdiction,
such findings shall in no way affect the remaining obligations of the parties hereunder and the
court may substitute a lawful term or condition for any unlawful term or condition so long as the
effect of such substitution is to provide the parties with the benefits of this Agreement.
14. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate
or any other licensee of any of the terms, covenants or conditions of this Agreement shall
constitute a waiver of any subsequent breach or default in performance of said terms, covenants or
conditions.
14A. VOTING
For all provisions of this Agreement referring to voting, the term ‘Plans’ shall mean all
entities licensed under the Blue Cross License Agreement and/or the Blue Shield License Agreement,
and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted
votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes
(if any) that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that it
holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For
all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement
shall be deemed satisfied with a lesser weighted vote unless the greater of: (i) 6/52 or more of
the Plans (rounded to the nearest whole number, with
-11-
0.5 or multiples thereof being rounded to the next higher whole number) fail to cast
weighted votes in favor of the question; or (ii) three (3) of the Plans fail to cast weighted
votes in favor of the question. Notwithstanding the foregoing provision, if there are thirty-nine
(39) Plans, the requirement of an affirmative three-fourths weighted vote shall be deemed
satisfied with a lesser weighted vote unless four (4) or more Plans fail to cast weighted votes in
favor of the question.
15. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in accordance with, the
laws of the State of
Illinois.
16. HEADINGS
The headings inserted in this agreement are for convenience only and shall have no bearing on
the interpretation hereof.
-12-
IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as
of the date of last signature written below.
Controlled Affiliate:
Controlling Plan:
Controlling Plan:
BLUE CROSS AND BLUE SHIELD ASSOCIATION
-13-
EXHIBIT A
CONTROLLED AFFILIATE LICENSE STANDARDS
APPLICABLE TO REGIONAL MEDICARE
PART D PRESCRIPTION DRUG PLAN PRODUCTS
March 2009
PREAMBLE
The standards for licensing Controlled Affiliates for Medicare Part D Prescription Drug Plan
Products are established by BCBSA and are subject to change from time-to-time upon the affirmative
vote of three-fourths (3/4) of the Plans and three-fourths (3/4) of the total weighted vote. Each
Controlling Plan is required to use a standard Controlled Affiliate license form provided by BCBSA
and to cooperate fully in assuring that the licensed Controlled Affiliate maintains compliance with
the license standards.
Standard 1 — Organization and Governance
A Controlled Affiliate is defined as an entity organized and operated in such a manner, that it
meets the following requirements:
(1) Controlled Affiliate is owned or controlled by two or more Controlling Plans;
(2) Each Controlling Plan is authorized pursuant to a separate Blue Cross License Agreement to
use the Licensed Marks in a geographic area in the Region and every geographic area in the Region
is so licensed to at least one of the Controlling Plans; and
(3) The Controlling Plans must have the legal authority directly or indirectly through
wholly-owned subsidiaries:
(a) to select members of the Controlled Affiliate’s governing body having not less than 100%
voting control thereof;
(b) prevent any change in the articles of incorporation, bylaws or other establishing or
governing documents of the Controlled Affiliate with which the Controlling Plans do not concur;
(c) exercise control over the policy and operations of the Controlled Affiliate; and
-14-
EXHIBIT A (continued)
Notwithstanding anything to the contrary in (a) through (c) hereof, the Controlled Affiliate’s
establishing or governing documents must also require written approval by each of the Controlling
Plans before the Controlled Affiliate can:
|
(i) |
|
change its legal and/or trade names; |
|
|
(ii) |
|
change the geographic area in which it operates (except such
approval shall not be required with respect to business of the Controlled
Affiliate conducted under the Licensed Marks within the Service Area of one of
the Controlling Plans pursuant to a separate controlled affiliate license
agreement with BCBSA sponsored by such Controlling Plan); |
|
|
(iii) |
|
change any of the type(s) of businesses in which it engages
(except such approval shall not be required with respect to business of the
Controlled Affiliate conducted under the Licensed Marks within the Service
Area of one of the Controlling Plans pursuant to a separate controlled
affiliate license agreement with BCBSA sponsored by such Controlling Plan); |
|
|
(iv) |
|
take any action that any Controlling Plan or BCBSA reasonably
believes will adversely affect the Licensed Marks and Name. |
In addition, the Controlling Plans directly or indirectly through wholly-owned subsidiaries shall
own 100% of any for-profit Controlled Affiliate.
Standard 2 — Financial Responsibility
A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance
that it can fulfill all of its contractual obligations to its customers.
Standard 3 — State Licensure/Certification
A Controlled Affiliate shall maintain appropriate and unimpaired licensure and certifications.
-15-
EXHIBIT A (continued)
Standard 4 — Certain Disclosures
A Controlled Affiliate shall make adequate disclosure in contracting with third parties and in
disseminating public statements of:
|
a. |
|
the structure of the Blue Cross and Blue Shield System; and
|
|
|
b. |
|
the independent nature of every licensee. |
Standard 5 — Reports and Records for Controlled Affiliates
A Controlled Affiliate and/or its Controlling Plans shall furnish, on a timely and accurate basis,
reports and records relating to these Standards and the License Agreements between BCBSA and
Controlled Affiliate.
Standard 6 — Best Efforts
During each year, a Controlled Affiliate shall use its best efforts to promote and build the value
of the Blue Cross Marks.
Standard 7 — Participation in Master Business Associate Agreement
Controlled Affiliates shall comply with the terms of the Business Associate Agreement for Blue
Cross and Blue Shield Licensees to the extent they perform the functions of a business associate or
subcontractor to a business associate, as defined by the Business Associate Agreement.
-16-
EXHIBIT B
ROYALTY FORMULA FOR SECTION 9 OF THE
CONTROLLED AFFILIATE LICENSE AGREEMENTS
APPLICABLE TO REGIONAL MEDICARE PART D PRESCRIPTION DRUG PLAN PRODUCTS
Controlled Affiliate will pay BCBSA a fee for this license in accordance with the following
formula:
An amount equal to its pro rata share of each Controlling Plan dues payable to BCBSA
computed with the addition of the Controlled Affiliate’s members using the Marks on regional
PDP products and related services as reported on the Quarterly Enrollment Report with BCBSA.
The payment by each Controlling Plan of its dues to BCBSA, including that portion described
in this paragraph, will satisfy the requirement of this paragraph, and no separate payment
will be necessary.
Amended as of June 14, 2007
-17-
EXHIBIT 2
Membership Standards
Page 1 of 5
Preamble
The Membership Standards apply to all organizations seeking to become or to continue as Regular
Members of the Blue Cross and Blue Shield Association. Any organization seeking to become a
Regular Member must be found to be in substantial compliance with all Membership Standards at the
time membership is granted and the organization must be found to be in substantial compliance with
all Membership Standards for a period of two (2) years preceding the date of its application. If
Membership is sought by an entity which controls or is controlled by one or more Plans, such
compliance shall be determined on the basis of compliance by such Plan or Plans.
The Regular Member Plans shall have authority to interpret these Standards.
A Regular Member Plan that operates as a “Shell Holding Company” is defined as an entity that
assumes no underwriting risk and has less than 1% of the consolidated enterprise assets (excludes
investments in subsidiaries) and less than 5% of the consolidated enterprise net general and
administrative expenses.
A Regular Member Plan that operates as a “Hybrid Holding Company” is defined as an entity that
assumes no underwriting risk and has either more than 1% of the consolidated enterprise assets
(excludes investments in subsidiaries) or more than 5% of the consolidated enterprise net general
and administrative expenses.
|
|
|
Standard 1: |
|
A Plan shall maintain a governing Board, which shall control the Plan and ensure that
the Plan follows appropriate practices of corporate governance. A Plan’s Board shall not be
controlled by any special interest group, shall make an annual determination that a majority
of its directors are independent, and shall act in the best interest of its Corporation and
its customers. The Board shall be composed of a majority of persons other than providers of
health care services, who shall be known as public members. A public member shall not be an
employee of or have a financial interest in a health care provider, nor be a member of a
profession which provides health care services. |
Amended as of March 15, 2007
EXHIBIT 2
Membership Standards
Page 2 of 5
|
|
|
Standard 2: |
|
A Plan shall furnish to the Association on a timely and accurate basis reports and
records relating to compliance with these Standards and the License Agreements between the
Association and the Plans. Such reports and records are the following: |
|
A. |
|
BCBSA Membership Information Request; |
|
|
B. |
|
Biennial trade name and service xxxx usage
material, including disclosure material under Standard 7; |
|
|
C. |
|
Changes in the governance of the Plan, including
changes in a Plan’s Charter, Articles of Incorporation, or Bylaws,
changes in a Plan’s Board composition, or changes in the identity of
the Plan’s Principal Officers; |
|
|
D. |
|
Quarterly Financial Report, Semi-annual “Health
Risk-Based Capital (HRBC) Report” as defined by the NAIC, Annual
Financial Forecast, Annual Certified Audit Report, Insurance Department
Examination Report, Annual Statement filed with State Insurance
Department (with all attachments), Plan, Subsidiary and Affiliate
Report; and |
|
• |
|
Plans that are a Shell Holding Company as defined in the
Preamble hereto are required to furnish only a calendar year-end
“Health Risk-Based Capital (HRBC) Report” as defined by the NAIC. |
Amended as of November 15, 2001
EXHIBIT 2
Membership Standards
Page 3 of 5
|
E. |
|
Quarterly Enrollment Report and Member
Touchpoint Measures Index (MTM) |
|
• |
|
Plans that are a Shell Holding Company as defined in the
Preamble hereto are not required to furnish a Quarterly Enrollment
Report |
|
|
• |
|
For purposes of MTM reporting only, a Plan shall file a
separate MTM report for each Geographic Market and on an
enterprise basis, except that the enterprise report shall not
included the Geographic Market as defined in section (c) of
footnote 2 to the guidelines to administer Regular member Standard
4. |
|
|
|
Standard 3: |
|
A Plan shall be operated in a manner that provides reasonable
financial assurance that it can fulfill its contractual
obligations to its customers. |
|
|
|
Standard 4: |
|
A Plan shall be operated in a manner responsive to customer
needs and requirements. |
|
|
|
Standard 5: |
|
A Plan shall effectively and efficiently participate in each
national program as from time to time may be adopted by the
Member Plans for the purposes of providing portability of
membership between the Plans and ease of claims processing for
customers receiving benefits outside of the Plan’s Service
Area.
Such programs are applicable to Blue Cross and Blue Shield
Plans, and include: |
|
A. |
|
Transfer Program; |
|
|
B. |
|
Inter-Plan Teleprocessing System (ITS); |
|
|
C. |
|
BlueCard Program; |
|
|
D. |
|
National Account Programs; |
|
|
E. |
|
Business Associate Agreement for Blue Cross and Blue Shield Licensees,
effective April 14, 2003; and |
|
|
F. |
|
Inter-Plan Medicare Advantage Program. |
Amended as of November 15, 2007
EXHIBIT 2
Membership Standards
Page 4 of 5
|
|
|
Standard 6: |
|
In addition to requirements under the national programs
listed in Standard 5: Participation in National Programs, a
Plan shall take such action as required to ensure its
financial performance in programs and contracts of an
inter-Plan nature or where the Association is a party. |
|
|
|
Standard 7: |
|
A Plan shall make adequate disclosure in contracting with
third parties and in disseminating public statements of (i)
the structure of the Blue Cross and Blue Shield System, (ii)
the independent nature of every Plan, and (iii) the Plan’s
financial condition. |
|
|
|
Standard 8: |
|
A Plan shall cooperate with the Association’s Board of
Directors and its Plan Performance and Financial Standards
Committee in the administration of the Plan Performance
Response Process and in addressing Plan performance problems
identified thereunder. |
|
|
|
Standard 9: |
|
A Plan shall obtain a rating of its financial strength from
an independent rating agency approved by the Association’s
Board of Directors for such purpose. |
|
|
|
Standard 10: |
|
Notwithstanding any other provision in this License
Agreement, during each year, a Plan and its Controlled
Affiliate(s) engaged in providing licensable services
(excluding Life Insurance and Charitable Foundation Services)
shall use their best efforts to promote and build the value
of the Blue Cross Marks. |
|
|
|
Standard 11: |
|
Neither a Plan nor any Larger Controlled Affiliate shall
cause or permit an entity other than a Plan or a Licensed
Controlled Affiliate thereof to obtain control of the Plan or
Larger Controlled Affiliate or to acquire a substantial
portion of its assets related to licensable services. |
Amended as of June 16, 2005
EXHIBIT 2
Membership Standards
Page 5 of 5
|
|
|
Standard 12: |
|
No provider network, or portion thereof, shall be rented or
otherwise made available to a National Competitor if the
Licensed Marks or Names are used in any way with such
network.
A provider network may be rented or otherwise made available,
provided there is no use of the Licensed Marks or Names with
respect to the network being rented. |
Amended as of March 18, 2004
EXHIBIT 3
GUIDELINES WITH RESPECT TO USE OF
LICENSED NAME AND MARKS IN CONNECTION WITH NATIONAL
ACCOUNTS
Page 1 of 3
1. The strength of the Blue Cross/Blue Cross National Accounts mechanism, and the continued
provision of cost effective, quality health care benefits to National Accounts, are predicated on
locally managed provider networks coordinated on a national scale in a manner consistent with
effective service to National Account customers and consistent with the preservation of the
integrity of the Blue Cross/Blue Shield system and the Licensed Marks. These guidelines shall be
interpreted in keeping with such ends.
2. A National Account is an entity with employee and/or retiree locations in more than one Plan’s
Service Area. Unless otherwise agreed, a National Account is deemed located in the Service Area in
which the corporate headquarters of the National Account is located. A local plant, office or
division headquarters of an entity may be deemed a separate National Account when that local
plant, office or division headquarters 1) has employee locations in more than one Service Area,
and 2) has independent health benefit decision-making authority for the employees working at such
local plant, office or division headquarters and for employees working at other locations outside
the Service Area. In such a case, the local plant, office or division headquarters is a National
Account that is deemed located in the Service Area in which such local plant, office or division
headquarters is located. The Control Plan of a National Account is the Plan in whose Service Area
the National Account is located. A participating (“Par”) Plan is a Plan in whose Service Area the
National Account has employee and/or retiree locations, but in which the National Account is not
located. In the event that a National Account parent company consolidates health benefit-decision
making for itself and its wholly-owned subsidiary companies, the parent company and the subsidiary
companies shall be considered one National Account. The Control Plan for such a National Account
shall be the Plan in whose Service Area the parent company headquarters is located.
3. The National Account Guidelines enunciated herein below shall be applicable only with respect
to the business of new National Accounts acquired after January 1, 1991.
4. Control Plans shall utilize National Account identification cards complying with then currently
effective BCBSA graphic standards in connection with all National Accounts business to facilitate
administration thereof, to minimize subscriber and provider confusion, and to reflect a commitment
to cooperation among Plans.
Amended as of June 12, 2003
EXHIBIT 3
Page 2 of 3
5. Disputes among Plans and/or BCBSA as to the interpretation or implementation of these
Guidelines or as to other National Accounts issues shall be submitted to mediation and mandatory
dispute resolution as provided in the License Agreement. For two years from the effective date of
the License Agreement, however, such disputes shall be subject to mediation only, with the results
of such mediation to be collected and reported in order to establish more definitive operating
parameters for National Accounts business and to serve as ground rules for future binding dispute
resolution.
6. The Control Plan may use the BlueCard Program (as defined by IPPC) to deliver benefits to
employees and non-Medicare eligible retirees in a Participating Plan’s service area if an
alternative arrangement with the Participating Plan cannot be negotiated. The Participating
Plan’s minimum servicing requirement for those employees and non-Medicare retirees in its service
area is to deliver benefits using the BlueCard Program. Account delivery is subject to the
policies, provisions and procedures of the BlueCard Program.
7. For provider payments in a Participating Plan’s area (on non-BlueCard claims), payment to the
provider may be made by the Participating Plan or the Control Plan at the Participating Plan’s
option. If the Participating Plan elects to pay the provider, it may not withhold payment of a
claim verified by the Control Plan or its designated processor, and payment must be in conformity
with service criteria established by the Board of Directors of BCBSA (or an authorized committee
thereof) to assure prompt payment, good service and minimum confusion with providers and
subscribers. The Control Plan, at the Participating Plan’s request, will also assure that measures
are taken to protect the confidentiality of the data pertaining to provider reimbursement levels
and profiles.
Amended as of June 14, 1996
EXHIBIT 3
Page 3 of 3
8. The Control Plan, in its financial agreements with a National Account, is expected to
reasonably reflect the aggregate amount of differentials passed along to the Control Plan by all
Participating Plans in a National Account.
9. Other than in contracting with health care providers or soliciting such contracts in areas
contiguous to a Plan’s Service Area in order to serve its subscribers or those of its licensed
Controlled Affiliate residing or working in its Service Area, a Control Plan may not use the
Licensed Marks and/or Name, as a tag line or otherwise, to negotiate directly with providers
outside its Service Area.
Amended as of March 13, 2003
EXHIBIT 4
GOVERNMENT PROGRAMS AND CERTAIN OTHER USES
Page 1 of 10
1. A Plan and its licensed Controlled Affiliate may use the Licensed Marks and Name in bidding on
and executing a contract to serve a Government Program, and in thereafter communicating with the
Government concerning the Program. With respect, however, to such contracts entered into after the
1st day of January, 1991, the Licensed Marks and Name will not be used in communications or
transactions with beneficiaries or providers in the Government Program located outside a Plan’s
Service Area, unless the Plan can demonstrate to the satisfaction of BCBSA’s governing body that
such a restriction on use of the Licensed Marks and Name will jeopardize its ability to procure
the contract for the Government Program. As to both existing and future contracts for Government
Programs, Plans will discontinue use of the Licensed Marks and Name as to beneficiaries and
Providers outside their Service Area as expenditiously as circumstances reasonably permit.
Effective January 1, 1995, except as provided in the first sentence above, all use by a Plan of
the Licensed Marks and Name in Government Programs outside of the Plan’s Service Area shall be
discontinued. Incidental communications outside a Plan’s Service Area with resident or former
resident beneficiaries of the Plan, and other categories of necessary incidental communications
approved by BCBSA, are not prohibited. For purposes of this Paragraph 1, the term “Government
Programs” shall mean Medicare Part A, Medicare Part B and other non-risk government programs.
2. In connection with activity otherwise in furtherance of the License Agreement, a Plan and its
Controlled Affiliates that are licensed to use the Licensed Marks and Name in its Service Area
pursuant to the Controlled Affiliate License Agreements authorized in clauses a) through c) of
Paragraph 2 of the Plan’s License Agreement with BCBSA may use the Licensed Marks and Name outside
the Plan’s Service Area in the following circumstances which are deemed legitimate and necessary
and not likely to cause consumer confusion:
|
a. |
|
sending letterhead, envelopes, and similar items solely for administrative
purposes (e.g., not for purposes of marketing, advertising, promoting, selling or
soliciting the sale of health care plans and related services); |
|
|
b. |
|
distributing business cards other than in marketing and selling; |
|
|
c. |
|
contracting with health care providers or soliciting such contracts in areas
contiguous to the Plan’s Service Area in order to serve its subscribers or those of
such licensed Controlled Affiliates residing or working in its service area; |
Amended as of March 17, 2005
EXHIBIT 4
Page 2 of 10
|
d. |
|
issuing a small sign containing the legal name or trade name of the Plan or
such licensed Controlled Affiliates for display by a provider to identify the latter
as a participating provider of the Plan or Controlled Affiliate; |
|
|
e. |
|
advertising in publications or electronic media solely to persons for
employment; |
|
|
f. |
|
advertising in print, electronic or other media which serve, as a
substantial market, the Service Area of the Plan or licensed Controlled Affiliate,
provided that no Plan or Controlled Affiliate may advertise outside its Service Area
on the national broadcast and cable networks and that advertisements in national
print media are limited to the smallest regional edition encompassing the Service
Area; |
|
|
g. |
|
advertising by direct mail where the addressee’s zip code plus 4 includes,
at least in part, the Plan’s Service Area or that of a licensed Controlled
Affiliate. |
|
|
h. |
|
negotiating rates with a health care provider for services to a specific
member, provided that all of the following conditions are met: |
|
(1) |
|
the health care provider does not have a contract,
applicable to the services rendered or to be rendered, with the Licensee (or
any of the Licensees in the case of overlapping Service Areas) in whose
Service Area the health care provider is located; and |
|
|
(2) |
|
the Plan or Controlled Affiliate reasonably determines
that the member did/does not have a reasonable opportunity to access a
participating provider whose contract applies to the services rendered or to
be rendered; and |
|
|
(3) |
|
at least one of the following circumstances exists: |
|
(i) |
|
the member received emergency services
and the Plan or Controlled Affiliate knows or reasonably
anticipates that the charges on the claim will meet or exceed
$5,000; or |
Amended as of June 19, 2008
EXHIBIT 4
Page 3 of 10
|
(ii) |
|
a provider, in consultation pre- or post-
treatment with the Plan or Controlled Affiliate, makes/made a
treatment recommendation or referral to a non-par provider or to a
par provider whose contract does not apply to the services to be
rendered; or |
|
|
(iii) |
|
the member inadvertently accessed a
non-par provider or non-contracted services in the course of
receiving services from a par provider (e.g., the member sees a
non-par consulting specialist in a participating hospital); and |
(4) the Licensee (and in the case of overlapping Service Areas, all of the
Licensees) in whose Service Area the health care provider is located consent(s)
in advance.
Amended as of June 19, 2008
EXHIBIT 4
Page 4 of 10
|
i. |
|
contracting with a pharmacy management organization (“Pharmacy
Intermediary”) to gain access to a national or regional pharmacy network to provide
self-administered prescription drugs to deliver a pharmacy benefit for all of the
Plan’s or licensed Controlled Affiliate’s members nationwide, provided, however,
that the Pharmacy Intermediary may not use the Licensed Marks or Name in contracting
with the pharmacy providers in such network; |
|
|
j. |
|
contracting with the corporate owner of a national or regional retail
pharmacy chain to gain access to the pharmacies in the chain to provide
self-administered prescription drugs to deliver a pharmacy benefit for all of the
Plan’s or licensed Controlled Affiliate’s members nationwide, provided that (1) the
Plan and the Controlled Affiliate may not contract directly with pharmacists or
pharmacy stores outside the Plan’s Service Area, and (2) neither the Plan’s or the
Controlled Affiliate’s name nor the Licensed Marks or Name may be posted or
otherwise displayed at or by any pharmacy store outside the Plan’s Service Area; |
|
|
k. |
|
contracting with a dental management organization (“Dental Intermediary”)
to gain access to a national or regional dental network to deliver a routine dental
benefit for all of the Plan’s or licensed Controlled Affiliate’s members nationwide,
provided, however, that the Dental Intermediary may not use the Licensed Marks or
Name in contracting with the dental providers in such network; |
|
|
l. |
|
contracting with a vision management organization (“Vision Intermediary”)
to gain access to a national or regional vision network to deliver a routine vision
benefit for all of the Plan’s or licensed Controlled Affiliate’s members nationwide,
provided, however, that the Vision Intermediary may not use the Licensed Marks or
Name in contracting with the vision providers in such network; |
|
|
m. |
|
contracting with an independent clinical laboratory for analysis and
clinical assessment of specimens that are collected within the Plan’s Service Area; |
Amended as of March 17, 2005
EXHIBIT 4
Page 5 of 10
|
n. |
|
contracting with a durable medical equipment or home medical equipment
company for durable medical equipment and supplies and home medical equipment and
supplies that are shipped to a location within the Plan’s Service Area; |
|
|
o. |
|
contracting with a speciality pharmaceutical company for non-routine
biological therapeutics that are ordered by a health care professional located
within the Plan’s Service Area; |
|
|
p. |
|
contracting with a company that operates provider sites in the Plan’s
Service Area, provided that the contract is solely for services rendered at a site
(e.g., hospital, mobile van) that is within the Plan’s Service Area; |
|
|
q. |
|
contracting with a company that makes health care professionals available
in the Plan’s Service Area (e.g., traveling home health nurse), provided that the
contract is solely for services rendered by health care professionals who are
located within the Plan’s Service Area. |
|
|
r. |
|
entering into a license agreement between and among BCBSA, the Plan and a
debit card issuer located outside the Plan’s Service Area, and entering into a
corresponding operating agreement or agreements, in order to offer a debit card
bearing the Licensed Marks and Name to eligible persons as defined by the
aforementioned license agreement. |
|
|
s. |
|
in conjunction with contracting with a National Account as Control Licensee
or Alternate Control Licensee (as those terms are defined in the Inter-Plan Programs
Policies and Provisions (“IP Policies”)) to offer Blue-branded Health Coverage to the
National Account, offering Blue-branded Health and Wellness Programs to all members of
the National Account, including members who have not enrolled in the Blue-branded
Health Coverage (“non-Blue Health Coverage members”), provided that: |
|
(i) |
|
the Plan and/or licensed Controlled Affiliate has no contact
or interaction with providers outside of the Plan’s Service Area regarding
such non-Blue Health Coverage members, except as specifically provided in the
IP Policies; and |
Amended as of March 19, 2009
EXHIBIT 4
Page 6 of 10
|
(ii) |
|
if in accordance with IP Policies another Licensee is
soliciting or servicing under the Brands a local plant, office or division of
the account that is outside of the Plan’s Service Area, the Plan and/or
licensed Controlled Affiliate may not offer Blue-branded Health and Wellness
Programs to any employees working at such local plant, office or division
without the consent of such other Licensee; and |
|
|
(iii) |
|
if the Plan and/or licensed Controlled Affiliate provides an
information card to the non-Blue Health Coverage members, the card may not
display the Symbols in the masthead, must contain a prominent disclosure
conveying that it is not a health insurance card, and otherwise must be
designed so that it is dissimilar to a Blue member identification card. |
For purposes of this subparagraph s, the following definitions apply:
“Health and Wellness Program” shall mean a program that includes at least one of
the following elements or a related element:
|
– |
|
Health Risk Assessment and/or Preventive Screenings |
|
|
– |
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Exercise and Fitness Programs |
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|
– |
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Health and Wellness Events (e.g., attendance at a health
fair, a 5K walk) |
|
|
– |
|
Nutrition and Weight Management |
|
|
– |
|
Health Education (e.g., smoking cessation classes) |
|
|
– |
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Prenatal and Parenting Education |
|
|
– |
|
Disease or Chronic Condition Management |
The above listing is intended to represent examples of the types of programs that
may be offered, and other programs, including those offered through different media
such as the internet or telephonically, may also be deemed Health and Wellness
programs.
“Health Coverage” shall mean providing or administering medical, surgical,
hospital, major medical, or catastrophic coverage, or any HMO, PPO, POS or other
managed care plan for the foregoing services.
Amended as of November 13, 2008
EXHIBIT 4
Page 7 of 10
3. In connection with activity otherwise in furtherance of the License Agreement, a Controlled
Affiliate that is licensed to use the Licensed Marks and Name pursuant to a Controlled Affiliate
License Agreement authorized in clauses d) or e) of Paragraph 2 of the Plan’s License Agreement
with BCBSA may use the Licensed Marks and Name outside the Region (as that term is defined in such
respective Controlled Affiliate License Agreements) in the following circumstances which are
deemed legitimate and necessary and not likely to cause consumer confusion:
|
a. |
|
sending letterhead, envelopes, and similar items solely for administrative
purposes (e.g., not for purposes of marketing, advertising, promoting, selling or
soliciting the sale of health care plans and related services); |
|
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b. |
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distributing business cards other than in marketing and selling; |
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c. |
|
contracting with health care providers or soliciting such contracts in areas
contiguous to the Region in order to serve its subscribers residing in the Region,
provided that the Controlled Affiliate may not use the names of any of its
Controlling Plans in connection with such contracting unless the provider is located
in a geographic area that is also contiguous to such Controlling Plan’s Service Area; |
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d. |
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issuing a small sign containing the legal name or trade name of the
Controlled Affiliate for display by a provider to identify the latter as a
participating provider of the Controlled Affiliate, provided that the Controlled
Affiliate may not use the names of any of its Controlling Plans on such signs unless
the provider is located in a geographic area that is also contiguous to such
Controlling Plan’s Service Area; |
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e. |
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advertising in publications or electronic media solely to persons for
employment; |
Amended as of March 17, 2005
EXHIBIT 4
Page 8 of 10
|
f. |
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advertising in print, electronic or other media which serve, as a
substantial market, the Region, provided that the Controlled Affiliate may not
advertise outside its Region on the national broadcast and cable networks and that
advertisements in national print media are limited to the smallest regional edition
encompassing the Region, and provided further that any such advertising by the
Controlled Affiliate may not reference the name of any of its Controlling Plans
unless the respective Controlling Plan is authorized under paragraph 2 of this
Exhibit 4 to advertise in such media; |
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g. |
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advertising by direct mail where the addressee’s zip code plus 4 includes,
at least in part, the Region, provided that such advertising by the Controlled
Affiliate may not reference the name of any of its Controlling Plans unless the
respective Controlling Plan is authorized under paragraph 2 of this Exhibit 4 to
send direct mail to such zip code plus 4. |
|
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h. |
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[Intentionally left blank, pending review by the Inter-Plan Programs
Committee of the applicability of the case management rule to such Controlled
Affiliates.] |
|
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i. |
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contracting with a pharmacy management organization (“Pharmacy
Intermediary”) to gain access to a national or regional pharmacy network to provide
self-administered prescription drugs to deliver a pharmacy benefit for the
Controlled Affiliate’s regional Medicare Advantage PPO or regional Medicare Part D
Prescription Drug members enrolled under the Licensed Marks pursuant to such
respective Controlled Affiliate License Agreements, provided, however, that the
Pharmacy Intermediary may not use the Licensed Marks or Name in contracting with the
pharmacy providers in such network; |
|
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j. |
|
contracting with the corporate owner of a national or regional retail
pharmacy chain to gain access to the pharmacies in the chain to provide
self-administered prescription drugs to deliver a pharmacy benefit to the Controlled
Affiliate’s regional Medicare Advantage PPO or regional Medicare Part D Prescription
Drug members |
Amended as of March 17, 2005
EXHIBIT 4
Page 9 of 10
|
|
|
enrolled under the Licensed Marks pursuant to such respective Controlled
Affiliate License Agreements, provided that (1) the Controlled Affiliate may not
contract directly with pharmacists or pharmacy stores outside the Region, and (2)
neither the Controlled Affiliate’s name nor the Licensed Marks or Name may be
posted or otherwise displayed at or by any pharmacy store outside the Region; |
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k. |
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contracting with a dental management organization (“Dental Intermediary”)
to gain access to a national or regional dental network to deliver a routine dental
benefit for the Controlled Affiliate’s regional Medicare Advantage PPO members
enrolled under the Licensed Marks pursuant to such Controlled Affiliate License
Agreement, provided, however, that the Dental Intermediary may not use the Licensed
Marks or Name in contracting with the dental providers in such network; |
|
|
l. |
|
contracting with a vision management organization (“Vision Intermediary”)
to gain access to a national or regional vision network to deliver a routine vision
benefit for the Controlled Affiliate’s regional Medicare Advantage members enrolled
under the Licensed Marks pursuant to such Controlled Affiliate License Agreement,
provided, however, that the Vision Intermediary may not use the Licensed Marks or
Name in contracting with the vision providers in such network; |
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|
m. |
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contracting with an independent clinical laboratory for analysis and
clinical assessment of specimens that are collected within the Controlled
Affiliate’s Region; |
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|
n. |
|
contracting with a durable medical equipment or home medical equipment
company for durable medical equipment and supplies and home medical equipment and
supplies that are shipped to a location within the Controlled Affiliate’s Region; |
|
|
o. |
|
contracting with a specialty pharmaceutical company for non-routine
biological therapeutics that are ordered by a health care professional located
within the Region; |
Amended as of March 17, 2005
EXHIBIT 4
Page 10 of 10
|
p. |
|
contracting with a company that operates provider sites in the Region,
provided that the contract is solely for services rendered at a site (e.g.,
hospital, mobile van) that is within the Region; |
|
|
q. |
|
contracting with a company that makes health care professionals available
in the Region (e.g., traveling home health nurse), provided that the contract is
solely for services rendered by health care professionals who are located within the
Region. |
4. |
|
BCBSA shall retain the right to use the Licensed Marks in conjunction with the
Federal Employee Program and with any other national offering made to federal employees
pursuant to the Federal Employees Health Benefits Program (FEHBP), including the right
to license such use to its vendors, but only in the following manner. |
|
a. |
|
the Licensed Marks may only be used by BCBSA with the term “Federal
Employee Program”, “Federal”, “FEP”, or similar language identifying the program
as a benefit program for federal employees; |
|
|
b. |
|
the Licensed Marks may not be used by BCBSA with the name(s) of a
specific Plan or Plans and; |
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|
c. |
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any use by BCBSA in conjunction with a new national FEHBP program
proposed after the enactment of this amendment will require the approval of the
BCBSA Board of Directors. |
Amended as of March 16, 2006
EXHIBIT 5
Page 1 of 23
MEDIATION AND MANDATORY DISPUTE RESOLUTION (MMDR) RULES
The Blue Cross and Blue Shield Plans (“Plans”) and the Blue Cross Blue Shield Association
(“BCBSA”) recognize and acknowledge that the Blue Cross and Blue Shield system is a unique
nonprofit and for-profit system offering cost effective health care financing and services. The
Plans and BCBSA desire to utilize Mediation and Mandatory Dispute Resolution (“MMDR”) to avoid
expensive and time-consuming litigation that may otherwise occur in the federal and state judicial
systems. Even MMDR should be viewed, however, as methods of last resort, all other procedures for
dispute resolution having failed. Except as otherwise provided in the License Agreements, the
Plans, their Controlled Affiliates and BCBSA agree to submit all disputes to MMDR pursuant to these
Rules and in lieu of litigation.
1. Initiation of Proceedings
A. Pre-MMDR Efforts
Before filing a Complaint to invoke the MMDR process, the CEO of a complaining party, or
his/her designated representative, shall undertake good faith efforts with the other side(s) to try
to resolve any dispute.
B. Complaint
To commence a proceeding, the complaining party (or parties) shall provide by certified mail,
return receipt requested, a written Complaint to the BCBSA Corporate Secretary (which shall also
constitute service on BCBSA if it is a respondent) and to any Plan(s) and/or Controlled
Affiliate(s) named therein. The Complaint shall contain:
|
i. |
|
identification of the complaining party (or parties)
requesting the proceeding; |
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|
ii. |
|
identification of the respondent(s); |
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|
iii. |
|
identification of any other persons or entities who are
interested in a resolution of the dispute; |
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|
iv. |
|
a full statement describing the nature of the dispute; |
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|
v. |
|
identification of all of the issues that are being submitted
for resolution; |
Amended as of November 21, 1996
EXHIBIT 5
Page 2 of 23
|
vi. |
|
the remedy sought; |
|
|
vii. |
|
a statement as to whether the complaining party (or parties)
elect(s) first to pursue Mediation; |
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|
viii. |
|
any request, if applicable, that the matter be handled on an
expedited basis and the reasons therefor; and |
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|
ix. |
|
a statement signed by the CEO of the complaining party
affirming that the CEO has undertaken efforts, or has directed efforts to be
undertaken, to resolve the dispute before resorting to the MMDR process. |
The complaining party (or parties) shall file and serve with the Complaint copies of all documents
which the party (or parties) intend(s) to offer at the Arbitration Hearing and a statement
identifying the witnesses the party (or parties) intend(s) to present at the Hearing, along with a
summary of each witness’ expected testimony.
C. Answer
Within twenty (20) days after receipt of the Complaint, each respondent shall serve on BCBSA
and on the complaining party (or parties);
|
i. |
|
a full Answer to the aforesaid Complaint; |
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|
ii. |
|
a statement of any Counterclaims against the complaining
party (or parties), providing with respect thereto the information specified
in Paragraph 1.B., above; |
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|
iii. |
|
a statement as to whether the respondent elects to first
pursue Mediation; and |
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|
iv. |
|
any request, if applicable, that the matter be handled on an
expedited basis and the reasons therefor. |
The respondent(s) shall file and serve with the Answer or by the date of the Initial Conference set
forth in Paragraph 3.C., below, copies of all documents which the respondent(s) intend(s) to offer
at the Arbitration Hearing and a statement identifying the witnesses the party (or parties)
intend(s) to present at the Hearing, along with a summary of each witness’ expected testimony.
Amended as of September 20, 2007
EXHIBIT 5
Page 3 of 23
D. Reply To Counterclaim
Within ten (10) days after receipt of any Counterclaim, the complaining party (or parties)
shall serve on BCBSA and on the responding party (or parties), a Reply to the Counterclaim. Such
Reply must provide the same information required by Paragraph 1.C., above.
2. Mediation
To facilitate the mediation of disputes between or among BCBSA, the Plans and/or their
Controlled Affiliates, the BCBSA Board has provided for Mediation under these Rules. Mediation may
be pursued in lieu of or in an effort to obviate the Mandatory Dispute Resolution process, and all
parties are strongly urged, but not required, to exhaust the mediation procedure provided for
herein. In the event any party refuses to proceed with Mediation, the parties shall
proceed immediately to Mandatory Dispute Resolution, as provided in Section 3.
A. Selection of Mediators
If all parties agree to pursue Mediation, they shall promptly attempt to agree upon: (i) the
number of mediators desired, not to exceed three mediators; and (ii) the selection of experienced
mediator(s) from an independent entity to mediate all disputes set forth in the Complaint and
Answer (and Counterclaim and Reply, if any). In the event the parties are unable to agree upon the
selection or number of mediators, both within five (5) days of the service of the Answer or Reply
to Counterclaim, whichever is later, the BCBSA Corporate Secretary shall immediately refer the
matter to a nationally recognized professional ADR organization (such as CPR or JAMS) for mediation
by a single mediator to be selected by the ADR organization.
B. Binding Decision
Before the Mediation Hearing described below, the BCBSA Corporate Secretary shall contact the
parties to determine whether they wish to be bound by any recommendation of the selected
mediator(s) for resolution of the disputes. If all wish to be bound, the Corporate Secretary will
send appropriate documentation to them for their signatures before the Mediation Hearing begins.
Amended as of September 20, 2007
EXHIBIT 5
Page 4 of 23
C. Mediation Procedure
The Mediator(s) shall apply the mediation procedures and processes provided for herein (not
the rules of the ADR organization with which they are affiliated) and shall promptly advise the
parties of a scheduled Mediation Hearing date. Unless a party requests an expedited procedure, or
unless all parties to the proceeding agree to one or more extensions of time, the Mediation Hearing
set forth below shall be completed within forty (40) days of BCBSA’s receipt of the Complaint. The
selected mediator(s), unless the parties otherwise agree, shall adhere to the following procedure:
|
i. |
|
Each party must be represented by its CEO or other
representative who has been delegated full authority to resolve the dispute.
However, parties may send additional representatives as they see fit. |
|
|
ii. |
|
Each party will be given one-half hour to present its case,
beginning with the complaining party (or parties), followed by the other party
or parties. The parties are free to structure their presentations as they
see fit, using oral statements or direct examination of witnesses. However,
neither cross-examination nor questioning of opposing representatives will be
permitted. At the close of each presentation, the selected mediator(s) will
be given an opportunity to ask questions of the presenters and witnesses. All
parties must be present throughout the Mediation Hearing. The selected
mediator(s) may extend the time allowed for each party’s presentation at the
Mediation Hearing. The selected mediator(s) may meet in executive session,
outside the presence of the parties, or may meet with the parties separately,
to discuss the controversy. |
|
|
iii. |
|
After the close of the presentations, the parties will
attempt to negotiate a settlement of the dispute. If the parties desire, the
selected mediator(s), or any one or more of the selected mediators, will sit
in on the negotiations. |
Amended as of September 20, 2007
EXHIBIT 5
Page 5 of 23
|
iv. |
|
After the close of the presentations, the selected
mediator(s) may meet privately to agree upon a recommendation for resolution
of the dispute which would be submitted to the parties for their consideration
and approval. If the parties have previously agreed to be bound by the
results of this procedure, this recommendation shall be binding upon the
parties. |
|
|
v. |
|
The purpose of the Mediation Hearing is to assist the parties
to settle their grievances short of mandatory dispute resolution. As a
result, the Mediation Hearing has been designed to be as informal as possible.
Rules of evidence shall not apply. There will be no transcript of the
proceedings, and no party may make a tape recording of the Mediation Hearing. |
|
|
vi. |
|
In order to facilitate a free and open discussion, the
Mediation proceeding shall remain confidential. A “Stipulation to
Confidentiality” which prohibits future use of settlement offers, all position
papers or other statements furnished to the selected mediator(s), and
decisions or recommendations in any Mediation proceeding shall be executed by
each party. |
|
|
vii. |
|
Upon request of the selected mediator(s), or one of the
parties, BCBSA staff may also submit documentation at any time during the
proceedings. |
D. Notice of Termination of Mediation
If the Mediation cannot be completed within the prescribed or agreed time period due to the
lack of cooperation of any party, as determined by the selected mediator(s), or if the Mediation
does not result in a final resolution of all disputes at the Mediation Hearing or within ten (10)
days after the Mediation Hearing, any party or any one of the selected mediators shall so notify
the BCBSA Corporate Secretary, who shall promptly issue a Notice of Termination of Mediation to all
parties, to the selected mediator(s), and to the MDR Administrator. Such notice shall serve to
bring the Mediation to an end and to initiate Mandatory Dispute Resolution. Upon agreement of all
parties and the mediator(s), the Mediation process may continue at the same time the MDR process is
invoked. In such case, the Notice of Termination of Mediation described above serves to initiate
the MDR proceeding, but does not terminate mediation proceedings, which may proceed simultaneous
with the MDR proceeding.
Amended as of September 20, 2007
EXHIBIT 5
Page 6 of 23
3. Mandatory Dispute Resolution (MDR)
If any party elects not to first pursue Mediation, or if a Notice of Termination of Mediation
is issued as set forth in Paragraph 2.D., above, then the unresolved disputes set forth in any
Complaint and Answer (and Counterclaim and Reply, if any) shall be subject to mandatory binding
arbitration (herein referred to as “MDR”).
A. MDR Administrator
The Administrator for purposes of Mandatory Arbitration shall be an independent nationally
recognized entity such as CPR or JAMS, specializing in alternative dispute resolution. In the
event the parties pursued Mediation with CPR, JAMS or a similar organization, that organization
also shall serve as the MDR Administrator, unless all parties notify the BCBSA Corporate Secretary
in writing within two (2) days of receiving the Notice of Termination of Mediation that they wish
to pursue MDR with another nationally recognized organization serving as MDR Administrator.
In the event the parties (i) did not pursue Mediation, (ii) pursued mediation with a Mediator
not affiliated with an ADR organization that offers a panel of arbitrators, or (iii) all parties
that pursued Mediation notified the BCBSA Corporate Secretary that they wish to have an MDR
Administrator that is different from the organization with which their mediator was affiliated,
they shall promptly attempt to agree on a nationally recognized ADR entity that supplies a panel of
arbitrators. If they reach such agreement within five (5) days of the Notice of Termination of
Mediation or receipt of the Answer or Reply to Counterclaim (whichever is later), the parties shall
promptly inform the BCBSA Corporate Secretary of their agreed upon ADR organization. In the event
the parties are unable to reach agreement on an MDR Administrator within that timeframe, the BCBSA
Corporate Secretary shall immediately refer the matter to CPR, JAMS or a similar organization for
MDR.
Any person who served as a Mediator shall not serve as an arbitrator for the same or similar
dispute for purposes of MDR.
B. Rules for MDR
The rules controlling all aspects of MDR shall be exclusively those provided for herein. The
rules promulgated or otherwise used by the MDR Administrator organization shall not apply.
Amended as of September 20, 2007
EXHIBIT 5
Page 7 of 23
C. Initial Conference
Within seven (7) days after a Notice of Termination has issued or the matter has otherwise
been referred to an MDR Administrator, or within five (5) days after the time for filing and
serving the Answer or Reply to any Counterclaim (whichever is later) if the parties elect first not
to mediate, the parties shall confer with the Administrator to discuss selecting a dispute
resolution panel (“the Panel”). This conference (the “Initial Conference”) may be by telephone.
The parties are encouraged to agree to the composition of the Panel and to present that agreement
to the Administrator at the Initial Conference. If the parties do not agree on the composition of
the Panel by the time of the Initial Conference, or by any extension thereof agreed to by all
parties and the Administrator, then the Panel Selection Process set forth in subparagraph D, below,
shall be followed.
D. Panel Selection Process
The Administrator shall designate, prior to the Initial Conference, at least seven potential
arbitrators. Each party shall be permitted to strike any designee for cause and the Administrator
shall determine the sufficiency thereof in its sole discretion. The Administrator will designate a
replacement for any designee so stricken. Each party shall then be permitted one peremptory strike
from the list of designees. The Administrator shall set the dates for exercising all strikes,
which shall be set to encourage the prompt selection of arbitrators.
After the parties exercise any designee strikes for cause and their peremptory strike against
any designee of their choice, the parties shall each rank the remaining panel members in order of
preference and provide the Administrator, without serving on any other party, their ranked list.
The Administrator shall not disclose any party’s ranked list to members of the panel or to other
parties.
From the remaining designees, and after considering opportunities to maximize, so far as
possible, the collectively stated arbitrator preferences provided by the parties on their ranked
lists, the Administrator shall select a three member Panel. The Panel Selection Process shall be
completed no later than ten (10) days after the Initial Conference.
Each Arbitrator shall be compensated at his or her normal hourly rate or, in the absence of an
established rate, at a reasonable hourly rate to be promptly fixed by the Administrator for all
time spent in connection with the proceedings and shall be reimbursed for any travel and other
reasonable expenses.
Amended as of September 20, 2007
EXHIBIT 5
Page 8 of 23
E. Duties Of The Arbitrators
The Panel shall promptly designate a Presiding Arbitrator for the purposes reflected below,
but shall retain the power to review and modify any ruling or other action of said Presiding
Arbitrator. Each Arbitrator shall be an independent Arbitrator, shall be governed by the Code of
Ethics for Arbitrators in Commercial Disputes and shall at or prior to the commencement of any
Arbitration Hearing take an oath to that effect. Each Arbitrator shall promptly disclose in
writing to the Panel and to the parties any circumstances, whenever arising, that might cause doubt
as to such Arbitrator’s compliance, or ability to comply, with said Code of Ethics, and, absent
resignation by such Arbitrator, the remaining Arbitrators shall determine in their sole discretion
whether the circumstances so disclosed constitute grounds for disqualification and for replacement.
With respect to such circumstances arising or coming to the attention of a party after an
Arbitrator’s selection, a party may likewise request the Arbitrator’s resignation or a
determination as to disqualification by the remaining Arbitrators. With respect to a sole
Arbitrator, the determination as to disqualification shall be made by the Administrator.
There shall be no ex parte communication between the parties or their counsel
and any member of the Panel.
F. Panel’s Jurisdiction And Authority
The Panel’s jurisdiction and authority shall extend to all disputes between or among the
Plans, their Controlled Affiliates, and/or BCBSA, except for those disputes excepted from these
MMDR procedures as set forth in the License Agreements.
With the exception of punitive or treble damages, the Panel shall have full authority to award
the relief it deems appropriate to resolve the parties’ disputes, including monetary awards and
injunctions, mandatory or prohibitory. The Panel has no authority to award punitive or treble
damages except that the Panel may allocate or assess responsibility for punitive or treble damages
assessed by another tribunal. Subject to the above limitations, the Panel may, by way of example,
but not of limitation:
Amended as of September 20, 2007
EXHIBIT 5
Page 9 of 23
|
i. |
|
interpret or construe the meaning of any terms, phrase or
provision in any license between BCBSA and a Plan or a Controlled Affiliate
relating to the use of the BLUE CROSS® or BLUE SHIELD® service marks. |
|
|
ii. |
|
determine whether BCBSA, a Plan or a Controlled Affiliate has
violated the terms or conditions of any license between the BCBSA and a Plan
or a Controlled Affiliate relating to the use of the BLUE CROSS® or BLUE
SHIELD® service marks. |
|
|
iii. |
|
decide challenges as to its own jurisdiction. |
|
|
iv. |
|
issue such orders for interim relief as it deems appropriate
pending Hearing and Award in any Arbitration. |
It is understood that the Panel is expected to resolve issues based on governing principles of
law, preserving to the maximum extent legally possible the continued integrity of the Licensed
Marks and the BLUE CROSS/BLUE SHIELD system. The Panel shall apply federal law to all issues
which, if asserted in the United States District Court, would give rise to federal question
jurisdiction, 28 U.S.C. § 1331. The Panel shall apply Illinois law to all issues involving
interpretation, performance or construction of any License Agreement or Controlled Affiliate
License Agreement unless the agreement otherwise provides. As to other issues, the Panel shall
choose the applicable law based on conflicts of law principles of the State of Illinois.
G. Administrative Conference
Within five (5) days of the Panel being selected, the Presiding Arbitrator shall confer with
the parties and the other members of the Panel and shall schedule, in writing, a conference in
which the parties and the Panel shall participate (the “Administrative Conference”). The
Administrative Conference shall take place no later than fifteen (15) days after the Panel is
selected. At the Administrative Conference the parties and the Panel shall discuss the scheduling
of the Arbitration Hearing and any other matter appropriate to be considered, including but not
limited to: any written discovery in the form of requests for production of documents or requests
to admit facts; the identity of any witness whose deposition a party may desire and a showing of
exceptional good cause for the taking of any such deposition; the desirability of bifurcation or
other separation of the issues; the need for and the type of record of conferences and hearings,
including the need for transcripts; the need for expert witnesses and
Amended as of September 20, 2007
EXHIBIT 5
Page 10 of 23
how expert testimony should be presented; the appropriateness of motions to dismiss and/or for full
or partial summary judgment; consideration of stipulations; the desirability of presenting any
direct testimony in writing; and the necessity for any on-site inspection by the Panel. If the
parties agree, the Administrative Conference may be by telephone.
H. Discovery
|
i. |
|
Requests for Production of Documents: All requests for the
production of documents must be served no later than five (5) days after the
date of the Initial Conference. Within twenty (20) days after receipt of a
request for production of documents, a party shall (a) serve responses and
objections to the request, (b) produce all responsive, non-privileged
documents to the requesting party, and (c) to the extent any responsive
documents are withheld on the grounds of attorney-client privilege or work
product, produce a log identifying such documents in the manner specified in
Fed. R. Civ. P. 26(b)(5). If, after reviewing a privilege log, the requesting
party believes attorney-client privilege or work product protection was
improperly claimed by the producing party with respect to any document, the
requesting party may ask the Presiding Arbitrator to conduct an in-camera
inspection of the same. With respect to documentary and other discovery
produced in any MDR proceeding by BCBSA, the fact that a party’s CEO or other
senior officers may serve on the BCBSA Board of Directors, BCBSA Board
Committees or other BCBSA work groups, task forces and the like, shall not be
a basis for defeating an otherwise valid claim of attorney-client privilege or
work product protection over such documentary or other discovery materials by
BCBSA. |
|
|
ii. |
|
Requests for Admissions: Requests for Admissions may be
served up to twenty-one (21) days prior to the discovery cut-off set by the
Presiding Arbitrator. A party served with Requests For Admissions must
respond within twenty (20) days of receipt of said request. The good faith use
of and response to Requests for Admissions is encouraged, and the Panel shall
have full discretion, with reference to the Federal Rules of Civil Procedure,
in awarding appropriate sanctions with respect to abuse of the procedure. |
Amended as of September 20, 2007
EXHIBIT 5
Page 11 of 23
|
iii. |
|
Depositions: As a general rule, the parties will not be
permitted to take party or non-party deposition testimony for discovery
purposes. The Presiding Arbitrator, in his or her sole discretion, shall have
the authority to permit a party to take such deposition testimony upon a
showing of exceptional good cause. The parties will be permitted to take de
bene esse deposition1 testimony to the fullest extent permitted by
law of any witness who cannot be compelled to testify at the Arbitration
Hearing. No deposition, for discovery purposes or otherwise, shall exceed
three (3) hours, excluding objections and colloquy of counsel. Depositions
may be recorded in any manner recognized by the Federal Rules of Civil
Procedure and the parties shall specify in each notice of deposition or
request for permission to take deposition testimony the manner in which such
deposition shall be recorded. |
|
|
iv. |
|
Expert witness(es): If a party intends to present the
testimony of an expert witness during the oral hearing, it shall provide all
other parties with a written statement setting forth the information required
to be provided by Fed. R. Civ. P. 26(a)(2)
(B) ten (10) days prior to the discovery cut-off set by the Presiding
Arbitrator. If a party intends to present the testimony of a rebuttal expert
witness during the Arbitration Hearing, it shall provide all other parties with
a written statement setting forth the information required to be provided by
Fed. R. Civ. P. 26(a)(2)(B) within twenty (20) days after the date on which the
written statement of the expert witness whose testimony is to be rebutted was
produced. |
|
|
v. |
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Discovery cut-off: The Presiding Arbitrator shall determine
the date on which the discovery period will end, but the discovery period
shall not exceed thirty (30) days from the date of the Administrative
Conference without the agreement of all parties. |
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As used in these Rules, “de bene esse deposition” means
a deposition that is not taken for discovery purposes, but is taken for the
purpose of reading part or all of the deposition transcript into the record at
the Arbitration Hearing, to the extent permitted by the Panel, because the
witness cannot be compelled to testify at the Arbitration Hearing or has
exercised a right provided under these Rules to provide deposition testimony in
lieu of testimony at the Arbitration Hearing. |
Amended as of September 20, 2007
EXHIBIT 5
Page 12 of 23
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Additional discovery: Any additional discovery will be at
the discretion of the Presiding Arbitrator. |
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Discovery Disputes: Any discovery disputes shall be raised
by motion to the Presiding Arbitrator, who is authorized to resolve all such
disputes, and whose resolution will be binding on the parties unless modified
by the Arbitration Panel. Prior to raising any discovery dispute with the
Presiding Arbitrator, the parties shall meet and confer, telephonically or in
person, in an attempt to resolve or narrow the dispute. If a party refuses to
comply with a decision resolving a discovery dispute, the Panel, in keeping
with Fed. R. Civ. P. 37, may refuse to allow that party to support or oppose
designated claims or defenses, prohibit that party from introducing designated
matters into evidence or, in extreme cases, decide an issue submitted for
resolution adversely to that party. |
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Extensions: The time for responding to discovery requests
may be extended by the Presiding Arbitrator for good and sufficient cause
shown. Any request for such an extension shall be made in writing. |
I. Panel Suggested Settlement/Mediation
At any point during the proceedings, the Panel at the request of any party or on its own
initiative, may suggest that the parties explore settlement and that they do so at or before the
conclusion of the Arbitration Hearing, and the Panel shall give such assistance in settlement
negotiations as the parties may request and the Panel may deem appropriate. Alternatively, the
Panel may direct the parties to endeavor to mediate their disputes as provided above, or to explore
a mini-trial proceeding, or to have an independent party render a neutral evaluation of the
parties’ respective positions. The Panel shall enter such sanctions as it deems appropriate with
respect to any party failing to pursue in good faith such Mediation or other alternate dispute
resolution methods.
Amended as of September 20, 2007
EXHIBIT 5
Page 13 of 23
J. Subpoenas on Third Parties
Pursuant to, and consistent with, the Federal Arbitration Act, 9 U.S.C. § 9 et seq., and
subject to Paragraph 3.G(iii) above, a party may request the issuance of a subpoena on any third
party, including but not limited to any third party Blue Plan or any officer, employee or director
of a third party Blue Plan, to compel deposition testimony or the production of documents, and, if
good and sufficient cause is shown, the Panel shall issue such a subpoena.
K. Arbitration Hearing
An Arbitration Hearing will be held within thirty (30) days after the Administrative
Conference if no discovery is taken, or within thirty (30) days after the close of discovery,
unless all parties and the Panel agree to extend the Arbitration Hearing date, or unless the
parties agree in writing to waive the Arbitration Hearing. The parties may mutually agree on the
location of the Arbitration Hearing. If the parties fail to agree, the Arbitration Hearing shall
be held in Chicago, Illinois, or at such other location determined by the Presiding Arbitrator to
be most convenient to the participants. The Panel will determine the date(s) and time(s) of the
Arbitration Hearing(s) after consultation with all parties and shall provide reasonable notice
thereof to all parties or their representatives.
L. Arbitration Hearing Memoranda
Twenty (20) days prior to the Arbitration Hearing, each party shall submit to the other party
(or parties) and to the Panel an Arbitration Hearing Memorandum which sets forth the applicable law
and any argument as to any relevant issue. The Arbitration Hearing Memorandum will supplement, and
not repeat, the allegations, information and documents contained in or with the Complaint, Answer,
Counterclaim and Reply, if any. Ten (10) days prior to the Arbitration Hearing, each party shall
submit to each other party a list of all expert and fact witnesses (but not including rebuttal fact
witness) that such party intends to have testify at the Arbitration Hearing and a brief summary of
the testimony each such witness is expected to give. In addition, no later than five (5) days
prior to the Arbitration, each party may submit to each other party and to the Panel a Response
Arbitration Hearing Memorandum which sets forth any response to another party’s Arbitration Hearing
Memorandum.
Amended as of September 20, 2007
EXHIBIT 5
Page 14 of 23
M. Notice For Testimony
Ten (10) days prior to the Arbitration Hearing, any party may serve a Notice on any other
party (or parties) requesting the attendance at the Arbitration Hearing of any officer, employee or
director of the other party (or parties) for the purpose of providing noncumulative testimony. If
a party fails to produce one of its officers, employees or directors whose noncumulative testimony
during the Arbitration Hearing is reasonably requested by an adverse party, the Panel may refuse to
allow that party to support or oppose designated claims or defenses, prohibit that party from
introducing designated matters into evidence or, in extreme cases, decide an issue submitted for
mandatory dispute resolution adversely to that party; provided, however, that a party may refuse to
produce a director to testify if, within two (2) days of receiving a notice requesting the
attendance of such director at the Arbitration Hearing, the party agrees to make the director
available for a de bene esse deposition at a mutually convenient time at any location within fifty
(50) miles of the director’s primary residence chosen by the party requesting the director’s
testimony. This Rule may not be used for the purpose of burdening or harassing any party, and the
Presiding Arbitrator may impose such orders as are appropriate so as to prevent or remedy any such
burden or harassment.
Pursuant to, and consistent with, the Federal Arbitration Act, 9 U.S.C. § 9 et seq., twenty
(20) days or more prior to the Arbitration Hearing, a party may request the issuance of a subpoena
on any third party, including but not limited to any third party Blue Plan, BCBSA or any officer,
employee or director of a third party Blue Plan or BCBSA for the purpose of providing
noncummulative testimony at the Arbitration Hearing, and, if good and sufficient cause is shown,
the Panel shall issue such a subpoena; provided however, that a director of a third party Blue Plan
or BCBSA may refuse to testify if, within two (2) days of receiving a subpoena requesting the
attendance of such director at the Arbitration Hearing, the director agrees to make him/herself
available for a de bene esse deposition at a mutually convenient time at any location within fifty
(50) miles of the director’s primary residence chosen by the party requesting the director’s
testimony. Each Blue Plan agrees to waive, on its own behalf and on behalf of its directors and
officers, any objection it otherwise might have to any such subpoena based on service, venue or
extraterritoriality.
Amended as of September 20, 2007
EXHIBIT 5
Page 15 of 23
N. Arbitration Hearing Procedures
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Attendance at Arbitration Hearing: Any person having a
direct interest in the proceeding is entitled to attend the Arbitration
Hearing. The Presiding Arbitrator shall otherwise have the power to require
the exclusion of any witness, other than a party or other essential person,
during the testimony of any other witness. It shall be discretionary with the
Presiding Arbitrator to determine the propriety of the attendance of any other
person. |
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Confidentiality: The Panel and all parties shall maintain
the privacy of the Arbitration Proceeding. The parties and the Panel shall
treat the Arbitration Hearing and any discovery or other proceedings or events
related thereto, including any award resulting therefrom, as confidential
except as otherwise necessary in connection with a judicial challenge to or
enforcement of an award or unless otherwise required by law. |
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Stenographic Record: Any party, or if the parties do not
object, the Panel, may request that a stenographic or other record be made of
any Arbitration Hearing or portion thereof. The costs of the recording and/or
of preparing the transcript shall be borne by the requesting party and by any
party who receives a copy thereof. If the Panel requests a recording and/or a
transcript, the costs thereof shall be borne equally by the parties. |
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Oaths: The Panel may require witnesses to testify under oath
or affirmation administered by any duly qualified person and, if requested by
any party, shall do so. |
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Order of Arbitration Hearing: An Arbitration Hearing shall
be opened by the recording of the date, time, and place of the Arbitration
Hearing, and the presence of the Panel, the parties, and their
representatives, if any. The Panel may, at the beginning of the Arbitration
Hearing, ask for statements clarifying the issues involved. |
Amended as of September 20, 2007
EXHIBIT 5
Page 16 of 23
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Unless otherwise agreed, the complaining party (or parties) shall then present
evidence to support their claim(s). The respondent(s) shall then present
evidence supporting their defenses and Counterclaims, if any. The complaining
party (or parties) shall then present evidence supporting defenses to the
Counterclaims, if any, and rebuttal. |
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Witnesses for each party shall submit to questions by adverse parties and/or
the Panel. |
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The Panel has the discretion to vary these procedures, but shall afford a full
and equal opportunity to all parties for the presentation of any material and
relevant evidence. |
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Evidence: The parties may offer such evidence as is
relevant and material to the dispute and shall produce such evidence as the
Panel may deem necessary to an understanding and resolution of the dispute.
Unless good cause is shown, as determined by the Panel or agreed to by all
other parties, no party shall be permitted to offer evidence at the
Arbitration Hearing which was not disclosed prior to the Arbitration Hearing
by that party. The Panel may receive and consider the evidence of witnesses
by affidavit upon such terms as the Panel deems appropriate. |
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The Panel shall be the judge of the relevance and materiality of the evidence
offered, and conformity to legal rules of evidence, other than enforcement of
the attorney-client privilege and the work product protection, shall not be
necessary. The Federal Rules of Evidence shall be considered by the Panel in
conducting the Arbitration Hearing but those rules shall not be controlling.
All evidence shall be taken in the presence of the Panel and all of the
parties, except where any party is in default or has waived the right to be
present. |
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Settlement offers by any party in connection with Mediation or MDR proceedings,
decisions or recommendations of the selected mediators, and a party’s position
papers or statements furnished to the selected mediators shall not be
admissible evidence or considered by the Panel without the consent of all
parties. |
EXHIBIT 5
Page 17 of 23
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Closing of Arbitration Hearing: The Presiding Arbitrator
shall specifically inquire of all parties whether they have any further proofs
to offer or witnesses to be heard. Upon receiving negative replies or if he
or she is satisfied that the record is complete, the Presiding Arbitrator
shall declare the Arbitration Hearing closed with an appropriate notation made
on the record. Subject to being reopened as provided below, the time within
which the Panel is required to make the award shall commence to run, in the
absence of contrary agreement by the parties, upon the closing of the
Arbitration Hearing. |
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With respect to complex disputes, the Panel may, in its sole discretion, defer
the closing of the Arbitration Hearing for a period of up to thirty (30) days
after the presentation of proofs in order to permit the parties to submit
post-hearing briefs and argument, as the Panel deems appropriate, prior to
making an award. |
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For good cause, the Arbitration Hearing may be reopened for up to thirty (30)
days on the Panel’s initiative, or upon application of a party, at any time
before the award is made |
O. Awards
An Award must be in writing and shall be made promptly by the Panel and, unless otherwise
agreed by the parties or specified by law, no later than thirty (30) days from the date of closing
the Arbitration Hearing. If all parties so request, the Award shall contain findings of fact and
conclusions of law. The Award, and all other rulings and determinations by the Panel, may be by a
majority vote.
Parties shall accept as legal delivery of the Award the placing of the Award or a true copy
thereof in the mail addressed to a party or its representative at its last known address or
personal service of the Award on a party or its representative.
Awards are binding only on the parties to the Arbitration and are not binding on any
non-parties to the Arbitration and may not be used or cited as precedent in any other proceeding.
Amended as of September 20, 2007
EXHIBIT 5
Page 18 of 23
After the expiration of twenty (20) days from initial delivery, the Award (with corrections,
if any) shall be final and binding on the parties, and the parties shall undertake to carry out the
Award without delay.
Proceedings to confirm, modify or vacate an Award shall be conducted in conformity with and
controlled by the Federal Arbitration Act. 9 U.S.C. § 1, et seq.
P. Return of Documents
Within sixty (60) days after the Award and the conclusion of any judicial proceedings with
respect thereto, each party and the Panel shall return any documents produced by any other party,
including all copies thereof. If a party receives a discovery request in any other proceeding
which would require it to produce any documents produced to it by any other party in a proceeding
hereunder, it shall not produce such documents without first notifying the producing party and
giving said party reasonable time to respond, if appropriate, to the discovery request.
4. Miscellaneous
A. Expedited Procedures
Any party to a Mediation may direct a request for an expedited Mediation Hearing to the
Chairman of the Mediation Committee, to the selected Mediators, and to all other parties at any
time. The Chairman of the Mediation Committee, or at his or her direction, the then selected
Mediators, shall grant any request which is supported by good and sufficient reasons. If such a
request is granted, the Mediation shall be completed within as short a period as practicable, as
determined by the Chairman of the Mediation Committee or, at his or her direction, the then
selected Mediators.
Any party to an Arbitration may direct a request for expedited proceedings to the
Administrator, to the Panel, and to all other parties at any time. The Administrator, or the
Presiding Arbitrator if the Panel has been selected, shall grant any such request which is
supported by good and sufficient reasons. If such a request is granted, the Arbitration shall be
completed within as short a time as practicable, as determined by the Administrator and/or the
Presiding Arbitrator.
Amended as of September 20, 2007
EXHIBIT 5
Page 19 of 23
B. Temporary or Preliminary Injunctive Relief
Any party may seek temporary or preliminary injunctive relief with the filing of a Complaint
or at any time thereafter. If such relief is sought prior to the time that an Arbitration Panel
has been selected, then the Administrator shall select a single Arbitrator who is a lawyer who has
no interest in the subject matter of the dispute, and no connection to any of the parties, to hear
and determine the request for temporary or preliminary injunction. If such relief is sought after
the time that an Arbitration Panel has been selected, then the Arbitration Panel will hear and
determine the request. The request for temporary or preliminary injunctive relief will be
determined with reference to the temporary or preliminary injunction standards set forth in Fed. R.
Civ. P. 65.
C. Defaults and Proceedings in the Absence of a Party
Whenever a party fails to comply with the MDR Rules in a manner deemed material by the Panel,
the Panel shall fix a reasonable time for compliance and, if the party does not comply within said
period, the Panel may enter an Order of default or afford such other relief as it deems
appropriate. Arbitration may proceed in the event of a default or in the absence of any party who,
after due notice, fails to be present or fails to obtain an extension. An Award shall not be made
solely on the default or absence of a party, but the Panel shall require the party who is present
to submit such evidence as the Panel may require for the making of findings, determinations,
conclusions, and Awards.
D. Notice
Each party shall be deemed to have consented that any papers, notices, or process necessary or
proper for the initiation or continuation of a proceeding under these rules or for any court action
in connection therewith may be served on a party by mail addressed to the party or its
representative at its last known address or by personal service, in or outside the state where the
MDR proceeding is to be held.
The Corporate Secretary and the parties may also use facsimile transmission, telex, telegram,
or other written forms of electronic communication to give the notices required by these rules.
EXHIBIT 5
Page 20 of 23
E. Expenses
The expenses of witnesses shall be paid by the party causing or requesting the appearance of
such witnesses. All expenses of the MDR proceeding, including compensation, required travel and
other reasonable expenses of the Panel, and the cost of any proof produced at the direct request of
the Panel, shall be borne equally by the parties and shall be paid periodically on a timely basis,
unless they agree otherwise or unless the Panel in the Award assesses such expenses, or any part
thereof against any party (or parties). In exceptional cases, the Panel may award reasonable
attorneys’ fees as an item of expense, and the Panel shall promptly determine the amount of such
fees based on affidavits or such other proofs as the Panel deems sufficient.
F. Disqualification or Disability of A Panel Member
In the event that any Arbitrator of a Panel with more than one Arbitrator should become
disqualified, resign, die, or refuse or be unable to perform or discharge his or her duties after
the commencement of MDR but prior to the rendition of an Award, and the parties are unable to agree
upon a replacement, the remaining Panel member(s):
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shall designate a replacement, subject to the right of any
party to challenge such replacement for cause. |
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shall decide the extent to which previously held hearings
shall be repeated. |
If the remaining Panel members consider the proceedings to have progressed to a stage as to
make replacement impracticable, the parties may agree, as an alternative to the recommencement of
the Mandatory Dispute Resolution process, to resolution of the dispute by the remaining Panel
members.
In the event that a single Arbitrator should become disqualified, resign, die, or refuse or be
unable to perform or discharge his or her duties after the commencement of MDR but prior to the
rendition of an Award, and the parties are unable to agree upon a replacement, the Administrator
shall appoint a successor, subject to the right of any party to challenge such successor for cause,
and the successor shall decide the extent to which previously held proceedings shall be repeated.
EXHIBIT 5
Page 21 of 23
G. Extensions of Time
Subject to the provisions of Paragraph 3.H.(viii.), any time limit set forth in these Rules
may be extended upon agreement of the parties and approval of: (1) the Mediator if the proceeding
is then in Mediation; (2) the Administrator if the proceeding is in Arbitration, but no Arbitration
Panel has been selected; or (3) the Arbitration Panel, if the proceeding is in Arbitration and the
Arbitration Panel has been selected.
H. Intervention
The Plans, their Controlled Affiliates, and BCBSA, to the extent subject to MMDR pursuant to
their License Agreements, shall have the right to move to intervene in any pending Arbitration. A
written motion for intervention shall be made to: (1) the Administrator, if the proceeding is in
Arbitration, but no Arbitration Panel has been selected; or (2) the Arbitration Panel, if the
proceeding is in Arbitration and the Arbitration Panel has been selected. The written motion for
intervention shall be delivered to the BCBSA Corporate Secretary (which shall also constitute
service on the BCBSA if it is a respondent) and to any Plan(s) and/or Controlled Affiliate(s) which
are parties to the proceeding. Any party to the proceeding can submit written objections to the
motion to intervene. The motion for intervention shall be granted upon good cause shown.
Intervention also may be allowed by stipulation of the parties to the Arbitration proceeding.
Intervention shall be allowed upon such terms as the Arbitration Panel decides.
I. BCBSA Assistance in Resolution of Disputes
The resources and personnel of the BCBSA may be requested by any member Plan at any time to
try to resolve disputes with another Plan.
J. Neutral Evaluation
The parties can voluntarily agree at any time to have an independent party render a neutral
evaluation of the parties’ respective positions.
Amended as of September 20, 2007
EXHIBIT 5
Page 22 of 23
K. Recovery of Attorney Fees and Expenses
i. Motions to Compel
Nothwithstanding any other provisions of these Rules, any Party subject to the License
Agreements (for purposes of this Section K and all of its sub-sections only hereinafter
referred to collectively and individually as a “Party”) that initiates a court action or
administrative proceeding solely to compel adherence to these Rules shall not be determined
to have violated these Rules by initiating such action or proceeding.
ii Recovery of Fees, Expenses and Costs
The Arbitration Panel may, in its sole discretion, award a Party its reasonable attorneys’
fees, expenses and costs associated with a filing to compel adherence to these Rules and/or
reasonable attorneys’ fees, expenses and costs incurred in responding to an action filed in
violation of these Rules; provided, however, that neither fees, expenses, nor costs shall
be awarded by the Arbitration Panel if the Party from which the award is sought can
demonstrate to the Arbitration panel, in its sole discretion, that it did not violate these
Rules or that it had reasonable grounds for believing that its action did not violate these
Rules.
iii Requests for Reimbursement
For purposes of this Section K, any Party may request reimbursement of fees, expenses
and/or costs by submitting said request in writing to the Arbitration Panel at any time
before an award is delivered pursuant Paragraph to 3.O above with a copy to the Party from
which reimbursement is sought, explaining why it is entitled to such reimbursement. The
Party from which reimbursement is sought shall have twenty (20) days to submit a response
to such request to the Arbitration Panel with a copy to the Party seeking reimbursement.
Amended as of September 20, 2007
EXHIBIT 5
Page 23 of 23
L. Calculation of Time and Deadlines
In computing any period of time prescribed or allowed under these rules, the day of the act or
event from which the designated period of time begins to run shall not be included. The last day
of the period so computed shall be included, unless it is a Saturday, a Sunday, or a legal holiday,
in which event the period runs until the end of the next day which is not one of the aforementioned
days. When the period of time prescribed is less than six (6) days, intermediate Saturdays,
Sundays and legal holidays shall be excluded in the computation. As used in this rule, “legal
holiday” includes New Year’s Day, Xxxxxx Xxxxxx Xxxx, Xx. Day, Washington’s Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day and any
other day appointed as a holiday by the President or the Congress of the United States.
Amended as of September 20, 2007